Sometime ago, I published ‘Musings: Nigerian Business Landscape Improvement Issues’ (Musings I). Originally published in my ‘Taxspectives’ column in THISDAY Lawyer, 29.05.2012, p.7 (as ‘Why Government Must Acquire a Business Mindset…’), it is also available as a LeLaw Thought Leadership Insights piece amongst others at: www.lelawlegal.com.  Subsequently, the Nigerian Immigration Act, No. 8 of 2015 (IA), was enacted, repealing its predecessor, IA, Cap. I-1, LFN 2004 (originally enacted in 1963). The Immigration Regulations 2017 issued pursuant to the IA followed; and most recently, the Ministry of Interior (MoI)’s Citizenship and Business Department issued the ‘Handbook on Expatriate Quota Administration (Revised 2020)’ (the Handbook).

This sequel takes up my argument in Musings I that the requirement of Business Permit (BP) approval by the MoI is now a regulatory anachronism in Nigeria’s statute books, and contributes to bureaucracy that slows down the wheels of business.[1] My respectful view is that the MoI’s BP is an impediment that weighs down on Nigeria’s ranking on the global Ease of Doing Business, and ought to have attracted the reform-minded attention of the hard working Presidential Enabling Business Environment Council (PEBEC) to recommend that the Federal Government (FG) dispenses with it.[2]

This is moreso that the Nigerian Investment Promotion Commission (NIPC), established by the NIPC Act, Cap. N16, LFN 2004 (a 1995 enactment), in practice issues companies with foreign participation with ‘Business Permit’ upon their registration with the NIPC, pursuant to section 20 NIPC Act. Arguably, that provision probably envisaged (albeit not expressly), that MoI’s BP was no longer to apply, especially pre-IA.[3] Increasing liberalisation has made MoI’s BP requirement less tenable; thus the IA’s BP provision ought to have fallen away, in 2015 when the IA was being re-enacted, but alas! In the Doing Business 2020 Report (DB 2020), http://documents1.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-20 20-Comparing-Business-Regulation-in-190-Economies.pdf, Nigeria ranked 131st out of 190 countries (20th In Africa). Part of how the Federal Government (FG) can put action behind its intent to keep improving Nigeria’s Ease of Doing Business’ rankings, is to remove MoI’s BP.

Clearly, Nigeria (like other sovereigns) reserves the right to control the entry and exit of foreigners into her territory; being the apparent rationale for issuing different kinds of visas, etc.[4] Such right is exemplified for example by sections 37-39 IA[5] and no one can reasonably challenge that. This article examines in greater detail why the MoI’s BP requirement - as a prerequisite to foreign companies doing business in in Nigeria – has outlived its usefulness in Nigeria’s regulatory landscape. We will set the context/preface our discussion with the extant BP framework.

  1. BP: Regulatory Basis 

Per Section 36(1)(b) IA (Entry for business purposes):

“No person other than a citizen of Nigeria shall on his own account or in partnership with any other person practice a profession or establish or take over any trade or business whatsoever or register or take over any company with limited liability for any such purpose, without the consent in writing of the Minister given on such [conditions] by or on behalf of such persons, as the Minister may prescribe.”[6]

Section 112 IA empowers the Minister to make regulations that are in his opinion necessary or expedient to give effect to the IA.[7]

On its own part, Para 2.0, the Handbook (Available Services) states inter alia:

“The services currently available are:                                  

2.1 Grant of [BP]: This is a certificate issued on the authority of the Minister of Interior to wholly foreign owned or joint venture companies intending to do business in Nigeria to enable them operate legally. The certificate remains valid as long as the company’s operations does not infringe upon the law of the land which may lead to its revocation.

2.2 Amendment of [BP]: This is a facility in which a certificate is issued to reflect changes in a Company’s details/information.”

Its Para 3.0 (General Rules) stipulates that “[BP] is granted to only wholly foreign or joint venture companies with a minimum share capital of N10 million to enable them commence business in the country”,[8] whilst Para 4.0 (Specific Requirements) sets out that “All applications by companies for [BP] and Expatriate Quota Position should be accompanied by the” therein listed documents.

  1. What is the Continuing Rationale for BP in Nigeria?

This question cannot but agitate one’s mind; it is respectfully submitted that BP has outlived its usefulness and the IA should be urgently amended to remove the requirement, for the following reasons:

