Nigeria | Highlights of the Business Facilitation (Miscellaneous Provisions) Act

• Enactment of the Business Facilitations Act in Nigeria will affect certain businesses, government agencies, organizations and individuals.
  
  
• The new law includes 21 amendments to existing laws.
  
  
• This Alert summarizes the key amendments.
   

Executive summary

A 2023 change in law in Nigeria could have wide-reaching implications for businesses, government agencies, organizations and individuals.

Nigeria's President Muhammadu Buhari signed the Business Facilitation (Miscellaneous Provisions) Act, 2022 (BFA or the Act) into law on 14 February 2023. The new law has an effective date of 8 February 2023.

The BFA introduced 21 amendments to existing Laws, including the Companies and Allied Matter Act, (CAMA), Investments and Securities Act (ISA), Nigerian Investments Promotion Commission (NIPC) Act, and National Office for Technology Acquisition and Promotion (NOTAP) Act. The amendments are part of the Nigerian Government's initiative to foster an enabling environment for all businesses in Nigeria.

This Alert summarizes the key amendments to the various legislation as provided in the Act, and the impact of such changes.

Detailed discussion

1. Companies and Allied Matters Act, 2020 (CAMA)

a. Amendment to the list of foreign companies exempted from registration in Nigeria

Section 78(3) of CAMA 2020 was amended by inserting a new paragraph (c), which extends the parameters for exemption of foreign companies intending to carry on business in Nigeria from the incorporation requirement, to include, exemption of foreign companies by an Act of the National Assembly.

This implies that a foreign company that intends to carry on business in Nigeria must comply with the incorporation provisions in the CAMA, unless it is exempted under (i) the provision of any preceding Companies Act applicable in Nigeria before commencement of CAMA, (ii) a treaty to which Nigeria is a party, and (iii) any other Act of the National Assembly.

b. Addition to mode for increment of issued share capital

Section 127 (1) of the CAMA, was amended to allow companies having "share capital" to increase their issued share capital either by allotting new shares in a general meeting or through a resolution of the Board of Directors, subject to the condition or direction that may be imposed in the company's articles of association or by the company in a general meeting.

c. Limitation of preemptive rights options to private companies

Section 142(1) of the CAMA was amended to limit the preemptive rights to only private companies. Hence these rights are not applicable to public companies.

d. Authorization of the board to allot shares

Section 149 of the CAMA introduced a new subsection (1), which stipulates that the powers to allot the shares of a company can only be exercised by the board of directors if an express authority has been vested in the company's board in a general meeting or in the company's articles of association.

e. Reduction of time to file notice of allotment of shares

Section 154(1) of the CAMA was amended to shorten the timeframe within which a company must return an allotment of shares to the CAC to within15 days after the allotment has been made.

f. Introduction of electronic share certificate

Section 171 of the CAMA introduced a new subsection (7), which provides that share certificates may either be in physical or electronic form.

g. All companies may hold general meetings electronically

Section 240(2) of the CAMA only allowed private companies to hold their meetings electronically, as long as the meetings are conducted in accordance with the articles of the company.

However, the section was amended by removing the word "private." This implies that all companies, not just private companies, may now hold their general meetings electronically as long as the meetings are conducted in accordance with the articles of the company.

h. Change in the number of independent directors for public companies

Section 275 (1) and (2) of the CAMA was amended to require that a public company shall have at least one-third of the total number of its directors as independent directors. By increasing the number of independent directors in a company's board, transparency and accountability in decision making should be fostered.

i. Conformity of financial statements solely to the standards of the Financial Reporting Council of Nigeria

Section 378 of the CAMA introduces a new subsection (1), which makes the accounting standards issued by the Financial Reporting Council of Nigeria the only standards upon which a company's financial statements prepared under section 377 of CAMA must comply.

2. Nigerian Export Promotion Council Act, Cap. N108, Law of the Federation of Nigeria (LFN), 2004 (NEPCA 2004)

• Amendment to the Composition of the Governing Board of the NEPCA
  
  Section 2 of the NEPCA 2004 was amended by introducing a new subsection (2), which list the members of the Governing Board of the Council (the Board) as representatives of the: Federal Ministries of Industry Trade and Investment (formerly Federal Ministry of Commerce); Mines and Steel, Agriculture; and Finance.
  
  In addition to these members, a representative of the Bank of Industry, Central Bank of Nigeria, Manufacturers Association of Nigeria (Export Group) and of the Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA) were included as members of the Governing Board.
  
  The amendment to the composition of the Board removed a representative of the Association of Nigerian Exporters and of the Farmer's Association as members of the Board as previously provided by the NEPCA 2004.

