1. LEGAL SYSTEM AND STRUCTURES

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1 Nigeria Contributed by: N&A Contact: Udo Udoma & Belo-Osagie Takemi Hiramatsu (profile) This memorandum has been prepared by Udo Udoma & Belo-Osagie ( UUBO ) in response to a request from a foreign investor for general information that would be useful to a foreign company that wishes to do business in Nigeria. UUBO does not, in this memorandum, intend to provide comprehensive advice on the most appropriate structures or strategies for a specific investment. The information provided is of a general nature and we recommend that, before proceeding with any investments or establishing a business in Nigeria, foreign investors should forward any additional questions or requests for advice that is specifically tailored to their business plans and other requirements to us for further consideration. 1. LEGAL SYSTEM AND STRUCTURES 1.1 Describe the legal system on which the laws in your country are based. The Nigerian legal system derives from English Law, which is applicable in Nigeria by virtue of its colonisation by the British. It includes common law, the doctrines of equity, statutes of general application in force in England since 1st January, 1900 and English law made before 1st October, 1960 and extending to Nigeria. Nigerian law has developed through legislation passed by the Nigerian legislature, application of customs and traditions into customary law as well as judicial precedents. 1.2 What are the types of legal entities available for the establishment of a business? Briefly describe the legal features of and the process for the establishment of these entities and the periodic mandatory filings and costs associated with establishing a business? The Companies and Allied Matters Act Cap C20, Laws of the Federation of Nigeria 2004 ( CAMA ) is the principal legislation that regulates the affairs of Nigerian companies, and provides, in section 54, that in order to do business in Nigeria, a foreign investor must incorporate a separate entity in Nigeria, and until the entity is so incorporated, it shall not have a place of business or an address for service of documents or processes in Nigeria for any purposes other than the receipt of notices and other

2 documents as matters preliminary to incorporation under CAMA. Business in Nigeria can be established as either (a) private companies limited by shares, (b) private companies limited by guarantee, (c) public companies limited by shares or (d) unlimited liability companies. But all businesses are required to file annual returns. The company structure recognised under CAMA, and their salient legal features are: Private Company Limited By Shares - A private limited liability company has a separate legal personality from its owners with perpetual succession, a common seal and the capacity to sue and be sued in its own name. A private company limited by shares must have a minimum of two and maximum of fifty shareholders. Private Company Limited By Guarantee - A private company limited by guarantee is appropriate where a company is to be formed for promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar objects. The income and property are to be applied solely towards the promotion of its objects, and no portion is to be paid directly or indirectly to the members except as permitted by law. The liability of the members is limited to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. Upon winding up of the company, its remaining assets are not to be shared but shall be transferred to a company limited by guarantee having similar objects or applied to some charitable object. Public Company Limited By Shares A public company limited by shares also has a separate legal personality from its owners with perpetual succession, a common seal and the capacity to sue and be sued in its own name. There is however, no maximum to the number of shareholders in a public company limited by shares. Unlimited Liability Company The liability of the members of an unlimited liability company is unlimited. This means that debtors can look to the members of the company for the settlement of their debts in the event that the company cannot pay its debts. Generally, establishing any of the above-mentioned entities involves first choosing a name for the proposed company and conducting an availability search at the Corporate Affairs Commission ( CAC Nigeria s company registry) to confirm that the particular name is available and reserving it if it is available. Secondly, a memorandum and articles of association (M&A) for the company must be prepared. The law requires that every company must have at least two shareholders and at least two directors. It is 2

