Exchanges

• The Nigerian Exchange Limited, which lists equity securities and debt securities
• FMDQ Securities Exchange Limited, which lists debt securities, derivatives, and money market instruments
• NASD PLC, an over-the-counter platform which admits unlisted equity securities
• AFEX Commodities Exchange Limited, a commodities exchange
• Lagos Commodities and Futures Exchange, a commodities exchange
• NCX Commodity Exchange, a commodities exchange

Current number of Listed Companies

Approximately 157 on The Nigerian Exchange Limited

Regulatory body

Securities and Exchange Commission (SEC)

Public offers / disclosure regulations

Investments and Securities Act, 2007 (ISA) [3]

Rules and Regulations of the Securities and Exchange Commission, 2013 (as amended) (SEC Rules)

The Rulebook of The Nigerian Stock Exchange 2015 (NGX Rulebook) 

Amendments to the Listing Rules of the Nigerian Exchange Limited, 2022

FMDQ Bond Listing and Quotation Rules

Takeover / Merger Regulations 

The laws and regulations governing takeover/merger in Nigeria are set out in the:

• Federal Competition and Consumer Protection Act 2018
• Merger Review Guidelines 2020
• Merger Review Regulations 2020
• Merger Review (Amended) Regulations 2021
• Investment and Securities Act, 2007
• SEC Rules (as amended and supplemented from time to time)
• Companies and Allied Matters Act 2020

Corporate Governance Code

Code of Corporate Governance for Public Companies (the Code), 2018

Principal legislation

The principal regulation governing the capital market in Nigeria is the Investments and Securities Act (ISA).

Impact of regulatory regime on business

The Federal Competition and Consumer Protection Commission (FCCPC) prescribes the threshold for the notification of mergers to the FCCPC and for determining when a merger is to be classified as a large (and thus, mandatorily notifiable) or small merger (and thus, voluntarily notifiable).

For a merger to be considered a “large” merger, the combined annual turnover of both the acquirer and the target in, into or from Nigeria, must equal or exceed N1,000,000,000 (One Billion Naira) or/and the annual turnover of the target in, into or from Nigeria equals or exceeds N500,000,000 (Five Hundred Million Naira).

Processing fee for schemes of merger/acquisition and take-over are as set out below:

Pursuant to the Merger Review (Amended) Regulations, 2021, the estimated processing fee would be the higher of the sum of either the percentages of the consideration sum payable for the transaction, or the sum of the percentages of the last combined annual turnover of the merging undertakings.

The relevant turnover will be the combined annual turnover of all the merging parties in Nigeria, for the preceding financial year. In addition, there is an application fee of N50,000.00 (Fifty Thousand Naira) payable in respect of each company involved in the merger.

The standard time frame for the FCCPC review is 20 – 40 business days in the case of small mergers, and 60 – 120 days in the case of large mergers. However, the parties may opt for an expedited review procedure, upon payment of a statutory fee of N10,000,000.00 (Ten Million Naira). The expedited review procedure reduces the timeframe for the review by 40%.

Legislation

The Federal Competition and Consumer Protection Act 2018 (FCCPA) is the primary legislation on competition which promotes fair, efficient and competitive markets in the Nigerian economy. Consequently, where the FCCPC determines that the business practice of a company prevents or substantially reduces competition, the FCCPC may, in the public interest, order the break-up of the company into separate entities in such a way that its operations do not cause a substantial restraint of competition in its line of business or in the market.

In addition to the FCCPA, the Nigerian Communications Act - Competition Practices Regulations 2007 (the NCC Regulations) made pursuant to the Nigerian Communications Act, empowers the Nigerian Communications Commission (NCC) to review certain transactions for the acquisition of the shares of a telecommunications company for competition concerns. Further, the Banks and Other Financial Institutions Act, 2020 (BOFIA) contains provisions on restructuring, reorganisation, mergers and disposals of banks. Separately, the Securities and Exchange Commission is empowered to regulate mergers, acquisitions, combinations or other affected transactions between or among companies, involving acquisitions of shares, assets, business, or subsidiaries of a public company.

