Nigeria is not competing adequately for foreign direct investment. I will explain this.
The Ministry of Interior is responsible for licensing businesses in Nigeria wholly foreign-owned or joint venture owners with expatriates.
According to the “Handbook on Expatriate Quota Administration issued by the Federal Ministry of Interior, the ministry approves this investment in Nigeria by issuing a business license.
Thus, to do business in Nigeria as a corporate entity owned 100% by foreigners or a joint venture between Nigerians and foreigners, the entity needs a Business Permit issued by the Ministry of Interior.
The business permit requires the entity to have a minimum paid-up share capital of N100m. The handbook also states, “The value of equipment or machinery imported into the country for the purpose of conducting business could also form a portion of the paid-up capital to be invested in the country.”
The Ministry of Interior requires proof of this capital being imported or other funding source, including a “Certificate of Capital Importation along with a covering letter from the bank or with a scannable QR Code.”
In addition to this, the investors must show proof that they have acquired a permanent, I stress again permanent owner operating premises, thus evidence of acquisition of permanent operating premises, i.e., lease/tenancy agreement, C of O or R of O.
Let me use this example: if I set up a company to offer online training. I can attract the New York Institute of Finance to partner with me to provide financial training in Nigeria. I MUST invest N100m to show evidence of that via a Capital Importation Certificate and then get a permanent place of business in Nigeria to get a business license to operate legally in Nigeria.
These are onerous requirements; why do I need N100m to capitalize on my business? Why is N100m minimum for all companies?
What happens if I do not have N100m? Or a permanent residence?
Easy; I can visit the US or Rwanda and incorporate a company there. The US or Rwanda do not require N100m paid-up capital. This is one reason 80% of Nigerian startups are flocking to Delaware to incorporate: it is far CHEAPER.
Nigeria must realize that investment capital is mobile and that Nigeria, as an investing destination, is competing with nations like the US and Rwanda.
This circular from the Ministry of Interior makes Nigeria uncompetitive to foreign investment. It imposes onerous requirements to create local jobs.
It feels more like a plan to increase Internally Generated Revenue at the expense of Foreign Direct Investment.
Cancel the N100m requirement or amend it to reflect the necessary capital required for different categories of business.