3 permitted, however, for one shareholder to hold the bulk of the shares in the company with the second shareholder holding only one share. The M&A will be submitted to the CAC together with: A Statement of the authorised share capital of the company and return of allotment of shares (Form CAC 2); Evidence that the stamp duty payable in respect of this share capital has been paid. Stamp duty payable is 0.75% of the authorised share capital of the company ( a company limited by guarantee only pays a nominal stamp duty Nigerian Naira (( NGN or =N= )) [approximately US$3.21 at current exchange rate of US$1 to =N=155.75] given that it does not have a share capital); A statement of the particulars of the initial directors of the company, of which there must be at least two (Form CAC 7); A notice of the address of the registered office of the company (form CAC 3); and A declaration, sworn to by a lawyer, confirming that all matters preliminary to the registration of the representative office have been complied with (Form CAC 4). Thirdly, filing fees (1% of the share capital, and 2% in the case of public companies) must be paid to the Registrar-General of Companies. And finally, if the application is approved, a Certificate of Incorporation will be issued. 1.3 With respect to each entity described above, would an investor in such entity have the full range of investment rights and instruments available, including redeemable shares, preference shares, puts/calls, options/warrants with respect to its interest in such entity. In the case of a company limited by guarantee, given that it does not have a share capital, and cannot distribute profit, an investor in such an entity does not have investment rights. In all of the other entities described above, however, all of the investment rights are available with the exception of warrants which are not available in Nigeria. Such investment rights are, however, subject to the provision of the entity s governing rules (i.e., the memorandum and articles of association). 3

4 1.4 Are the rights of an investor (and, in particular, the rights of minority investors) in any of these entities protected in law? The rights of investors are generally protected under Nigerian law, and sections 299 to 330 of the CAMA make provision for the protection of minority investors. The rules give minority shareholders the power to challenge the actions of the majority to redress a wrong committed to the company or which has negatively affected the rights of the minority shareholders. 1.5 Will an investor be able to acquire recognition and protection for industrial and intellectual property rights? Trademarks Under the Trade Marks Act, registration of a name/logo is permitted in respect of goods and services. To be successfully registered it will be necessary to establish to the Registrar of Trade Marks that the word/description has characteristics that distinguish it from an ordinary word. The logo must be distinctive and cannot be identical to a previously registered mark. Registration is normally granted for seven years in the first instance and may be renewed for further periods of fourteen (14) years each upon application. The proprietor of a registered trademark may permit other persons to be registered as users. Patents and designs Also, it is possible to register industrial designs or patents. As the registered owner of an industrial design an investor will have the right to preclude others from reproducing the design in the manufacture of a product, or importing or selling a product that makes use of the design, or from utilising such a product for commercial purposes. As the holder of a registered patent the investor will have the right to prevent any member of the public from infringing that patent in anyone of a number of ways specified in the Patents and Designs Act. An investor can register a patent in Nigeria as a 'statutory inventor', defined as the person who, whether or not the inventor, first applies for a patent or claims priority for a foreign patent application in respect of the invention. The true inventor, however, is entitled to be named as such in the patent and this right cannot be modified by contract. Similarly, an investor can register a design as the 'statutory creator', which is defined in terms similar to those defining the statutory inventor. Patents are usually granted for twenty years commencing from the date of the filing of the relevant application, but will be nullified if the prescribed annual fee is not paid. An industrial design is registrable for five years in the first instance, and may be renewed for two consecutive five-year periods upon payment of the prescribed fees. 4

