Saturday, 13 April 2013
Doing business in Nigeria
•Why experts rate it worst among 185 nations By ISAAC ANUMIHE Doing business in Nigeria has been discovered from expert finds to be one of the most difficult among the over 185 economies of the world. A study by the World Bank, which examined the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy’s per-capita gross national income, found that Nigeria was the costliest in terms of money, time and infrastructure deficit. Even the Corporate Affairs Commission (CAC) online system commissioned in June 2005 to facilitate the process, has not helped matters as it immediately went comatose as soon as it took off. The system was expected to search unique company names immediately upon the purchase of an e-payment card from an accredited bank. “Although, this service was widely advertised by CAC, until now the system is not fully operational either because of power fluctuation or because of lack of availability of the pre-paid cards necessary to conduct the on-line transaction. In most cases, the applicants have to go to the CAC office to complete this procedure,” the study said. It further said that to prepare the requisite incorporation documents, the incorporators must complete the requisite statutory forms, prepare and print the memorandum and articles of association and have them stamped by the Federal Inland Revenue Service (FIRS) and this takes seven days with a 0.75 percent stamp duty paid on capital. The declaration by the solicitor engaged in the formation of the company may be sworn to at either the State High Court for a fee of N250 and that lasts one day. ? The same way, the declaration by the solicitor engaged in the formation of the company may be sworn to at either the State High Court for a fee of N250 or at the Federal High Court for a fee of N100. After this, the person will register the company with the CAC and pay fees at the bank desk at CAC. However, to register the company with the CAC, the following incorporation documents are submitted:?? •Name reservation and availability form that will include two copies of memorandum and articles of association, stamped by the commissioner for stamp duties Forms CAC 3, CAC 4, declaration of compliance, Form CAC 7, particulars of directors, Form CAC 2, statement of share capital and return of allotment of shares. That is followed by the payment of incorporation fees of N10,000 for company whose nominal share capital does not exceed N1,000,000, and N10,000 for every N1,000,000 thereafter. Incorporation fees for a company whose share capital exceeds N1,000,000, N10,000 for the first N1,000,000.00 and N10,000 for every additional N1,000,000 or N500 incorporation forms, stamp duties payable on the share capital of a company at the rate of 0.75 per cent, N500 for each additional copy of memorandum and articles of association stamped, N3,000 for certified true copy of memorandum and articles of association, N2,000 for certified true copy of particulars of directors, N2,000 for certified true copy of particulars of shareholders. Moreover, N60,000 is the approximate cost of company incorporation conducted by professionals (lawyers, chartered accountants or chartered secretaries) accredited by CAC and the payment can be done at the bank desk at CAC. A study on the rigours of business in Nigeria noted that “in June 2005, the CAC commissioned a system for online company registration, in which registration documents and payments may be processed electronically by the commission’s accredited lawyers. But the system is not yet fully implemented. This costs N59,592 legal fees; N500 incorporation forms; N20,000 incorporation fees; N500 for each additional copy of memorandum and N500 for additional copy of the Articles of Association stamped; N 3,000 for certified true copy of memorandum and articles of association; N2,000 for certified true copy of particulars of directors; N2,000 for certified true copy of particulars of shareholders.” Also, to register with the Federal Board of Inland Revenue Department of the Ministry of Finance for income tax and VAT, the Federal Inland Revenue Service (FIRS) requires the applicant to complete tax registration forms for corporate income tax registration as well as VAT. “The company submits an application letter to the tax authority for a tax clearance certificate and, for income tax purposes, registers at the integrated tax office.? The registration requires submitting a completed tax office–issued application (taxpayer registration input form, TRIF/2006/001 COYS) with:?Tax registration forms for corporate income tax as well as VAT; an application letter to the tax authority for tax clearance certificate and, for income tax purposes; registers at the integrated tax office.? It requires submitting a completed tax office–issued application (taxpayer registration input form, TRIF/2006/001 COYS) with: completed FIRS questionnaire; memorandum and articles of association; certificate of incorporation; directors’ names and addresses; tax adviser’s name and address; letter of appointment of a tax adviser and corresponding letter of acceptance; the date the company commenced business; names, addresses and mobile numbers of major promoters and the chairman of the company, including their email addresses? Besides the cost of time, money and lack of infrastructure, corruption at every facet and stage of the processes of registration and the general economy are huge drawbacks for investors. Any serious business organization in Nigeria runs on generators to process its goods and services and this affects the cost of products and services to the effect that even imported finished products are cheaper in the Nigerian market. For example, mobile telecommunication companies power over their over 10 million cell sites all over the country with generators; pay security and operators of the generators. Even after paying for the location of the base stations, they still have to tip the community in which the base stations are located for them to allow the stations to stay. The security question has been an intractable issue in Nigeria today. Most of the masts have been blown off by vandals and the companies have replaced them at extra costs. So, for investors, Nigeria is a dreaded place for business because investing in Nigeria is not only at a great cost but at a great risk. Following this, most of the firms have relocated to the neighbouring countries. The result is increase in unemployment and crime. In addition to that, interest rate for credit facilities is unacceptably high in Nigeria. While some banks charge up to 17 per cent, others charge as high as 21 per cent. This has made borrowing difficult for small scale industries.