Scope

The FCCPC initiates broad-based policies and reviews economic activities in Nigeria to identify and prohibit anticompetitive and restrictive practices that may distort competition or constitute an abuse of a dominant position of market power. Relatedly, the FCCPC reviews and analyses mergers and other business combinations or arrangements to ensure that such combination(s) do not distort or impede the efficiency of the markets in Nigeria.

Separately, the FCCPC also regulates anti-competitive activity and conduct and transactions with provisions that may indicate or lead to price manipulation, agreements in restraint of competition, cartels, abuse of dominant positions and monopolies.

Ratified?

Yes

Corruption Perception Index rank worldwide for 2022

150

Signatories to United Nations Convention Against Corruption (UNAC)?

Yes

UNAC Ratified?

Yes

Signatories to the African Union Convention on Preventing and Combating Corruption?

Yes

Corruption Perception Index Score for 2022

24

Signatories to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?

No

Enforcement of foreign judgments

There are three (3) regimes under which foreign judgments may be enforced in Nigeria:

Recognition and enforcement of foreign judgment by Nigerian courts are governed by:

(a)    The Reciprocal Enforcement of Judgment Ordinance 1922, which was enacted during the colonial era and preserved by the Foreign Judgments (Reciprocal Enforcement) Act 1961 (The “Act”).

The courts of Nigeria will recognise and enforce (without re-examination or re-litigation of the matter adjudicated upon) any judgment rendered by the courts of England and Wales, in respect of any dispute which satisfies the requirements of the Reciprocal Enforcement of Judgments Ordinance, Cap 175 Laws of the Federation of Nigeria, 1958 (the Ordinance). The requirements under the Ordinance are as follows:

• the application for registration and enforcement of the judgment of the English court must be filed within 12 months of the date of the judgment or such longer period as may be allowed by the Nigerian court.
• the English court must have acted within the scope of its jurisdiction.
• the defending party must have voluntarily appeared or otherwise submitted or agreed to submit to the jurisdiction of the English court.
• the defending party must have been duly served with the court processes (leading to the judgment).
• the judgment must not be one that was obtained by fraud.
• there must be no appeal pending and the other party must not be entitled to appeal the judgment (at the time the enforcement is sought) or, if the other party is entitled to appeal, it must be established that such party has not shown any intention of appealing.
• the judgment is not in respect of a cause of action, which for reasons of public policy (or any other reason) the Nigerian courts would have refused to give judgment.

(b)    The Foreign Judgments (Reciprocal Enforcement) Act 1961, which provides for judgments obtained in the superior courts of any country to which the Act applies to be enforced by registration under Part I of the Act.

Under the Foreign Judgment (Reciprocal Enforcement) Act (the Act), a judgment obtained in a foreign country may be enforced in Nigeria within 6 years of the judgment or award where there exists a reciprocal agreement between Nigeria and the foreign jurisdiction to recognise and enforce judgments delivered by courts in their respective jurisdictions, provided that such foreign judgment will not be enforced if it has been wholly satisfied; or it could not be enforced by execution in the country of the original court. However, the courts of the Federal Republic of Nigeria will recognise and enforce (without re-examination or re-litigation of the matter adjudicated upon) any judgment of a court of a foreign jurisdiction to which the Act applies, even where there is no reciprocal agreement between Nigeria and such foreign jurisdiction, where:

• the application for registration and enforcement of the judgment of a New York court must be filed in a Nigerian court within 12 months after the date of the judgment or such longer periods as may be allowed by the Nigerian court;
• the judgment has not been wholly satisfied;
• the judgment is final and conclusive as between the parties thereto;
• there is payable under such judgment, a sum of money, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty; and
• the judgments would have been enforceable by execution in the jurisdiction of the original court.

(c)    Common law, which recognises the enforcement of a judgment obtained outside the jurisdiction, upon an action on the judgment. Under this procedure, the party wishing to rely on same must institute a fresh action. The judgment creditor's best course of action will be to file a new action using the undefended list procedure or summary judgment procedure, where a judicial decision can be rendered without a full trial, in order to save time and when the claimant firmly believes that his claim cannot be contested. For a foreign judgment to be enforceable under the Common Law procedure in Nigeria, it must be a monetary judgment.