5 Priority of registration Nigeria is a party to the International Convention for the Protection of Industrial Property 1883, as amended (the Paris Convention). All being equal: this should mean that if an investor seeks to file an application for a patent, or for the registration of a trademark, a utility model or an industrial design, it will enjoy a right of priority for the purpose of filing if its country of origin, or where the patent was first registered, is also a signatory to this convention. Under Nigerian law, however, Convention Countries, for purposes of this treaty, are those listed in the Patents and Designs (Convention Countries) Order If an investor has put in such an application in a Convention Country it should have a right of priority for a period of twelve months in the case of a patent and utility model, and six months in the case of a trademark, after the date of that application. Should an investor seek to register a trademark or patent in Nigeria the application should be deemed to have been made on the same date as that made in the foreign Convention Country provided the priority period has not elapsed. 2 FOREIGN INVESTMENT AND CORPORATE GOVERNANCE 2.1 What, if any, are the applicable restrictions on foreign ownership of or local content rules for private businesses? By virtue of the provisions of the Nigerian Investment Promotion Commission Act, Cap N117, Laws of the Federation of Nigeria 2004 ( NIPC Act ) it is possible for foreign investors to own 100% of the equity of a limited liability company, and other than certain matters set out in the negative list, a Nigerian company that is 100% foreign owned may engage in the same businesses as a Nigerian company that is wholly or partially owned by Nigerians. The areas of business that are prohibited by the negative list are: a. the production of arms and ammunition; b. production of, and dealing in narcotic drugs, and psychotropic substances; c. production of military and paramilitary wears and accoutrement including those of the police and the customs, immigration and prison services; and d. other items as the Executive Council of the Federation may from time to time determine. In relation to companies in the oil and gas and cabotage sectors, companies in which a minimum of 51% of the shareholding is held by Nigerians have first or exclusive consideration for bids for contracts. 5

6 2.2 What are the restrictions on currency convertibility and repatriation? What procedural steps, if any, are required on the acquisition and disposal of an investment? Generally, there are no restrictions on currency convertibility and repatriation. Under the current Nigerian regulatory framework, however, a foreign investor wishing to remit dividends and profits must invest into Nigeria through an Authorised Dealer (i.e. an institution - usually a bank - that is licensed by the Central Bank of Nigeria ( CBN ) to deal in foreign exchange) and obtain a Certificate of Capital Importation ( CCI ) as evidence of such importation. The CCI is issued by the Authorised Dealer only after the foreign currency in-flowed has been converted into Naira; but once it is in place, monies can be remitted freely out of Nigeria provided the transaction qualifies as an Eligible Transaction. Disposal of an investment qualifies as an Eligible Transaction. The CCI enables investors to access the official foreign exchange market. We should mention that capital gains tax is not payable on a disposal of shares. 2.3 Describe the extent of an investors liability as an equity-holder (or equivalent) in a private business (including any liabilities arising as a result of an investor appointing an individual to the management board or advisory or other committee (or equivalent) of a company). Under Nigerian law, in the case of limited liability companies, whether private or public, the liability of the members is limited to the amount paid or unpaid on its shares. For companies limited by guarantee, the liability of members is limited to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up (this is usually set out in the company limited by guarantee s memorandum of association). It is only in an unlimited liability company that the liability of the members is unlimited. 2.4 Are the duties of directors prescribed under law? Broadly describe the general fiduciary obligations of a company director and to whom such obligations are owed. Are there any unique corporate governance rules that govern company boards and committees? The duties of directors are set out in CAMA. A director stands in a fiduciary relationship to the company and shall observe the utmost good faith towards the company in any transaction with the company. According to section 279: 6

7 (a) a director also has a fiduciary responsibility to the company in the following circumstances: (i) where he is acting as agent of a particular shareholder; or (ii) where even though he is not an agent of any shareholder, such a shareholder or other person is dealing with the company s securities; (b) a director is required to act at all times in what he believes to be the best interests of the company as a whole so as to preserve its assets, further its business, and promote the purposes for which it was formed, and in such manner as a faithful, diligent, careful and ordinarily skilful director would act in the circumstances; (c) the matters to which the director of a company is to have regard in the performance of his functions include the interest of the company's employees in general, as well as the interests of its members; (d) a director shall exercise his powers for the purpose for which he is specified and shall not do so for a collateral purpose, and the power, if exercised for the right purpose does not constitute a breach of duty, if it, incidentally, affects a member adversely; (e) a director shall not fetter his discretion to vote in a particular way; (f) where a director is allowed to delegate his powers under any provision of CAMA such a director shall not delegate the power in such a way and manner as may amount to an abdication of duty; (g) no provision, whether contained in the articles or resolutions of a company, or in any contract shall relieve any director from the duty to act in accordance with this section or relieve him from any liability incurred as a result of any breach of the duties conferred upon him under this section; and (h) any duty imposed on a director under Section 279 of the CAMA is enforceable against the director by the company. Also, the Securities Exchange Commission ( SEC ) Code of Corporate Governance applies to directors of companies in the public sector, and the CBN Code of Corporate Governance applies to directors of companies in the banking sector. 7

