CORPORATE LAW AND PRACTICE

UNIT 3

FOREIGN PARTICIPATION IN NIGERIAN BUSINESS SECTOR

Foreign participation in the Nigerian business sector is governed by various statutes and regulations. The framework aims to balance attracting foreign investment with protecting local interests and ensuring compliance with national economic policies. The statutes and regulations includes the following:

  1. The Nigerian investment promotion commission act (NIPC ACT): The Nigerian investment promotion commission act (NIPC Act) 1995 is the key legislation governing foreign investments in Nigeria. The act establishes the Nigerian investment promotion commission (NIPC), which facilitates and promotes foreign investment. See section 17 of the NIPC act which provides that a non-Nigerian may invest and participate in the operation of any enterprise in Nigeria. This provision grants foreign investors the legal right to operate and own businesses, subject to compliance with applicable laws.
    However, there are some restrictions on the scope of foreign participation, as outlined in section 31 of the NIPC act, which deals with activities reserved for Nigerian nationals only. While foreign investors have broad access to the Nigerian market, certain sectors are reserved exclusively for Nigerian citizens, as identified under the NIPC act and other related legislation. See section 31 of the NIPC act which specifies that foreign investors are restricted from engaging in industries listed on the "negative list" which includes the production of arms and ammunition, production of and dealing in narcotic drugs and psychotropic substances, and production of military and paramilitary apparel and accoutrements as these sectors are reserved for local entities due to national security concerns.
  2. Companies and allied matters act (CAMA) 2020: The companies and allied matters act (CAMA) 2020 is another key piece of legislation governing corporate practice in Nigeria, including foreign participation. CAMA requires foreign investors to register their businesses before commencing operations in Nigeria. See section 78 of CAMA which mandates that every foreign company intending to carry on business in Nigeria must incorporate a company in Nigeria. Without such incorporation, the foreign entity cannot legally carry out any business activities within the country.
    There are, however, some exemptions provided under section 80 of CAMA, which allow foreign companies to operate without incorporation if the president grants special exemptions which are typically granted for foreign companies invited by the government for specific projects. Under Nigerian law, there is no minimum equity requirement for foreign investors except in specific regulated sectors such as oil and gas or telecommunications, where foreign ownership is subject to sector-specific regulations. See also the case of Attorney-General of the Federation v. Atiku Abubakar (2007) 10 NWLR (Pt. 1041) where the Nigerian courts recognized the right of foreign individuals and companies to own businesses in Nigeria, provided they comply with statutory requirements like registration under CAMA and obtaining relevant licenses.
  3. The foreign exchange (monitoring and miscellaneous provisions) act: The foreign exchange (monitoring and miscellaneous provisions) act, often referred to as the FEMMPA, regulates the inflow and outflow of foreign capital. It provides a legal framework for foreign investors to repatriate profits, dividends, and capital in convertible currencies. See section 15 which allows foreign investors to repatriate their capital and any accrued profits, provided that the investments were brought into Nigeria via authorized dealers and in accordance with the provisions of the act and the case of Shell Petroleum Development Company (SPDC) v. Nigeria Agip Oil Company Ltd. (2017) 11 NWLR (Pt. 1577) where the Nigerian court upheld the provisions of the FEMMPA, allowing for the repatriation of capital and profits by foreign entities, provided they complied with the requirements for proper documentation and authorization through authorized dealers.
  4. National office for technology acquisition and promotion (NOTAP) act: The NOTAP act 1979 mandates the registration of foreign technology agreements in Nigeria. This is intended to ensure that technology transfer from foreign entities to Nigerian companies is properly regulated and monitored. See section 6 of the NOTAP act which requires that all agreements related to foreign technology, including franchise, management, and licensing agreements, must be registered with NOTAP. The aim is to protect local interests and ensure compliance with national policies.
  5. Restrictions under the petroleum industry act (PIA) 2021: The petroleum industry act (PIA) 2021 also places restrictions on foreign participation in the oil and gas sector, particularly in relation to local content. The Nigerian content development and monitoring board (NCDMB) administers local content regulations to ensure that Nigerian companies benefit from the sector. See section 3 of the NOGICD act which states that Nigerian companies must be given preference in the award of oil blocks, licenses, and contracts. This act ensures that foreign companies partner with Nigerian entities, especially in areas where technical expertise is required and the case of FRN v. Halliburton Inc. (2010) a case concerning violations of the Nigerian content act where the court reinforced the importance of compliance with local content requirements by foreign companies operating in the oil and gas sector.
  6. Immigration requirements for foreign participation: Foreign investors and their employees are subject to Nigerian immigration laws, which require appropriate visas and work permits. See the immigration act 2015 which governs the entry, stay, and exit of foreigners in Nigeria and section 36 of the act which provides for expatriate quota approvals, which stipulate the maximum number of foreign employees a company can employ. This ensures that Nigerian workers are not displaced by foreign labor.


CONCLUSION

Foreign participation in the Nigerian business sector is governed by a combination of regulatory frameworks aimed at promoting investment while protecting local interests. Compliance with statutes like the NIPC act, CAMA, FEMMPA, NOTAP act, and sector-specific regulations is essential for foreign entities to operate legally and profitably in Nigeria. These laws, alongside key case law, outline both the opportunities and restrictions foreign investors face when engaging in the Nigerian market.