Effectiveness of the Court System

Nigerian courts are becoming increasingly effective in the administration of justice, however, because litigation is sometimes protracted, Alternative Dispute Resolution (ADR) mechanisms are often   considered  to be expedient modes of dispute resolution in many commercial transactions. Arbitration and Mediation are encouraged as means of dispute resolution and many State governments are putting infrastructure in place to support these ADR mechanisms. For example, Lagos State has established the Lagos State Multi-Door Courthouse as a mediation centre for the resolution of disputes.

Enforcement of arbitral awards

Arbitral awards may be enforced through the following procedures:

• by instituting an action in court upon the award;
• by registration under the procedure for the reciprocal enforcement of judgments;
• by an application for the recognition and enforcement of the award under section 57 of the Arbitration and Mediation Act; and
• by enforcement under the New York Convention, 1958.

Structure of the court system

The Courts are divided into superior courts of record and inferior courts . The structure of the Nigerian court system is as follows (in order of hierarchy):

Superior Court of record

• Supreme Court
• Court of Appeal
• High Court of the States and Federal Capital Territory (FCT) / Federal High Court / National Industrial Court / Sharia Court of Appeal of the States & FCT / Customary Court of Appeal of the States & FCT

Inferior Court of record

• Magistrates' / District Court
• Customary Courts / Area Courts / Sharia Courts
• Court Martials

Perception of the local courts

The Nigerian judiciary has undergone significant reforms in recent times as there have been concerted efforts to improve the case management system and restore confidence in the judiciary. A recent significant constitutional reform towards ensuring the financial independence of state judiciary has recently been implemented.

Arbitration

The principal legislation on arbitration in Nigeria is the Arbitration and Mediation Act, 2023.

Foreign investment incentives

The foreign investment incentives available in Nigeria include:

• pioneer status (a tax holiday for certain qualified industries);
• guarantee against expropriation;
• 100% foreign ownership of businesses / companies (with the exception of businesses on the negative list);
• tax credits;
• capital allowances;
• investment allowances;
• tax exemptions;
• duty drawback;
• subsidies;
• unhindered repatriation of funds;
• export expansion grants;
• export development funds;
• double taxation reliefs; and
• guarantee against expropriation

However, in the following 3 industries/sectors laws, these are subject to local content provisions as stipulated in the Nigerian Oil and Gas Industry Content Development Act, the Advertising Regulatory Council of Nigeria Act, 2022 and the Coastal and Inland Shipping (Cabotage) Act.

A comprehensive list of available incentives are available here

Foreign investment rules

Listed companies

There is no restriction on the amount of equity that a foreign company may hold in a listed company.

A Nigerian company may be listed on either the:

• Premium Board;
• Main Board;
• lternative Securities Market Board;
• Growth Board; or
• Tech Board.

Depending on the relevant Board, the Nigerian Exchange Limited requires that a minimum of 10 - 20% of the issued shares of a publicly listed company are held by the public.

Advertising

• Advertising Regulatory Council of Nigeria Act, 2022
• Nigerian Communications Commission Guidelines on Advertisements and Promotions
• Guidelines for Advertisement of Regulated Products in Nigeria (NAFDAC/RR/019/00)
• Lagos State has its own law and regulatory body, namely, the Lagos State Structures for Signage and Advertisement Agency Law 2006, and the Lagos State Signage and Advertisement Agency, respectively. The Lagos State Signage and Advertisement Agency regulates outdoor advertising and signage displays in Lagos State. Although the Lagos State law is not nationally applicable, it is relevant to the extent that Lagos is the commercial nerve centre of Nigeria.
• Constitution of the Federal Republic of Nigeria, 1999
• Federal Competition and Consumer Protection Act 2018
• Consumer Protection (Sales Promotions) Regulations 2005

