The Corporate Affairs Commission (CAC) has rescinded its earlier directive mandating companies with foreign involvement in Nigeria to maintain a minimum paid-up capital of N100 million.
This reversal comes after significant criticism and opposition from financial experts and company founders.
The commission issued a circular shared on its official account, retracting its initial notice titled “Minimum Paid-Up Capital for Companies with Foreign Participation.” The CAC clarified that the initial notice was based on the Federal Ministry of Interior Handbook on Expatriate Quota Administration 2022 Revised Edition, which referenced paid-up capital rather than issued capital.
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In its statement, the commission advised its customers and the public to disregard the earlier notice and announced its intention to issue a revised notice in due course, indicating a more updated stance on the matter.
“Our dear esteemed customers and the general public are hereby advised to disregard our earlier issued notice titled “Minimum Paid-Up Capital for Companies with Foreign Participation”, the commission said.
Our dear esteemed customers and the general public are hereby advised to disregard our earlier issued notice titled "Minimum Paid-Up Capital for Companies with Foreign Participation"
— Corporate Affairs Commission (@cacnigeria1) December 8, 2023
Previously, the CAC had indicated its implementation of the requirement for companies with foreign involvement to maintain a minimum paid-up capital of N100 million.
“The Commission wishes to notify the General Public that it has, in line with the Revised Handbook on Expatriate Quota Administration (2022), commenced the implementation of the requirement of N100,000,000 (One Hundred Million Naira) MINIMUM PAID-UP CAPITAL for Companies with foreign participation.”
This directive, in line with the Revised Handbook on Expatriate Quota Administration (2022), stated that any application for incorporating a company with foreign participation would not be processed unless it complied with the specified capital requirement.
The directive, which shot up the cost of market participation by 900 percent, riled up the Nigerian business section on social media.
Before now, the minimum paid-up capital for such foreign companies to participate in the Nigerian market was N10 million. That is even considered high compared to other places.
“A country that is seeking foreign investment is requesting a minimum paid-up capital of $100k for foreigners to set up business in Nigeria. Even if Nigeria was Heaven, nobody is paying that amount,” a Nigerian said. “Delaware costs like $50 to register a new entity. If you even add agents and stuff, max $500. The UK is less than $500. Even Cayman or BVI doesn’t cost more than $3k to incorporate in as a foreigner.”
A country that is seeking foreign investment is requesting a minimum paid-up capital of $100k for foreigners to set up business in Nigeria. Even if Nigeria was Heaven, nobody is paying that amount.
??????
Delaware costs like $50 to register a new entity. If you even add… pic.twitter.com/jEVxnjuySU
— Brother Bernard (@MikaelCBernard) December 7, 2023
Analysts believe the decision to increase the market participation cost is “short-sighted” and makes the idea of a $1 trillion economy being pushed by the current administration laughable.
“THIS IS WRONG, this is a terrible idea,” financial expert, Kalu Aja noted. “You are essentially saying I must incorporate with N100m, PAID UP before I can get a foreign partner. The focus on PAID UP capital shows they are targeting IGR not FDI. This is so short sighted. Who is making these rules? Is the coordinating minister of the economy aware of this?”
He added that laws like that are part of the reasons Nigerians are leaving CAC to incorporate their startups in the US.
“This is why 80% of Nigerian startups are flocking to Delaware to incorporate; it’s far CHEAPER,” he said.
“You are here arguing that US investors should pay N100m to FG before they can invest in Nigeria. This is 2023 not 1981. It’s now a global village. You are competing with the Mexico, Vietnam and Rwanda. Grow up.”