You need not open a bank account – I know this may sound absurd, but most Nigerian businesses have thrived for decades without passing through a regular bank account.
According to a recent report FDI’s into Nigeria is expected to top $23b per year over the next five years. The Federal Government has also not rested on its oars, campaigning relentlessly for businesses to set up shop in Nigeria. In fact there is a Government Agency (Nigerian Investment Promotion Council- NIPC) set up just to help foreign investors who are willing to come into the country register businesses without fuss. The website of the NIPC tells investors “Why they should invest in Nigeria”, “Opportunities available for investments in Nigeria”, “Incentives available in Nigeria”, etc. What they however don’t tell you is the peculiarities of doing business in Nigeria.
So, I have decided to list what I call the “7 wonders of doing business in Nigeria”. These are 7 things that you probably cannot find in any other country except Nigeria.
1. Registration of Businesses cost much more than is advertised –Registration of businesses in Nigeria is done through the Corporate Affairs Commission (CAC). However, you pay between 2 to 5 times the officially advertised rates to register a company, non-profit organisation or business name. For example, it officially cost N10,000 to register a private company with a share capital of about N1m (One Million Naira only). However, it actually cost between N50,000 to N80,000 to register that king of company in Nigeria. This is a wonder as no one really cares to find out if it is actually possible to pay just N10,000 to register a business. The norm is that you must “settle” (a subtle word for bribe) to get your company registered and on time. Any lawyer you encounter will give you a price range of N80,000 – N120,000. Whether or not the lawyers, who register companies, are actually taking advantage of people is something the lawyers themselves will have to explain. Do they really pay these guys the “settlements” or is it just an acceptable means of extorting money from people?
2. Kickbacks are pretty much normal – Kickbacks basically refers to a form of bribery where the amounts are negotiated ahead of time or there is a simple understanding that an amount needs to be paid. In Nigeria, once you supply products or simply render a service for there is an unwritten rule that ensures the supplier must part away with some of his payments. He must pay either the Accountant or the Purchasing Manager, Managing Director, Stock Taker, Gate Man or indeed anyone or everyone who is influential (points man) to ensuring his supplies are continue unhindered and payments are received on time. Sometimes, these kickbacks are agreed well on time. A company supplying say 1000 litres of diesel may actual price it at N100 per litre, however, there is mostly a need to add an extra 5,10,15% to the actual invoiced value. The extra money added will be paid to the points man. In some cases there might be no prior agreement as to what is to be added. Only that the supplier must part away with some money otherwise he may never be given an opportunity to supply again.
3. Generators – Almost every business in Nigeria must add the cost of generator to a budget before setting up a business. Generators can come in various shapes and sizes, from the 1.2kva generators (popularly called I better pass my neighbor) to 800kva generators. You want to set up a barbers shop, salon, business center, call center, events place, hotel, hospital, school just about any business depend on generators as an alternative power supply to the epileptic official power company in the country. It’s a cost almost every business incurs.
4. We don’t pay the right taxes – Direct and Indirect taxes are the two major types of taxes businesses incur in Nigeria. Direct taxes include taxes such as Corporation Tax, Education Tax, Capital Gains Tax etc while Indirect Taxes are your Value Added Taxes, Withholding Tax etc. Except for Publicly quoted companies and companies with very high turnover, most small businesses do not pay or remit taxes. Taxes are mostly only declared when business when these businesses decide to apply for contracts from large corporate and government organizations. And even when that happens, the tax payers under declare profits just to ensure the tax they pay is as small as they can possibly get.
5. PR is sacrosanct – In most parts of the world, PR is notably referred to as an abbreviation of the Phrase “Public Relations”. Well, in Nigeria, PR refers to something else entirely. PR is a word attributed to some form of bribe paid to people to obtain some form of favour or information which mostly result in financial gains. For example, if you are seeking for some form of government contract, waivers or deals there is the likelihood that you must bribe officials who are influential in those positions. Without paying the business stands the risk of losing out of lucrative deals or penalties as the case may be. PR is a Nigerian wonder as it affects almost every sphere of business yet it is considered very normal just as the government steps up its anti-corruption campaign.
6. You need not open a bank account – I know this may sound absurd, but most Nigerian businesses have thrived for decades without passing through a regular bank account. This is mostly common in businesses that are involved in large scale localized trading. For example, dealers in popular markets such as Ladipo, Idumota, Oke Arin, Onitsha can go for years without having a need to deposit money into any bank. They just simply stash the cash under their mattresses or in a make shift safe in their shops. This has been a source of concern for the Central Bank partly leading to its decision to introduce the Cash-Less Policy which is meant to forcefully such funds into the banking system. This is also peculiar with most small businesses that operate under a “cash and carry” basis.
7. Most businesses do not have a regular address – This may sound really ludicrous but have you tried looking for an address of a company. Yes, addresses, phone numbers etc are mostly found on invoices and letter heads of most businesses but are they ever correct? It’s simple – the official way to get an address of any company in Nigeria is to run a search at the CAC. Nine out of ten times, the address you get from the CAC is either outdated or non-existent. Sometimes it’s a house address of one of the promoters of the businesses which was used hastily to register the business. One would expect that the addresses would be officially updated in the records of the CAC, however that is not usually the case as most businesses just carry on without ever bothering to update their addresses or even bother having an official address.
Visit Ugodre’s blog HERE.
Editor’s note: Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.