Other industries

• Banking - Banks and Other Financial Institutions Act
• Aviation - Civil Aviation Act; Nigeria Civil Aviation Regulations
• Companies - Companies and Allied Matters Act
• Power - Electric Power Sector Reform Act
• Manufacturing - Factories Act; National Environmental Standards Regulations Enforcement Agency (Establishment) Act; Environmental Impact Assessment Act; National Agency for Food and Drug Administration and Control Act; Standards Organization of Nigeria Act;
• Insurance - Insurance Act
• Capital markets - Investments and Securities Act; Federal Competition and Consumer Protection Commission Act
• Foreign investment - Nigerian Investment Promotion Commission Act; National Office for Technology Acquisition and Promotion Act
• Petroleum - Nigerian Oil and Gas Industry Content Development Act; Petroleum Industry Act
• Mining - Nigerian Minerals and Mining Act
• Media – Nigerian Broadcasting Commission Act; Nigeria Broadcasting Code; Nigerian Press Council Act; Printing Presses (Regulations) Act; Freedom of Information Act
• Pensions - Pension Reform Act
• Telecommunications - Nigerian Communications Act

EXCHANGE CONTROL

The foreign exchange market in Nigeria is regulated pursuant to the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act Cap F34 LFN 2004 (FEMM Act), the Central Bank of Nigeria Foreign Exchange Manual (CBN Manual) and the guidelines and circulars issued from time to time by the Central Bank of Nigeria (CBN). The FEMM Act establishes a foreign exchange market and authorises the CBN to make regulations for transactions conducted within the market.

Nigeria’s foreign exchange market is made up of three major segments: the CBN window, the interbank and the Bureau de Change. However, please note that the CBN recently discontinued the sale of foreign currencies to Bureaux de Change operators in Nigeria. Separately, a parallel foreign exchange market exists between unlicensed players who buy and sell, or licensed players and third parties that do not meet the documentation requirements for an eligible transaction at the official bank rate. It has been established that scarcity in the official sector and prevailing bureaucratic procedures necessitated the growth and development of the parallel market.

To access foreign currency at the official bank rate, the transaction must qualify as an eligible transaction within the definition of the CBN Manual. Eligible transactions include expatriate personal home remittances (monthly remittance, gratuity, leave pay, final balance, bonus, provident fund and company’s share of provident/pension fund liabilities to expatriate staff); educational expenses, re-insurance, insurance, net proceeds of international air ticket sales, aircraft lease fees, charter fees for bunkering, fishing and other vessels, repairs and maintenance of all shipping vessels and aircraft, travels (personal travel allowance, business trip allowance, foreign medical treatment, pilgrimage), conferences, seminars and training, etc.

The CBN appoints as Authorised Dealer or Authorised Buyer of foreign currency, any bank or non-banking corporate organization which shows evidence of adequate resources and capacity to operate in accordance with the provisions of the FEMM Act. All foreign currency to be utilised for the purchase of securities in Nigeria must be inflowed through an Authorised Dealer, who is required to issue a Certificate of Capital Importation (CCI) within a period of 24 – 48 hours.

In a bid to enhance transparency and efficient processing of foreign investment inflows to Nigeria, the CBN has deployed the electronic CCI platform and now requires Authorised Dealers to issue CCIs to investors in electronic form.

The CCI, once issued, guarantees an investor access to the Nigerian foreign exchange market for the repatriation of dividends, interest and profits (net of taxes) and the remittance of proceeds (net of all taxes) in the event of the sale or liquidation of the enterprise or any interest attributable to its investment.

CORPORATION TAX

Companies Income Tax (CIT) is payable each year on income tax on profits accruing in, derived from, brought into or received in Nigeria. It is payable by companies that are registered in Nigeria and non-resident entities carrying on business or that have a Significant Economic Presence (SEP) in Nigeria.

Currently, the CIT rate in Nigeria is:

• Exempted - profits of Small companies (companies with annual gross turnovers of N25million or less).
• 20% - Medium-sized companies (companies with gross annual turnovers greater than N25million but less than N100 million).
• 30% - Large companies (Companies with annual gross turnovers higher than N100million).

Taxation of companies in the oil & gas sector is primarily governed by the Petroleum Industry Act, 2021, which repealed the Petroleum Profit Tax Act and, instead, imposed: Hydrocarbon Tax, Companies Income Tax and Tertiary Education Tax.