  • Nigeria has liberalised her business environment since the late 1980s and continues to promise even more reforms for the purposes of improving the ease of doing business (EDB) and Nigeria’s investment competitiveness. As noted in Musings I, in substance Nigerian law no longer discriminates between foreign owned and local businesses for entry into sectors: all can participate except for sectors captioned “negative list” by the NIPC Act.[9] If foreign investors are not meant to be subject to any disability before they can invest in any permissible sector, why does the MoI need to “pre-approve” entry into such sectors? Registration with NIPC which is underpinned more by foreign investment data monitoring purposes (and particularly necessary where the foreign investor is applying for incentives administered by the NIPC), is evidenced by Business Permit. Why would the law empower both the NIPC and MoI to grant ‘Business Permit’? One is clearly unnecessary, and in my view it is the BP administered by the MoI (even if coordinated by the NIPC through its One Stop Investment Centre (OSIC) arrangement), that is unnecessary. Failure to streamline BP typifies unimpressive commentary on Nigeria’s business reform journey, that we seem not ready to go beyond the “pain barrier”.
  • MoI’s documentation requirements for BP reinforces that it is an unnecessary requirement. An example is certified true copies (CTCs) of incorporation documents. The incidence of incorporation alone shows that the promoters have satisfied the Corporate Affairs Commission (CAC) - the agency with exclusive oversight on incorporation, administration and liquidation of Nigerian companies – that the proposed business can be legally undertaken, as CAC will not permit illegal or prohibited objects. This thus begs the following questions: After the CAC has approved the objects and incorporated a foreign owned Nigerian company, can the MoI under the guise of BP refuse same?[10] Definitely, the answer is in the negative. Why can the MoI not rely on the CAC’s judgment such that at best documents are just sent to it for the more relevant purpose of approving expatriate quota (EQ)? Is the MoI more qualified to screen legality of business objects than the CAC?[11] Why should we have duplicative processes? Some of these snags were what Executive Order No. 1 of 2007[12] sought to remove for seamless service delivery.[13] Why are we not following through?[14] Ultimately, BP becomes an exercise of going through the motions just to fulfill all righteousness, with nil or at best little value added.[15]
  • Nigerian law mostly require regulators to treat businesses equally, irrespective of related foreign or local ownership stakes. By way of illustration, the Financial Reporting Council of Nigeria Act and Nigerian Code of Corporate Governance 2018 do not distinguish between Nigerian wholly, majority or minority owned businesses in terms of meeting corporate governance compliance requirements. The CAC and the Companies and Allied Matters Act (CAMA) 2020 also adopt the same approach; thus, sanctions for breach of corporate requirements are nationality neutral. The Federal Inland Revenue Service (FIRS) will apply tax laws irrespective of the nationality of shareholders of corporate taxpayers. In fact, any special treatment, for example enjoyment of tax treaty benefits will only be pursuant to extant provisions.[16] By the same token, NIPC will not grant incentives that foreign owned companies are ineligible for; in fact recent history (under President Jonathan) showed that Nigerian companies were the greatest beneficiaries of such. Will the Federal Competition and Consumer Protection Commission (FCCPC) enforce the FCCP Act No. 1 of 2019 more vigorously against foreign vis a vis Nigerian owned companies? We do not think so – the FCCP would be more concerned about furthering the FCCPA’s objectives as enshrined in section 1 FCCPA without fear or favour, as to the nationality of market participants.
  • Local content development or expatriate quota (EQ) are not co-terminous with BP. Government’s unimpeachably valid objective of fostering local content development and capacity utilisation, for example by discouraging, nay actively sanctioning the long term employment of expatriates at the expense of suitably qualified Nigerians,[17] are totally different issues from, and not co-terminous with, MoI’s BP. Those objectives can be effectively championed, and monitored without BP; there are sufficiently robust provisions vide the Nigerian Oil and Gas Industry Content Development Act 2010[18] and the Local Content Executive Orders in this regard.[19] Also, the perception that foreign owned businesses tend to employ less Nigerians lacks conclusive supporting scientific data, even if there may be instances of such. MoI’s engagement with other agencies such as the Nigerian Content Development Monitoring Board (NCDMB) and the Department of Petroleum Resources (DPR) is more in respect of EQ than BP.[20] This is moreso that as at the time of applying for BP, the company would have already obtained applicable sectoral approvals, such as DPR license to operate in the oil and gas industry.  
  • Light but effective regulation is the preferred and optimal business regulatory model. That Nigeria’s EDB rating is outside the top global 130 is not without reasons. Since the times have changed and the obvious need for improving Nigeria’s competitiveness for global investment capital remains undiminished, why are we still imposing unnecessary burdens? Like the sons of Issachar in 1 Chronicles 12:32, we must “understand the times” and know what Nigeria ought to do. As Jesus chastised the Pharisees in Matthew 23:4 and Luke 11: 46, there is no point in overlaying people with burdens too heavy to bear. “That is the way things have been” does not mean they should remain so, especially given the rapidity of change in the wider context. It is interesting that the only improvement that section 36(1)(b) IA made over equivalent 1963 IA, codified as IA, Cap. 350, LFN 1990 and section 8(1) IA, Cap. I-1, LFN 2004 provisions is merely the removal of location(s) of the proposed business and potential employees from conditions that the Minister may prescribe in granting BP approval. So there is really no significantly substantive change;[21] albeit between 1963 and 2015 is 52 years! Since regulators are not exclusive repositories of all knowledge, they can undertake periodic regulatory burden specific surveys to which the business community would make input and suggestions for consideration. Ultimately, it cannot be overemphasized that more efficient regulation contributes to profitability cum capacity to pay more taxes to government, and make other sustainable economic contributions such being employers of labour, with all its spill over benefits.
  • BP is actually a form of ‘blackmail’. Undoubtedly, a pro-business/enabling regulatory mindset should underpin Nigerian regulatory framework, exemplified by ‘light’ but effective and high impact oversight. Against this preferred context, BP is arguably a form of blackmail; this result is achieved by MoI tying BP to EQ – thus no EQ (which is mandatory authorisation to employ expatriates in Nigeria), can be granted if the foreign owned Nigerian company applicant does not also apply for BP. Rather than making some other regulatory applications subject to BP;[22] MoI should focus on those ones only, not BP. As suggested elsewhere in this article, there is arguably a cause of action against overly ‘heavy’ and excessive regulation, and MoI’s BP could be a notorious example? Thus, businesses must be willing to bite the bullet, once they can cross the relevant locus standi threshold. Unfortunately, the NIPC is by current provisions forced to participate in ‘the blackmail’, as its own Business Permit cannot in practice, be issued without the BP.
  • Professional standards and requirements are also in the mix. The MoI’s intervention is not necessary to ensure that Nigerian companies with foreign participation have requisite professional/technical capacity to undertake jobs. At the very least, public sector bidding requirements obligate them to show such capacity. Even in private sector scenarios, no serious client will engage firms without capacity to execute jobs. So in this sense, the market can take care of itself. Another point is that it is possible for companies to show profiles just for the purpose of ticking MoI’s boxes to get the BP, so the real test should come from prospective clients, whether in the public or private sector.[23]  
  1. Some Reform Proposals

