How is Nigeria Fairing: Starting a Business

How is Nigeria Fairing: Starting a Business in Nigeria
Nigeria is currently ranked 138th out of 190 countries with respect to “Starting a Business” on the World Bank Ease of Doing Business Index (DB Index). This is because starting a business in Nigeria can be difficult and usually requires twice as many procedures, and three times the amount of time, as it takes to do a similar activity in developed economies. In New Zealand for instance, registration of a business is an online procedure that takes less than one day.
The report shows that the process of starting a new business in Nigeria is hampered by government bureaucracy, with people resorting to third party agents to help them facilitate the process of business registration.
The steps of launching a business are shown below. Included are: the number of procedures entrepreneurs can expect to go through to start up and formally operate an industrial or commercial business, as well as the time and cost to complete these procedures and the paid-in minimum capital requirement as a percentage of gross national income (GNI) per capita.

No improvement in number of procedures

Procedures

The World Bank report 2017 indicated that 8 procedures are required, over a period of 25 days for starting a business in Nigeria, using Lagos as a case study. There has been no reduction in the number of procedures required to start a business in Nigeria over the past three years, the number remains at 8 procedures over the last 3 years. The procedures include:
  • Reserving a unique company name at the Corporate Affairs Commission (CAC), which takes average of 2 days to complete;
  • Preparing the requisite incorporation documents and paying the stamp duty, 7 days;
  • Signing the declaration of compliance (Form CAC 4) before a Commissioner for Oaths or a Notary Public, 1 day;
  • Registering the company at the Corporate Affairs Commission and paying the fees at the bank desk of CAC, 10 days;
  • Making a Company seal, 1 day (simultaneous with previous procedure);
  • Registering for income tax and VAT at Federal Inland Revenue Service, 1 day;
  • Registering for personal income tax, PAYE, at state tax office, 2 days (simultaneous with previous procedure) and;
  • Registering business premises with Lagos State government and paying the business premises levy at a designated bank, 1 day (simultaneous with previous procedure).

Reduction in the number of days

Time

There has been a significant improvement in the time it takes to start a business. According to the World Bank Doing Business index 2017, it takes approximately 25 days to start a business in Nigeria as compared to the 30 days which has been the case over the past 3 years.

No.
Procedures
Time (Days)
1.
Reserve a unique company name at the Corporate Affairs Commission (CAC)
2 days
2.
Prepare the requisite incorporation documents and pay the stamp duty
7 days
3.
Sign the declaration of compliance (Form CAC 4) before a Commissioner for Oaths or a Notary Public
1 day
4.
Register the company and pay fees
10 days
5.
Make a company seal
1 day (simultaneous with previous procedure)
6.
Register for income tax and VAT at Federal Inland Revenue Service
1 day
7.
Register for personal income tax PAYE at the State Tax Office
2 days (simultaneous with previous procedure)
8.
Register business premises with the Lagos State Government (if business is in Lagos) and pay the business premises levy
1 day (simultaneous with previous procedure)

Reduction in the cost

Cost

There has been a significant reduction in the cost of starting a business over the past five years.

No.
Procedures
Cost
1.
Reserve a unique company name at the Corporate Affairs Commission (CAC)
NGN 500 application form
2.
Prepare the requisite incorporation documents and pay the stamp duty
0.75% stamp duty paid on share capital + NGN 500 for each additional copy of Memorandum and Articles of Association stamped (2 copies)
3.
Sign the declaration of compliance (Form CAC 4) before a Commissioner for Oaths or a Notary Public
NGN 500 at the court or NGN 4,000 – NGN 5,000 with a Notary Public
4.
Register the company and pay fees
5.
Make a company seal
NGN 4,000 – NGN 6,000
6.
Register for income tax and VAT at Federal Inland Revenue Service
no charge
7.
Register for personal income tax PAYE at the State Tax Office
no charge
8.
Register business premises with the Lagos State Government (if business is in Lagos) and pay the business premises levy
NGN 10,000

What is the Government Doing?

The Presidential Enabling Business Environment Council (PEBEC) on February 21, 2017, approved a 60-day National Action Plan on Ease of Doing Business in Nigeria. The mandate of the Action Plan is to: “remove critical bottlenecks and bureaucratic constraints to doing business in Nigeria” and “move Nigeria 20 steps upwards in the World Bank Ease of Doing Business Index.”

The Action Plan, therefore, seeks to streamline the process of starting and registering a business in Nigeria from ten to two days by introducing the following initiatives: Enable online submission of registration documents; Improve reliability of Corporate Affairs Commission (CAC) online portal; Consolidate incorporation forms into one form; and Integrate Federal Inland Revenue Service (FIRS) e-payment solution into CAC’s online portal.

An enabling business environment will not only encourage domestic investment in different sectors of the economy, it will also go a long way in significantly improving Nigeria’s foreign direct investment, currently recorded as 1,348.23 USD million in 2016 (Trading Economics).

Read on:  How is Nigeria Fairing:  Dealing with Construction Permits

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