3. The Industrial Inspectorate Act, Cap I8, LFN 2004 (IIA 2004)

• Review of Minimum Capital Expenditure Threshold for Acceptance Certificate processing
  
  Section 3 (1) (a) and (b) of the IIA 2004 was amended by increasing the amount of qualifying capital expenditure that requires notification to the Director of the Industrial Inspectorate Division (IID) from 20 thousand naira (N20,000) to 5 million naira (N5,000,000).
  
  As a result of this amendment to the IIA 2004, the threshold for notice of intention to incur capital expenditure has increased to 5 million naira (N5,000,000).

4. Customs And Excise Management Act (CEMA)

a. Establishment and definition of "single window" for trade facilitation

Section 2 of the CEMA (the definition section of the Act) was amended to include the definition of single window as follows:

"[S]ingle window" means a platform or facility that allows parties involved in trade and transport to lodge trade-import, export or transit-data required by government departments, authorities, or agencies through a single-entry point interface to fulfil all import, export, transit related and other regulatory requirements.

The purpose of this amendment is to formally establish a clear legal definition of single window, which had not been defined in the CEMA previously because it is a relatively recent technology-based innovation.

Further, Section 18 of the CEMA was amended by inserting a new Section 18A, which provides for the Board of Customs and Excise (the Board) to establish and maintain a single-window technology platform with the aim of enabling traders to submit documentation or data requirements for importation, exportation or transit to a single point. This documentation is to be made available to the relevant authorities for examination; if this documentation has been submitted through the single window, no other authority or agency can request the documentation except in urgent circumstances.

The purpose of this amendment is to use technology to make the documentation and data process less burdensome.

Section 18 of the CEMA was also amended by inserting a new Section 18B, which provides that the examination and inspection of goods carried out by officers or relevant authorities must be properly coordinated and, where possible, should be scheduled to be done at the same time.

The purpose of this amendment is to ease the examination process for imported and exported goods (i.e., the process will be carried out in a more coordinated manner; administrative bottlenecks will be avoided, which should result in efficient use of time).

b. Reduction of the time frame for the delivery of uncleared goods upon completion of discharge

Section 31 of the CAMA was amended to reduce from 15 days to 5 days the time frame for delivering uncleared goods after the discharge of the importing vehicle. The proper officer is now expected to provide, within 5 days, a list of goods unloaded from the importing vehicle and not yet released to the person administering the area where the discharge took place.

Further, Section 31 (4) of the CEMA was amended to reduce the time frame from 14 days to 4 days within which the proper officer may direct the person administering the area where the discharge took place to move the uncleared and unentered goods to the Government warehouse or another approved place.

c. Reduction of the time frame for the appeal process

Paragraph 13 of the first schedule to the CEMA generally provides for the right of appeal where a buyer or his agent is dissatisfied with the customs valuation of his imported goods. Subparagraph (1) was amended to reduce the time frame from 7 days to 3 days within which an appeal can be instituted to the Customs Area Comptroller in charge of the area where the valuation took place; the time frame begins when the buyer or his agent becomes aware of the appeal and communicate the result.

Subparagraph (3) was amended to reduce the time frame from 15 days to 5 days for the buyer or his agent to further appeal to the Comptroller-General of Customs if dissatisfied with the result of the initial appeal.

Subparagraph (4) was amended to reduce the time frame from 10 days to 4 days for the Comptroller-General of Customs to consider the appeal and communicate the result.

Subparagraph (5) was amended to reduce the time frame from 14 days to 5 days for the buyer or his agent to institute an action in court if the buyer or his agent is dissatisfied with the result of the appeal.

The purpose of this amendment is to ensure efficiency in the appeals process.

5. Export (Prohibition) Act

• Prohibition of exportation from Nigeria of specified goods
  
  Section 1 of the Export (Prohibition) Act was substituted for a new Section 1, which prohibits the exportation from Nigeria of goods specified in the schedule to the Act, notwithstanding the provisions of the Customs Excise Tariff, Etc. (Consolidation) Act or any other enactment.
  
  Further, by the provisions of Section 1(2) & (3), the Minister of Finance is vested with the power to vary the prohibited goods for export by an Order.
  
  The effect of this new section is that the provisions of Customs and Excise Management Act with respect to prohibition of exportation of the goods specifically listed in the schedule to the Act supersedes the provisions in any other Act.