8 2.5 What are the basic employment regulations that apply to private businesses, including social security benefits? The basic employment regulations that apply to private businesses are the Employee Compensation Act and the Labour Act. The concept of social security is not developed in Nigeria. But the Pension Reform Act ( PRA ) requires employers to make contributions towards the pension savings of each employee. The PRA requires a total contribution of 15% of the monthly remuneration of the employee to be paid to a Pension Fund Administrator of the employee's choice within seven days of the remuneration being paid to the employee. The employer is obliged to contribute at least 7.5% of the employee s monthly remuneration while the employee contributes the outstanding 7.5%. The employer may, however, choose to contribute more than 7.5% in which case the contribution to be made by the employee would be reduced proportionately. 3. FINANCING AND CREDITOR PROTECTIONS 3.1 Is there availability of locally sourced debt either in local currency or in foreign currency (e.g. US$). If so, describe the general market trends for debt financing in connection with the acquisition of a business? Locally sourced debt is available in Nigeria. The debt market trends towards options provided by banks, such as term loans, revolving loans and over-drafts. Term loans are the most common and are usually short term of 1 or 2 years. However, they can be longer where project finance is involved and can expand to up to 7 years. 3.2 What are the restrictions, if any, to acquiring a business by means of a leveraged buyout where the purchase price is financed through a combination of equity and debt and in which the cash flows or assets of the business are used to secure and repay the debt? There are no specific restrictions when it comes to acquiring a business by means of a leveraged buyout, although, the approval of SEC is required for every acquisition. In addition, additional approvals apply based on the type of company involved. For instance where a bank is involved, the approval of CBN will be required. 8

9 3.3 Are equity-holders in a business allowed to take security or a pledge over the assets and/or shares of such business so that such equityholders take preference over other creditors of the business? If so, what procedure, if any, is required for such security or pledge to be obtained? Yes, equity holders are allowed to take security or a pledge over the assets of a business as long as the terms are not unreasonable. Under Nigerian law however, in the winding up of a company, claims in respect of employees such as wages, salaries, accrued holiday remuneration and social security contributions under the National Provident Fund are given preference over claims of other creditors. An equity-holder creditor cannot take preference over other creditors. 4. EXIT OPTIONS 4.1 Describe the full range of exit options available to investors in businesses in your country. The main exit options available to investors in businesses in Nigeria are private sales, listing on the Nigerian Stock Exchange ( NSE ) if the business is a public company or trade sales (i.e., the sale of the investee company s shares to another portfolio company). 4.2 Is there a stock exchange in your country? If so, what are the basic exchange rules for listing a business on the stock exchange? Yes. A public limited liability company can list securities on the NSE subject to the provisions of the listing rules. These rules generally require amongst other things that: (a) the application for Listing to be sponsored by a Dealing Member of the NSE; (b) the company be a public company, which will issue or has issued an invitation to the public to subscribe for its shares or has satisfied the NSE that the public is sufficiently interested in the company s shares to warrant Listing; and (c) all securities for which Listing is sought is first registered with the SEC. 9