The Hydrocarbon Tax is only applicable to upstream petroleum operations (except for deep offshore operations) in relation to crude oil, condensate and natural gas liquids produced from associated gas. Accordingly, the Federal Inland Revenue Service (FIRS) is empowered to collect the following:

• Hydrocarbon tax of 15%- 30% on profits from crude oil production;
• CIT at 30%; and
• Tertiary Education Tax at 3%.

It is however important to note that holders of Oil Mining Licences and Oil Prospecting Licences will continue to be taxed under the old law (i.e the Petroleum Profit Tax Act) except in cases where a conversion contract is executed as specified by the Petroleum Industry Act, 2021.

Generally, company dividends and other company distributions, whether or not of a capital nature, made by a Nigerian company are liable to tax at source at the rate of 10%. Dividends paid in the form of bonus shares or scrip dividends to individual shareholders are not subject to withholding tax.

TRANSFER PRICING

The Transfer Pricing regime in Nigeria is regulated in accordance with the Income Tax (Transfer Pricing) Regulations, 2018. The Companies Income Tax Act also contains provisions granting the Federal Inland Revenue Service the power to adjust transactions deemed to be “fictitious” or “non-arms length”.

It is a requirement of Regulation 4(1) of the Transfer Pricing Regulations that connected taxable persons follow the arm's length principle when engaging in transactions. Where a connected taxable person fails to comply with the provisions of the Regulation, the Federal Inland Revenue Service (FIRS or the Service) is empowered to make adjustments where necessary to make a controlled transaction consistent with the arm's length principle.

In determining whether the result of a transaction or series of transactions are consistent with the arm's length principle, one of the following transfer pricing methods is applied:

• the Comparable Uncontrolled Price method;
• the Resale Price method;
• the Cost Plus method;
• the Transactional Net Margin method;
• the Transactional Profit Split method; or
• any other method which may be prescribed by regulations made by the FIRS from time to time.

PAYROLL TAX AND SOCIAL SECURITY

The Pension Reform Act (PRA), 2014 establishes a contributory pension reform scheme for the payment of retirement benefits of employees of the Public Service, the Federal Capital Territory and the Private Sector in the Federal Republic of Nigeria. All employers in the public sector, and private employers that have 15 or more employees are required, under the Pension Reform Act (PRA) 2014, to participate in a contributory pension scheme in favour of their employees. Employers are required to make a compulsory monthly pension contribution of 10% of an employee's basic salary, transport and accommodation allowances. An employee also contributes a minimum of 8% of monthly earnings. The minimum total contribution is 18%, however, there is no maximum contribution limit.

PERSONAL INCOME TAX

Personal Income Tax (PIT) is a tax levied on individuals including employees, partners in a partnership, unincorporated trust, joint ventures, families and communities.

For residents of a State in Nigeria, there is a graduated scale as indicated below.

• First N300,000 taxed at 7%
• Next N300,000 taxed at 11%
• Next N500,000 taxed at 15%
• Next N500,000 taxed at 19%
• Next N1,600,000 taxed at 21%
• Above N3,200,000 taxed at 24%

Where an employee is not in Nigeria for a period or periods amounting to an aggregate of 183 days (inclusive of annual leave or temporary period of absence) in any 12-month period commencing in a calendar year, and ending either within the same year or the following year, such employee will be regarded as non-resident and will not be required to pay personal income tax.

The Finance Act 2020 amended the Personal Income Tax Act to provide that income earned by non-resident individuals, executors and trustees from technical, professional, management, or consultancy services remotely provided to a person resident in Nigeria shall be subject to a final 10% WHT in Nigeria, if the non-resident individual has a significant economic presence (SEP) in Nigeria.

DIVIDENDS

Dividends are subject to a 10% withholding tax whether paid to resident or non-resident recipients unless the rate is reduced under a double taxation treaty.

Where a non-Nigerian company which is not engaged in trade or business within Nigeria receives a dividend from a Nigerian company, the only tax payable on the dividend is the 10% withholding tax. No further tax is due from the non-Nigerian company.