6. Financial Reporting Council of Nigeria (FRCN) Act

• Preparation of financial reports in accordance with standards
  
  Section 59 of the FRCN Act was amended to introduce a new subsection (3), which provides that all general-purpose financial statements prepared by companies, government organizations and corporations in Nigeria should follow the standards, regulations, rules and pronouncement issued and adopted by the FRCN, notwithstanding the provisions of any law relating to form and content of financial statements.
  
  The purpose of this amendment is to formally establish that financial reporting of entities in Nigeria should only follow the principle and guidelines set out by the FRCN.

7. Nigerian Customs Service Board Act

• Modernization of the operations of the Board
  
  Section 3 of the Nigerian Customs Service Board Act was amended by inserting a new Subparagraph (iii) to the effect that, in carrying out its duties, the Board shall adopt modern means of operations and develop regulations for the carrying out of activities of the Nigerian Customs Service.
  
  The purpose of this amendment is to ensure that the activities of the Board in administering the Customs and Excise Management Act, is aligned with the world's best practices in terms of modern advancements.

8. Investments and Securities Act (ISA)

• Prohibition of security allotment
  
  Section 67 of the ISA was amended to introduce a new sub section (1), which prohibits the allotment of any company's securities offered to the public for subscription except where the money raised defrays certain costs stipulated by the law.
  
  The new section 1 provides that no allotment of any company's securities may be made unless:
  
  d. In the case of public company, the minimum amount stated in the prospectus to be raised by the issue of the company's share capital, has been subscribed, paid, received by the company and is for the settlement of any of the following costs:

• The purchase price of any property purchased or to be purchased by the company
  
  
• Any preliminary expenses and commission payable by the company in agreeing for subscription or procuring subscription for any shares in the company
  
  
• Working capital
  
  
• Payment of money borrowed to pay for acquisition of property, preliminary expenses and/or commission.
  
  
• In the case of private company, the Security and Exchange Commission (SEC) of Nigeria permits the allotment through its regulations.

9. National Office for Technology Acquisition and Promotion (NOTAP) Act

• Exemption from late registration penalty
  
  Section 5 (2) of the NOTAP Act was amended to exempt companies in their first two years of business operation from late registration penalties on the condition that the contracts are registered before the end of the second year of operations.
  
  Prior to this amendment, every contract or agreement between a Nigerian resident and foreign entity for the transfer of foreign technology into Nigeria was required to be registered with NOTAP within 60 days from the execution of the contract or agreements. The NOTAP prescribes N100,000 for late registration.
  
  By implication, companies in their first two years of business operation are now exempted from the above penalty if they register their contracts or agreements before the end of their second year of operation.

10. Nigerian Investment Promotion Commission (NIPC) Act

f. Registration for acquisition of foreign equity

Section 20 of the NIPC Act was amended by introducing a new subsection (3) which requires a company that acquires foreign equity after it commenced business to register with the NIPC.

Before the effective date of the BFA, the NIPC Act only requires a new company with foreign participation to register with the NIPC before commencement. The NIPC Act before this amendment was silent on whether an existing company that subsequently acquires foreign equity should register with the Commission.

Based on this amendment, any Nigerian company which subsequently acquires a foreign participation is required to register with the Commission within three (3) months of such acquisition.

g. Incentive for special investment

Section 22 of the NIPC Act was amended to detail the responsibilities of the Commission in identifying, determining, and promoting strategic or major investments.

The new section 22 requires the Commission to specify priority area of investment and any applicable benefits and incentives and negotiate special incentives packages for strategic investment in addition to the general incentive applicable to any enterprise under the law.

Furthermore, the Commission is required to publish the criteria for determining strategic investment and the details special incentives awarded in the Federal Government Gazette and on its website.

11. Pension Reform Act (PRA)

• Amendment to restriction on use of pension fund assets
  
  Sections 89 (2) of the Pension Reform Act has been amended by introducing a new subsection 2, which provides that:

h. Pension assets are eligible for securities lending as the National Pension Commission may approve.

i. Pension Fund Administrators may, subject to guidelines issued by the Commission, apply a percentage of the pension assets towards payment of equity contribution for payment of residential mortgage by a holder of retirement savings account.

Based on this amendment, Pension Fund Administrators may, subject to the guidelines issued by the National pension commission, apply a percentage of the pension assets in its custody for securities lending and for repayment of residential mortgage by retirement savings account holders.

12. Industrial Training Fund (ITF) Act

• Amendment to criteria to contribute to the fund
  
  Section 41(6) of the ITF Act has been amended to provide that an employer with 25 or more employees and operating outside the free trade zone shall, in respect of one calendar year, contribute 1% of its annual payroll to the Fund.
  
  The implication of this amendment is that employers with fewer than 25 employees are no longer required to contribute to the ITF. Also, companies operating within the free trade zone are exempted from making ITF contributions.