10 4.3 Are local businesses permitted to list their securities locally as well as on a foreign exchange? In Nigeria, local businesses can list their securities on the NSE as well as on other foreign exchanges such as the London Stock Exchange or the Dublin Stock Exchange (only public companies can however be listed on the NSE). The NSE permits dual listing which also supports and facilitates listed companies on other exchanges who wish to access the liquidity of the Nigerian markets through secondary or joint primary listings on the NSE. 5. TAXATION 5.1 Describe the broad types of taxes applicable to a business and equityholders (including any taxation applicable to earnings, interest, dividends and capital gains). There are several different categories of taxes that are levied on businesses and equity-holders by the Nigerian Government. Companies Income Tax: This tax is payable for each year of assessment of the profits of any company at a rate of 30%. These include profits accruing in, derived from brought into or received from a trade, business or investment. Also, in Nigeria Company dividends or other company distribution whether or not of a capital nature made by a Nigerian is liable to tax at source at the rate of 10%. Education Tax: This tax is charged in accordance with the Education Tax Act 1993 (as amended). It requires a company (incorporated in Nigeria) to pay tax at the rate of 2% of its profits as assessed under the Companies Income Tax Act. Withholding Tax: Nigerian law subjects certain activities and services to Withholding Tax. This means that where during transactions in any of the specified activities or services, a payment is due from one person to a company, the person making the payment is expected to deduct tax at the applicable rate and remit it to the relevant tax authority. The applicable rates range from 5% to 10%. Stamp Duties: Stamp duty is imposed on most legal documents and is jointly administered by the State and Federal authorities, depending on the type and nature of the document. Stamp duties are regarded as transaction taxes, and the rates chargeable would depend on the classification of the document. Some documents attract stamp duties on flat rate basis while others are assessed at ad valorem basis. 10

11 Capital Gains Tax: This applies to all gains accruing to a company from the sale or lease or other transfer of proprietary rights in a chargeable interest which are subject to a capital gains tax of 10%. The chargeable assets may be corporeal or incorporeal and it does not matter that such asset is not situated in Nigeria. Where, however, the company is a non-resident company, the tax will only be levied on the amount received or brought into Nigeria. Value Added Tax (VAT): VAT is charge at a flat rate of 5% on all invoiced amounts of taxable goods and services. VAT paid by a company on goods that it purchases for its business (input tax), is recoverable from VAT charged on company s sales (output tax). If output exceeds input in any particular month the excess is remitted to the Federal Inland Revenue Service (FIRS) but where input exceeds output the company is entitled to a refund of the excess from FIRS. Although it is not a tax per se, the PRA requires employers to make contributions towards the pension savings of each employee. 5.2 Does your country have any bilateral tax and investment treaties in place with any other jurisdictions? Nigeria has bilateral tax agreements with a number of countries including: Belgium Canada, France, the Netherlands, Parkistan, Philippines, Romania, South Africa and the United Kingdom. In addition, Nigeria currently has nine bilateral trade agreements with: South Africa, Cuba, Vietnam, Tunisia, United States, Egypt, Algeria, Niger, and Iran. At the multilateral and regional levels, however, the most notable include that with the World Trade Organisation (WTO) and the Trade Liberalisation Scheme (ETLS) under the Economic Community of West African States (ECOWAS). 5.3 Describe the broad types of taxes applicable to employees and employers and who is responsible for the collection and statutory filings in relation to such taxes. These taxes are usually remitted to the relevant tax authority by the employer and they include: Personal Income Tax: The legal basis for this tax is found in the provisions of the Personal Income Tax Decree [now Act] 104 of Every taxpayer in Nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside Nigeria, the salaries, wages, fees, allowances, and other gains or benefits, given or granted to an employee are chargeable to tax. The 11

12 employers of labour are deemed to be agents of the tax authority for the purposes of remitting taxes deducted from salaries due to employees. However residency of the taxpayer determines the extent of a taxpayer s liability in Nigeria. A person s place of residence for this purpose is defined as a place available for his domestic use in Nigeria on a relevant day, excluding hotels and rest houses. A person is deemed resident in Nigeria if he resides in Nigeria for 183 days in any 12 month period. Expatriates holding residence permits are liable to tax in Nigeria even if they reside in the country for less than 183 days in any 12-month period. Once residence can be established, the relevant tax authority of the territory is the tax authority in which the taxpayer has his place of residence or principal place of business. Industrial Training Fund (ITF) Contribution: This is a training tax called the industrial training fund levy which is charged at the rate of 1% of a company s total annual payroll where the company has 5 or more employees or has an annual turnover of NGN50,000,000 [approximately US$315,358] and above. National Housing Fund (NHF) Deduction: An employer is required to deduct 2.5% of the basic salary of all employees and remit the amounts to the NHF on a monthly basis. This is an obligation created by the National Housing Fund Act 1992 and is intended to provide mortgage loans for employees. 5.4 Describe in broad terms the circumstances, if any, under which a person who is not resident in your country will be required to register with and/or file returns with your tax authorities. A person who is not resident in Nigeria is not required to register with the tax authorities. Such an individual will however be liable to withholding tax on any income or profit deemed to be derived from Nigeria. 12