STAMP DUTY

Stamp duties are charged by both federal and state governments on various commercial and legal documents, such as deeds of transfer, insurance policies and bills of exchange.

Stamp duties are regarded as taxes on instruments recording transactions, and the rates chargeable would depend on the classification of the document. Some documents attract stamp duties on a nominal basis, while others are assessed on an ad valorem basis.

By the combined effect of the Finance Act 2019 and the clarification provided by the Federal Inland Revenue Service, any document executed outside Nigeria will be "deemed to be received in Nigeria" and consequently, liable to stamp duty if:

• such document is retrieved or accessed electronically in or from Nigeria;
• such document (or an electronic copy of it) is stored on a device (including a computer or magnetic storage) and brought into Nigeria; or
• such document (or an electronic copy of it) is stored on a device or computer in Nigeria;

ROYALTIES

The applicable tax rate payable on royalty payments by resident companies is 10% while resident individuals are charged at a rate of 5%. Non-resident companies and individuals are charged at a rate of 10% unless the non-resident company or individual is domiciled in a jurisdiction which has a double taxation treaty with Nigeria.

CAPITAL GAINS TAX

Capital Gains Tax (CGT) is charged at the rate of 10%. CGT accrues on an actual year basis and pertains to all gains accruing to a taxpayer from the sale, lease or other transfer of proprietary rights in a chargeable interest which may be corporeal or incorporeal (including digital assets) whether in or outside Nigeria.

It is imperative to note that the Finance Act 2021 amended the CGT Act by imposing CGT on the disposal of shares, subject to certain conditions.
By virtue of the Finance Act, 2023 capital losses can now be offset against capital gains, provided that such losses shall only be deductible against the same type of asset.

Further, where the aggregate capital losses in a tax year exceed the aggregate chargeable gains arising from the disposal of the same type of asset in the following year, a company may carry forward losses for deduction from chargeable gains arising from the disposal of such asset. However, those losses are only permitted to be carried forward for a maximum of five years immediately after the year in which the loss was incurred.

LOSSES

Under the Companies Income Tax Act, when ascertaining the profits of a company, prior losses sustained in the business are deductible.  A company may carry forward its tax losses or offset against its future taxable income indefinitely. However, losses from one trade / business cannot be offset against the income from another trade or business.

EXPORT PROCESSING ZONE

Approved enterprises operating within an area designated by the president to be an Export Processing Zone (Zone) are exempted from all Federal, State and Government taxes, levies and rates.  Legislative provisions pertaining to taxes, levies, duties and foreign exchange regulations do not apply within the Zones.

THIN CAP REGULATIONS

Under Nigerian law, there are no express thin capitalisation regulations and interest is a deductible expense.  However, in related parties' transactions, the FIRS may adjust the transaction to impose an 'arm's length' interest rate and tax the borrower's profit accordingly.

REAL PROPERTY TAX

Land use charge is payable in respect of properties. The charge is typically paid by the property owner and the computation of the charge would depend on the location of the property.

TECHNICAL SERVICE FEES

Technical service fees are subject to withholding tax at the respective rates of 10% for corporate recipients and 5% for individuals.

VALUE ADDED TAX

VAT is currently charged at the rate of 7.5% of the purchase price of chargeable goods and services.

INTEREST

A withholding tax of 10% is imposed on the payment of interest to residents and non-residents. The expenses incurred by way of interest on related party loans are tax-deductible.

[1] Based on data from The World Factbook by the Central Intelligence Agency. See Nigeria - The World Factbook (cia.gov)

[2] Based on data from The World Factbook of the Central Intelligence Agency. See Nigeria - The World Factbook (cia.gov); see also https://www.indexmundi.com/nigeria/religions.html

[3]   The Senate of the Federal Republic of Nigeria has passed into law, the Investments and Securities Bill, 2023. The Bill, which currently awaits presidential assent to come into full force and effect seeks to repeal the Investments and Securities Act, 2007 and to establish a new market infrastructure and wide-ranging system for the regulation of investments and securities in Nigeria.