Nigeria’s economy has much in common with those of China, Malaysia, Brazil and India. Free enterprise is the norm, although there are a number of important economic sectors such as telecommunications, electricity and water that have been or continue to be wholly or partially government-owned and controlled. The government’s policy is to promote the commercialisation, restructuring and privatisation of certain government-owned enterprises.
Recently, Nigeria has become the largest economy in Africa after rebasing its gross domestic product (GDP). Rebasing captured the structural changes in the economy especially in the banking, telecom and entertainment sectors, where Nigeria recorded dramatic growth in recent years. Nigeria gross domestic product is now $510 billion.
IMPORTS AND EXPORTS
Most of Nigeria’s exports to industrialised countries consist of primary and intermediate commodities. A large proportion of exports consist of unprocessed raw materials, with the oil and gas industry contributing the greatest proportion to the country’s total exports.
Nigeria is a major exporter of crude oil. The country is also an exporter of cocoa, rubber, cashew nuts and raw timber. It has the world’s third largest film production industry after the United States and India, becoming a major exporter of movies.
Imports include mainly capital goods, food products, refined petroleum and intermediate goods.
SETTING UP A BUSINESS
The most common form of business entity in Nigeria is the limited liability company.
Companies can be limited by guarantee or limited by shares. Companies limited by guarantee are generally not-for-profit organisations that primarily promote religious, charitable, educational and/or other similar interests. The names of companies limited by guarantee must end with the words ‘Limited by Guarantee’.
Companies having share capital may be public or private companies. The name of a public company must end with the word ‘Public Limited Company’ usually abbreviated to ‘PLC’ whereas private companies must end with the words ‘Limited’.
For a private company, the minimum number of shareholders is 2 and of directors also 2, while a public company may have an unlimited number of shareholders and as many directors as desired.
Directors need not own shares in the company and need not be resident in Nigeria, but a Nigerian resident must be appointed as the Company Secretary of the company. The company secretary of a public company must be a Nigerian resident. The board of directors is responsible for the daily management of the company for the benefit of its shareholders and acts for the company in transactions entered into by it. The shareholders exercise their powers in general meetings. The annual general meeting must be held within nine months of the financial year end and not more than 15 months after the last meeting. Shareholders may be individuals or corporate bodies, and any or all of the company’s shares may be held by non-residents.
The principle that a company is a separate entity and exists separately from its shareholders, applies to both private and public companies. A company can enter into contracts and can sue or be sued in its own name. A shareholder’s liability for the debts of the company is limited to the amount of capital they have invested in the shares.
A director may be held liable to indemnify the company or its shareholders against losses suffered by them in the following circumstances (amongst others):
- Unauthorised loans to directors or companies controlled by directors
- Breach of trust or faith, or wrongs committed by the director
- Reckless trading or fraud
- Untrue statements contained in a prospectus or financial statements
- Failure to repay monies received in respect of a share offer within a specified period.
UNLIMITED LIABILITY COMPANIES
Members of certain organised professions, such as attorneys, accountants, medical practitioners etc are not allowed to incorporate their companies as private companies which confer limited liability on the members who are therefore jointly and severally liable for the debts of the company. They can however register as Limited Partnerships in one state, Lagos State out of Nigeria’s 36 States and Federal Capital Territory.
ASSOCIATIONS AND UNIONS
These may register as Corporate Trustees or companies limited by guarantee. The constitution of an individual association spells out the obligations of members, which may include the terms of contributions to be made by the members.
PARTNERSHIPS AND SOLE PROPRIETORSHIPS
Partnerships are not subject to the requirements imposed on companies, but are subject to the general principles of the law of contact and to various special principles of common law applicable particularly to partnerships. They are not separate legal entities but are free to register as Business Names which formalises the existence of partnerships if the Partners so desire.