13 6 ENFORCEMENT AND REMEDIAL ACTION 6.1 Are there any statutory restrictions on the ability of contracting parties to choose the governing laws under which they agree to contract and/or the jurisdiction of the courts to whom the parties agree to submit in the event of a dispute? No. Under Nigerian law, parties are free to choose the governing law under which they agree to contract. Nigerian courts will not, however, treat an express choice of foreign law as conclusive where such foreign law has no relationship to or connection with the realities of the contract as a whole. They can assume jurisdiction notwithstanding an express choice of foreign law following a consideration of the following factors: (a) the location of the evidence and the convenience in terms of accessibility and expenses as between the domestic and foreign courts; (b) the applicability of the law of the foreign courts and its difference in material respects from Nigerian law; (c) with what countries the parties are connected and the closeness; (d) whether a party seeking to stay Nigerian proceedings on the basis that the parties had chosen a foreign law and a foreign court s jurisdiction genuinely desired trial in the foreign country or was only seeking procedural advantages; and (e) whether the plaintiffs would be prejudiced by having to sue in the foreign court: (i) (ii) (iii) (iv) because they would be deprived of security for that claim; because they would be unable to enforce any judgment obtained; because they would be faced with a time bar not applicable to the domestic court; or because, for political, racial, religious or other reasons, they would be unlikely to get a fair trial. 13

14 6.2 Are foreign court judgments enforceable in local courts. If so, describe the process by which such judgments are enforced? Foreign Court Judgments are enforceable in Nigerian Courts. Nigerian law is based on common law, precedents and local statute and, where there is a lacuna in the local law, the laws in England operate as persuasive authority to complement the Nigerian law. The relevant legislation is the Foreign Judgments (Reciprocal Enforcements) Act. In order to enforce a foreign judgment in Nigeria: (a) the judgment must be final and conclusive as between the parties; (b) there must be a sum of money payable, not being a sum payable in respect of a fine or other penalty; and (c) an application to enforce a judgment must be made to a High Court in Nigeria within 6 years from the date of the judgment, or where there has been an appeal against the judgment, after the date of the last judgment given in the appeal. The Judgment will however not be registered if it could not be enforced by execution in the country of the original court. On registration, the judgment has the same force and effect for the purposes of execution, and proceedings may be taken on it. The judgment debt carries interest and the registering High Court has the same control over the registered judgment as if the judgment was given in that High Court on the date of registration. 6.3 What insurance and/or guarantee products are available to mitigate risks (political, expropriation, corruption) and what other means exist to mitigate exogenous (non- performance-related) risk? Nigeria is a member of the Multilateral Investment Guarantee Agency (MIGA), which provides insurance to its member countries against War, terrorism, civil disturbance, expropriation as well as breach of contract, currency inconvertibility and transfer restriction. Investors also use other organisations that provide political coverage. 14

