Doing business in Africa: Country report Nigeria - legal framework conditions in German-Nigerian business relations
This article is intended to provide an overview of Nigeria’s legal system as well as answers to frequently asked questions that are of practical importance in the context of legal relations between Germany and Nigeria, for example when concluding or executing contracts.
Overview of the Nigerian legal system
Nigeria is a federal republic with a presidential system. The country is divided into 36 federal states and a federal territory (the capital Abuja). The state governments are each made up of a governor and a state parliament.
The Nigerian legal system is a combination of statutory law, the common law of the Anglo-Saxon tradition and customary law. In the north of the country, Islamic law (Sharia) also plays a certain role. Federal and state courts are governed by statute law and common law, while local courts continue to recognize the legitimacy of customary and Islamic law. In addition, traditional chiefs and emirs still have great influence, particularly in rural regions, and often act as arbitrators and justices of the peace.
Recognition, enforcement and execution of German titles
There is no bilateral recognition and enforcement agreement between Nigeria and Germany on the mutual recognition and enforcement of court decisions. There is therefore a certain risk that the judgments obtained may not be enforceable in the other country.
Nigeria is a member of the New York Convention of June 10, 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Nigeria has thus undertaken to grant arbitration agreements under private law to the exclusion of judicial recourse. In addition, arbitration proceedings conducted in other member states are recognized. Arbitration awards issued in this way are generally enforceable.
UN Sales Law in Nigeria
Nigeria has not acceded to the United Nations Convention on Contracts for the International Sale of Goods of April 11, 1980. The UN Convention on Contracts for the International Sale of Goods is not applicable in relation to Nigeria.
Investing and investment protection in Nigeria
Before foreign investors can invest in Nigeria, they must register with the state investment authority Nigeria Promotion Commission (NIPC).
Foreign investors can invest in almost all sectors in Nigeria. However, foreign investors are not permitted to invest in the manufacture of weapons and ammunition, the manufacture and trade in narcotics, psychotropic substances and the manufacture of military and paramilitary clothing and equipment.
Germany and Nigeria have concluded a bilateral treaty on investment protection. This ensures a uniform understanding of investment protection and its practical implementation between Germany and Nigeria. The agreement also ensures a certain degree of legal protection and investment protection for German investors in Nigeria (and vice versa).
Both Nigeria and Germany are members of the ICSID Convention (International Center for Settlement of Investment Disputes – ICSID). The ICSID is the most important convention for the settlement of investment disputes and determines which arbitration rules apply in arbitration proceedings relating to investment protection disputes.
Taxation in Nigeria
All companies operating in Nigeria are subject to income/corporate and education tax (exception: petroleum sector). The income tax rate is 30% of total profits and the education tax rate is 2% of taxable profits. It is important to note that companies with foreign headquarters only have to pay tax on sales generated in Nigeria.
Sales tax is 5% of the turnover of goods or services produced or imported domestically.
A withholding tax of 5 to 10% is also levied on certain payments to domestic companies, individuals and non-resident companies or investors.
There is no double taxation agreement between Germany and Nigeria.
Entry and residence regulations for German citizens in Nigeria
German citizens require a visa to enter Nigeria. This must be applied for in person, e.g. at the Nigerian Embassy in Berlin (https://nigeriaembassygermany.org/Visa-Issues.htm) or at the Nigerian Consulate General in Frankfurt am Main (http://www.nigeria-consulate-frankfurt.de/English/Consular-Matters/Visa-Matters/visa-matters.html ). A visa application can only be submitted online in some exceptional cases. The visa confirmation period is usually 3 weeks.
The visa is generally valid for three months. However, the permitted length of stay when entering Nigeria is often limited to a maximum of 4 weeks. However, the length of stay can be extended by the competent Nigerian authorities.
Nigerian short-term, business, visit or tourist visas do not entitle the holder to take up gainful employment in Nigeria. A work visa is required for this. This can be applied for at the Nigerian embassy in Berlin.
An eVisa or visa on arrival is generally available, but must be applied for online in advance. A written confirmation from a visa issuing authority is also required. The confirmation can also be used as an entry authorization for airlines.