According to a popular adage, “if the mountain will not come to Mohammed, Mohammed should go to the mountain.” Maybe it is time for affected stakeholders to influence reform in this area, as an example of how the private sector can actively influence government reform efforts, through the following approaches:

  • Suing for declaratory relief: Upon incorporation, a Nigerian company with foreign participation can approach the Federal High Court for declaratory reliefs that section 36(1)(b) IA is superfluous, ultra vires, obsolete and therefore should not apply. Or better still, Nigerian co-shareholders with foreigners in such companies can be joint plaintiffs with the company. If the era of section 7 Securities and Exchange Commission (SEC) Act prescription for regulatory (SEC) approval of share transfers in companies with foreign participation has long gone,[24] why do we still have a BP equivalent for start-up companies with both Nigerian and foreign participation? We need to ‘scrub’ the statute books and get rid of spider webs!
  • Advocacy for PEBEC to champion repeal: If we want to improve our EDB ratings, MoI’s BP regulation should go, vide amendment of the IA. Such would make for more efficient start up timelines for Nigerian companies with foreign participation. In these days of urgency to take business viable technology enabled ideas quickly to market, BP can be a reason why someone may decide to locate the business in Rwanda, Botswana or Mauritius, rather than Nigeria. The African Continental Free Trade Area Agreement (AfCFTA) to which Nigeria was a belated signatory, has made issues of Nigeria’s competitiveness even more compelling than ever. Nigeria has done similar reforms (enactment of liberalisation legislation/amendment/repeal of backward looking laws, etc), before and we can definitely do it again, or more going forward. Indeed, the pragmatic approach is that we must not settle, since ease of doing business is actually a journey and not a destination. If we do not keep the reform engine running, we will be left behind.[25]
  • MoI’s BP approval process re-engineering: Alternatively, even if we must continue to have MoI’s BP at all, the process (already automated),[26] should seek to improve its operation on a fast track basis, such that once applicants fill an online form, tick all the boxes, upload documents and make payment, the BP application is automatically approved.[27] Experience has shown that the more automated and less involving of physical interaction with civil servants a process is, generally the better the delivery and performance outcomes of such a process. In the present MoI BP scenario, despite the automation (online filling of forms etc), there is still a lot of manual processing of downloaded completed forms. Such should be minimized – once defined criteria are met, the system should automatically approve applications.[28] One major advantage of this is that applications will not suffer delays owing to personnel and team reshuffles.
  • Security check issues: In my view, pre-approval security checks on foreigners intending to set up businesses that will contribute to the Nigerian economy, which they would not have been subject to otherwise, is uncalled for. Intending investors should not be subject to extra security checks than their non-investing counterparts; in any event security checks during their visa approval process, at the point of entry or any such ones which other foreigners are subject to, such suffice. The Police and other security agencies can deal with sanctionable behaviour as they do for all citizens/residents.

Conclusion:

To borrow the title of the ‘Overview’ of DB 2020: “Tackling Burdensome Regulation” must be a constant focus of government and all stakeholders. It is a journey and not a destination. Nothing exemplifies this more than the finding in DB 2020 that Nigeria was 10th most improved economy but was not amongst the two African economies in the top 50 rankings (Mauritius 13th and Rwanda 38th).

Because it is “not yet uhuru”, it is imperative that government’s reformist agenda be underpinned by a great sense of urgency, which makes following through inescapable. The consistent advocacy of organisations like the Nigerian Economic Summit Group (NESG) and Nigerian Association of Chambers of Commerce Industry Mines and Agriculture (NACCIMA) amongst several others have helped thus far in the reform journey. They and the business citizenry must not lower their tempo in reform advocacy.