15 7 GOVERNMENT AND POLITICAL ENVIRONMENT 7.1 Are there any sectors of the economy that have recently been nationalised or privatised? Yes, the Power Sector. The Federal Government is currently implementing reforms in this sector through the Electric Power Sector Reform Act ( EPSR Act ) and the institution of the Presidential Task Force on Power. The EPSR Act was passed into law in 2005 to allow private companies to invest in and operate power companies in Nigeria. Prior to the enactment of the EPSR Act in March 2005, the Federal Government of Nigeria was wholly responsible for policy formulation, regulation, operation, and investment in the Nigerian electric power sector. The EPSR Act also provides for the creation of institutions required to protect consumers and stimulate investment in a power sector market with competing firms. The Bureau of Private Enterprises, a parastatal of the Federal Government, is currently driving the privatisation of the successor companies of the Power Holding Company of Nigeria. It is hoped that these reforms will attract more investments in the power sector. 7.2 Are there any sectors of the economy that require government licenses/permits for the involvement of foreign or private investors? Business Permit In addition to the requirement to incorporate, foreign companies must obtain a business permit from the Federal Ministry of Interior ( FMI ) before they can commence business in Nigeria. In order to obtain the business permit, a company with foreign participation should provide evidence that it has made an equity injection into the Nigerian company either as cash and/or equipment. What this means is that, the proposed foreign investors, will need to bring into Nigeria investments of either cash or equipment (or a combination of both) and provide evidence to the FMI that this investment has been brought into Nigeria. This inflow of capital is evidenced by a CCI. Registration with Nigerian Investments Promotion Commission (NIPC) The Nigerian Investments Promotion Commission Act Cap N117 Laws of the Federation of Nigeria 2004 (the NIPC Act ) requires that all companies with foreign participation in their capital structure should register with the NIPC after they are incorporated. A Certificate of Registration of Company with Foreign Participation is issued by the NIPC as evidence of the registration. 15

16 In addition to the above requirements, private investors with interest in the Power, Transportation, Banking, Insurance, Oil & Gas, Aviation or Telecommunications sectors require approvals from the relevant authorities. 7.3 Are there any approvals/permits that are required for employment of foreign employees? If a Nigerian company plans to employ expatriates to work in the company it will be necessary to obtain an Expatriate Quota position for each expatriate it wishes to employ. The Expatriate Quota, which is currently issued by the FMI, is an authorisation that establishes the maximum number of expatriates the company may employ. The Immigration Desk of the FMI has the discretion to determine the number of quota approvals to grant to any applicant irrespective of the authorised share capital of the applicant company. Typically, however, applicants must have an authorised share capital of at least =N=10,000, (approximately US$64, at the CBN s current exchange rate of approximately N to US$1.00). Quotas are granted on a temporary basis, usually for a period of 2 years in the first instance, and may be renewed up to five times or for a period not exceeding (10) ten years in exceptional circumstances. The exact number of expatriate quota positions granted will be dependent on the exact nature of a company s activities. The Nigerian government has a policy of encouraging the employment and training of Nigerians and therefore the renewal of a quota position is normally dependent on a showing that a Nigerian has been appointed to understudy the expatriate. It is possible, however, for companies with foreign equity participation to obtain a permanent until reviewed (PUR) quota. This will normally be given in respect of chief executives of such companies. A fee payable in convertible foreign currency is charged for renewals or grants of PUR quotas. After the grant of the expatriate quota positions, the expatriates to take up the positions will each be required to apply for residence permits, which is the authorisation they require to reside and work in Nigeria. Expatriates can be accompanied by their families and dependant applications will be submitted on behalf of such persons. 16

17 7.4 Describe any recent political events that are likely to have an impact on the investment environment in your country (e.g. any new or proposed government initiatives to attract foreign investments) There are several on-going reforms in the Oil & Gas sector and the introduction of the Petroleum Industry Bill that has just passed first reading at both chambers in the National Assembly (i.e. the House of Representatives and Senate) is expected to introduce changes to developments in this sector. The establishment of the Nigerian Oil and Gas Industry Content Development Act ( Local Content Act ) law seeks to increases participation of Nigerian ventures and workforce in the oil and gas sector. ******************************************************************************************************************** (as of July 22, 2013) This article is intended to provide only general, non-specific legal information and does not purport to give a legal opinion or advice on specific facts. 17