The Legal Side of Doing Business in Nigeria: Compliance Checklist You Need as a Small Business Owner

Wednesday, October28, 2020 / 01:00PM / By FCMBBusiness Zone / Header Image Credit: FCMB Business Zone

Setting up a business inNigeria is one of the roads to financial independence. As most persons who havestarted a business will know, the task of setting up shop is not an easy one asit is fraught with many false starts and setbacks. Most of the time, businessesdo not do well because the businessowners failed to takecognisance of key elements incidental to business success. One of the elementsthat can make or mar a business is legal compliance.

Legal compliance is the wayand method through which a business complies with the legal requirementsregulating the business environment, sector, and geographical location of abusiness.

Laws are made to regulate thebusiness environment as a means for the state to ensure a level playing fieldfor all persons who seek to do business within the state. Laws generally helpto ensure that there are certain guarantees within a state which makes businesspossible as there is an element of predictability. These legal requirementshelp to put business activity in check to ensure that stakeholders will havethe required assurances to invest in the state.

Some of these regulations arealso in place to ensure that businesses give some of the benefits derived fromthe use of government provided amenities utilised in the process of servicecreation and goods manufacture back to the state for redistribution to thepeople. While some other regulations are in place to ensure that consumers ofgoods and services can be assured of a certain level of value for their money.In all, the regulations are made as a corollary of government's duty to thepeople to ensure the welfare and security of lives and property are catered to.

Within the Nigerian businessregulation landscape, several laws and regulations abound to regulate businessactivities which a business that falls under the scope of application of suchregulation or law is duty bound to observe. As a result of the multiplicity ofsuch regulations, it is sometimes very difficult to keep up with them and thisusually leads to sanctions such as fines and penalties, forfeiture of licenses,and sometimes even criminal prosecution.

Quite a few institutions areset up by the government to monitor and enforce compliance with therequirements of laws and regulations affecting businesses. These institutionsinclude the Corporate Affairs Commission, the Federal Inland Revenue Service,the Inland Revenue Service of the various states, the National Agency for Foodand Drug Administration and Control, Securities and Exchange Commission, theNational Information Technology Development Agency and the StandardsOrganisation of Nigeria among others. There are also regulations monitored andenforced by local governments and their designated task forces. Businesses alsohave professional bodies that prescribe certain requirements for regulating theactivities of their members.

For this article however, ourfocus will be on the general compliance requirements for businesses that intendto setup within the Nigerian business landscape. Below is a compliancechecklist that every business enterprise must consider and ensure compliancewithin order to enjoy undisturbed business activity in Nigeria.

1. Company Registration

Every business inNigeria must be registered with the Corporate Affairs Commission (CAC) within28 days of commencement of business activity by virtue of Section 574(1) CAMA.A business can register as either a business name or a company. Companies canbe a limited liability company or an unlimited liability company. Companies canalso be either a private limited/unlimited company or public limited/unlimitedcompany. While a business name can be registered with only one person as a soleproprietor, a company must have a minimum of two shareholders.

2. Tax Identification Number (TIN)

Every person thatdoes business has a duty to pay taxes. Consequently, it is required that everybusiness must register as a taxpayer and get a tax identification number eitherfor the proprietor(s) in the case of business names or the company in the caseof corporates. The tax identification number is required for the payment oftaxes. Paying taxes is a major requirement of law.

Business namesare required to pay Personal income tax while corporates must pay CompaniesIncome Tax and Withholding Tax. Both companies and business names must both payvalue added tax on vatable goods and services.

3. Business Premises Registration

Business arerequired to undertake business premises registration by the payment of businesspremises registration fees/levy in the first year of doing business and arenewal fee for every other year of carrying out business operations. The rateof fees varies on whether the business premises is in a rural or urban area andthe state in which it is located.

4. NAFDAC Registration number

This is requiredfor businesses in the packaged food and drugs business. It is a mandatoryrequirement that producers of these products obtain a NAFDAC registrationnumber for each of their products. The National Agency for Food and DrugAdministration and Control is the regulatory body charged in ensuring thequality and standard of packaged foods and drugs. They carry out an inspectionof both facility and product before issuing a number. The Agency is responsiblefor controlling, maintaining the distribution of transportation, advertisement,exportation, importation, manufacture, and the registration of the categoriesof products such as drugs, chemicals, consumable goods, cosmetics, biological,and medical services.

5. Environmental Impact Assessment

Section 2 (1) ofthe Environmental Impact Assessment Act requires an assessment of public orprivate projects likely to have a significant (negative) impact on theenvironment. Section 2 (4) of the Act also specifies that an application inwriting to the National Environmental Standards and Regulation EnforcementAgency (NESREA) before embarking on projects for their environmental assessmentto determine if approval will be granted or otherwise. This is mandatory forbusinesses taking up development activities such as creation of parks, mining,quarries, agro-allied, fisheries, and related industries. This assessment isrequired to produce a report on the effect of the development activity on theenvironment.

See More Requirements HERE