13. National Housing Fund (NHF) Act

j. Changes to individuals subject to NHF contribution

Section 4 of the NHF Act has been amended to provide that employees who earn the national minimum wage and above in the public sector shall contribute 2.5% of their monthly income to the fund, while those in the private sector may contribute 2.5% of their monthly income to the fund.

Also, self-employed individuals who earn the national minimum wage and above must contribute 2.5% of their monthly income to the Fund.

Based on this amendment, an NHF contribution is no longer mandatory for employees in the private sector, while public sector employees and self-employed individuals are required to make NHF contributions.

k. Changes to income base for NHF contribution calculation

The qualifying income threshold for making NHF contributions has been increased from the basic salary per annum to gross income. Henceforth, qualifying persons earning the national minimum wage and above will contribute 2.5% of their monthly income to the Fund.

l. Reduction of accrued interest rate

Section 4 of the NHF Act was amended to provide that the interest rate payable on the NHF contribution shall now be 2% per annum or a different amount as may be determined by the Federal Mortgage Bank of Nigeria (FMBN).

By implication, the interest rate payable on the NHF contribution annually has been decreased from 4% to 2% or as may be determined by the FMBN.

14. Immigration Act (2015)

m. Changes in operational framework of entry visas

Section 20 of the Immigration Act (2015) was amended to reflect the inclusion of additional subsections (8) and (9), which further clarify the operational framework for entry visas administration. The amendment provides a 48-hour timeline within which visa applicants would receive an approval or rejection of their application.

Furthermore, all Nigerian consulates abroad, as well as immigration-related websites, would publish a comprehensive and up-to-date list of requirements, conditions and procedures with which all entry visas, including the visa on arrival, could be obtained. Note that this provision is beneficial to all applicants seeking Nigerian visas, especially as the aim is to provide comprehensive information on the New Visa Policy (NVP), which was initially launched in 2020 and expanded Nigeria's previous six visas to 79 visas.

However, the Nigeria Immigration Service (NIS) will need to clarify if all Nigeria consulates abroad will be offering all classes of visas, as this currently is not the case.

n. Replacement of the Minister with the Comptroller General

Section 36 of the Immigration Act (2015) was amended to replace the approval powers of the Minister with that of the Comptroller General of Immigration Services (CGIS). Specifically, all foreigners on their own account or in partnership with any other person, for business registration or take-over purposes (especially companies with limited liability), must obtain consent in writing from the CGIS.

This implies that the CGIS will approve all Business Permit applications. Furthermore, new subsection (4) in section 36 states that a notice of any change of particulars relating to a Business Permit shall be given to the CGIS.

Based on this amendment, further clarification would be helpful explaining the form this notice should take to create viable ground for compliance by all affected companies. Furthermore, the NIS may need to align this change with the processes of the Federal Ministry of Interior, the current custodian of this process, and issue a press release on the modalities for implementation.

o. Powers to establish any system for automated filling of documents

New subsections (5), (6) and (7) were added to section 36 of the Immigration Act (2015), conferring powers on the service to establish, use, adopt, regulate and prescribe fees for automated filling systems of any document or returns as prescribed in the Act. Such regulatory powers include making decisions on service operations, technical requirements, accessibility, accreditation, and service quality of such systems established by the NIS.

These newly included subsections suggest changes for document submissions such as residence permit applications, exit protocols of expatriates and statutory returns, which are currently performed manually. In the same vein, these additions are intended to increase transparency, promote efficiency, and reduce person-to-person interaction, thereby mitigating the risks associated with facilitations and other illegal dealings (e.g., engaging in bribery).

Considering the above and to achieve the desired objectives, it would be helpful for the NIS to sensitize all stakeholders on these newly established systems.

Next Steps

Following the enactment of the BFA, businesses, government agencies, organizations and individuals should analyze the provisions of the Act to understand its impact on their operations.
 

For additional information with respect to this Alert, please contact the following:

Ernst & Young Nigeria, Lagos
 

• Akinbiyi Abudu
  
  
• Audrey Obidike
  
  
• Adesope Okoh
  
  
• Chinwe Erobu
   

Ernst & Young Société d'Avocats, Pan African Tax — Transfer Pricing Desk, Paris
 

• Bruno Messerschmitt
  
  
• Alexis Popov
   

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
 

• Kwasi Owiredu
  
  
• Byron Thomas
   

Ernst & Young LLP (United States), Pan African Tax Desk, New York
 

• Brigitte Keirby-Smith
  
  
• Dele Olagun-Samuel

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.