Regulatory and compliance requirements every business owner in Nigeria must know

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Businesses operating in Nigeria are increasingly being regulated as the government strives to promote good corporate governance and best practices.

Laws and regulations are formulated by lawmakers to guide the conduct of individuals and institutions, businesses inclusive.

To ensure your business is on the right side of the law and compliant, there are certain key regulatory requirements, which must be obtained.

Key Legal Requirements

Tax Clearance Certificate – This needs no introduction and is issued by the Federal Inland Revenue Service. In their bid to capture the informal sector into the tax net, the FIRS has basically ensured that as a compliance requirement, most multinationals and large-cap companies must request for Tax Clearance Certificate from Vendors before contracts are consummated and LPO’s issued. Tax clearance Certificates are obtained after filing your Audited Accounts on or before the sixth month of any financial year and paying the tax liability if any. For example, Audited Accounts for the year ended December 31, 2012 must be filed on or before June 30 2013. Applications filed after the stipulated period attract a penalty.

Vat and WHT Remittances – VAT and WHT are indirect taxes collected by companies on behalf of the Government. The Government expects these deductions to be remitted monthly as such any failure to do so can attract very stiff penalties. You must make sure your remittances are up to date. Non-evidence of VAT and WHT remittances can often lead to a non-issuance of Tax Clearance Certificate.

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Monthly Employee deductions (Pension, NHF, PAYE) – Employee deductions are statutory payments all employers are expected to remit to respective bodies on behalf of their employees. Pension Fund deductions are remitted to the Pension Fund Custodians, NHF (National Housing Fund) which is a contribution to the fund by employees to enable them access mortgage loans is contributed to the Federal Mortgage Bank and PAYE is the statutory income tax employees pay based on Pay As You Earn paid to the resident State Government. Failure to comply attracts various penalties as prescribed by law.

Annual Returns – Annual Returns (AR) are statutory filing which must be done to the Corporate Affairs Commission. Annual Returns are prescribed under Part XII clause 370-378 in the Company and Allied Matters Act CAMA. They include Audited accounts signed and approved by the shareholders and board of directors of a company, details of shareholdings for the year, debentures or loans etc. AR must be filed within 42 days after a company has had its Annual General Meeting (AGM) Company, which must be filed.

Employee Compensation – Employee Compensation is insurance contributed by employers on behalf of their employees. It is mandatory and collected by the Nigerian Social Insurance Trust Fund (NSITF). NSITF officials regularly inspect organizations for compliance and also proffer still penalties. It is calculated as a minimum monthly contribution of 1% of the total monthly Payroll to the fund.

Industrial Training Fund –The Industrial Training Fund is also another contributory scheme managed by the Industrial Training Fund. Companies are expected to donate 1% of their Payroll Budget. They are however expected to refund part (about 50% of the contribution) of this amount at the end of the year provided companies are able to show evidence of training their staff. However, approval is still subject to conditions stipulated by the Fund irrespective of whether training was carried out.

Lassa Approval – Lagos State Signage Agency (LASSA) approves the placement of signage, billboards etc. in Lagos. Some states have already followed Lagos State by also inaugurating their own Signage Agencies. Common displays such as having the name of your company on a wall, stand alone object or by the lawn close to your office building require LASSA approvals which can be obtained after following specified designs and paying fees. These fees are also charged annually and incur penalties if left unpaid.

Local Government Permits and Levies – The Local Governments also oversee several other licenses such as, Waste Disposal, Environmental Permits, TV licenses etc. Local Governments take these levies seriously and can be quite persistent with collection. Once levies are paid they issue permits accordingly. Default in payment of levies can lead to threat of closure of your premises.

SON Approvals – The Standard Organization of Nigeria requires every company in Nigeria to register the product that they well with them. They enforce standardization processes amongst industry and are recognized by law. Manufacturers and importers of unassembled goods fall under this umbrella and must obtain SON Approvals to trade.

Financial Crime Prevention Returns – For organizations such as banks, hotels, cash vendors, etc the EFCC, CBN, and SSS typically request for a schedule of forex transactions and movement of cash exceeding a prescribed limit. This is to prevent money laundering and other fraudulent activities associated with the movement of cash.

SCUML Certificate

Designated Non-Financial Businesses and Professions are statutorily required to register with the Special Control Unit Against Money Laundering (“SCUML”) of the Economic and Financial Crimes Commission(EFCC) and obtain a registration certificate.

The certification gives your company a clean slate from money laundering, however, it will empower the EFCC to monitor and supervise the financial activities of your company.

The anti-graft agency will also be expecting your cash-based transaction reports (CBTRs) and Currency Transaction Reports (CTRs) for onward forwarding to the Nigeria Financial Intelligence Unit (NFIU).

FRC – The Financial Reporting Council is a new body that requires every company in Nigeria to register with them. They oversee the standardization of preparation of financial reports as prescribed by the Act setting them up. They also require consultants in fields other than accounting to register with them to provide services that are reported in the financial statements. Their scope is quite large and they have begun earnestly to register most companies.

Nigeria Data Protection Commission Registration

This is for companies involved in collecting or processing the personal information of over 2,000 individuals annually.

It is required that they submit a yearly Compliance Audit Report (CAR) to the Nigeria Data Protection Commission (NDPC) via a Data Protection Compliance Organisation (DPCO).

Failure to file CAR within the stipulated period attracts a default fee of 50% of the filing fee.

Early this year, NDPC mandated companies that process the data of Nigerians to register with the commission as “Data Controllers or Data Processors of Major Importance”.

Business Permits

This is for companies operating in Nigeria and is wholly or jointly owned by foreigners.

Such companies are expected to apply and obtain a business/work and residency permit from the Federal Ministry of  Interior.

The business department of the ministry is responsible for the issuance of approval letters and Business Permit to clients.

The certificate remains valid as long as the company’s operations do not infringe upon the laws of the Federal Republic of Nigeria which may lead to its revocation.

  • However, this permit is only for companies with a minimum paid-up capital of N100,000,000 Million naira. Requirements for accessing a business permit include a Certificate of Incorporation or registration of business name duly issued by the Corporate Affairs Commission and the Company’s Current Tax Clearance Certificate or individual income tax certificates for Partnership Businesses/firms (as applicable).

NOTAP Registration

A Nigerian company seeking to transact with a foreigner on a technology-agreement contract is expected to register with the National Office For Technology Acquisition and Promotion (NOTAP) to access to foreign exchange at the official rate.

However,  failure to register the contract will not affect the validity of the contract.

Note: Employees Compensation Act was corrected as 1% of total monthly Payroll and not Basic+Housing+Transport Allowance as initially stated. 5/7/2014

This article originally appeared in Nairametrics on May 20, 2013, and was first modified on 5th July 2014.

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