Nigeria Economy Overview

Currency

Nigerian Naira (NGN)

Working hours

40 hours/week

Public/bank holidays

24 public holidays

Capital

Abuja

Languages

Hausa, Yoruba, Igbo, Fulfulde, Ibibio, Kanuri, and Tiv

Population

227.71 million

Minimum hourly salary

NGN 437.50

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Nigeria’s labor market laws require that workers be classified correctly. Employers who misclassify employees as independent contractors can face penalties, including back payment of taxes and possible fines.

Fun fact

Nigeria is so rich in oil that it’s often called the “Giant of Africa,” with oil and gas making up nearly 90% of its export earnings, driving its economy and global influence!

Nigeria is Africa’s most populous country, and with over 227.71 million people, it is also the sixth most populous country in the world. It borders Niger, Chad, Cameroon, and Benin, while its capital, Abuja, is right in the center of the country, and its largest city, Lagos, sits on the coast in the Gulf of Guinea. Nigeria was colonized by the British in the late 1800s and then gained its independence in 1960, but struggled to establish stability and democracy until the late 1990s. 

Since that time, Nigeria’s economy has shown incredible growth. From a 1999 low of $57.48 billion, GDP peaked in 2014 at $568.5 billion due to major oil and gas exports. In 2024, the country’s GDP is back down to $252.74 billion, but growth is expected at a more moderate average of three or more percent per year over the next five years.

The country has a very young population and a dynamic, thriving culture. If you’re thinking about hiring Nigerians to work for your organization or setting up a business in the country, this review will provide you with a lot of useful information to help you get started.

Overview of Nigeria’s Economy

Nigeria uses its own currency, the Nigerian Naira (NGN), which is currently valued at roughly 1,640 NGD in USD. Nigeria’s economy was traditionally based on agriculture before the oil boom of the 20th century, and the oil and gas industry fueled incredible growth.

In the past ten years, however, the country’s economy has become increasingly diversified and much more robust. While oil is still important, it now contributes less than 10% to the GDP.

Instead, the agriculture, manufacturing, information and telecommunications, construction, mining, financial services, real estate, and professional services sectors make larger contributions. 

Nigeria’s main industrial products include:

  • Cement
  • Ceramics
  • Chemicals
  • Crude oil
  • Coal
  • Columbite
  • Fertilizer
  • Food products
  • Footwear
  • Skins and hides
  • Steel
  • Wood

Its main export markets include India (12.64%), Spain (11.96%), the Netherlands (9.59%), Indonesia (7.42%), and the United States (6.95%), and as well as its neighboring West African nations. It mostly exports cocoa, crude oil, fertilizer, gold, natural gas, and refined petroleum.

Nigeria imports cars and parts, clothing, plastics, refined petroleum, sugar, and wheat largely from China (22.69%), the Netherlands (10.37%), Belgium (10.33%), India (7.93%), and the United States (5.57%). 

Like most of its neighbors, Nigeria’s government encourages foreign direct investment (FDI) in the country and received inflows of 3.9 billion USD in 2023. Most of this capital came from the UK, South Africa, The United Arab Emirates, and the US. This investment has largely been in oil and gas, telecommunications, manufacturing, real estate, and agriculture.

Worker TypeMinimum Wage (NGN/month)Minimum Wage (USD/month)
Agricultural workers, laborers, and manufacturing workers70,00043
Middle class workers339,000200

With a population of 227.71 million people and a per capita GDP of $1,100, the World Bank classifies Nigeria as a lower-middle-income country. Nigeria is an affordable country to hire workers in, with a minimum wage increase in July 2024 to 70,000 NGN/month or roughly 43 USD.

While this new minimum wage is intended to help workers pay for increasing costs of living, it mostly applies to agriculture workers, laborers, and manufacturing workers. The average salary for middle-class workers is closer to 339,000 NGN or about 200 USD. Employers pay 11% social security contributions, but employees here are still very affordable.

Taxes

Employer Tax: 15%

Approximately 15% made up of:

  • National Pension Scheme: Employers contribute 10% of the employee’s gross salary.
  • National Social Insurance Trust Fund (NSITF): Employers contribute 1% of the employee’s gross salary.
  • Industrial Training Fund (ITF): Employers contribute 1% of the employee’s gross salary.
  • National Housing Fund (NHF): Employers are required to deduct 2.5% from the employee’s monthly salary and remit it to the Federal Mortgage Bank of Nigeria

Employee Tax: 7-24%

Labor Market Supplementary Pension (AM-Pension)

8% of salary

Income Tax

Employees in Nigeria are subject to the Pay-As-You-Earn (PAYE) system, with tax rates applied progressively to their annual taxable income.

Gross Income (NGN)

First ₦300,000

Next ₦300,000

Next ₦500,000

Next ₦500,000

Next ₦1,600,000

Above ₦3,200,000

Tax Rate

 7%

 11%

 15%

 19%

 21%

 24%

Overview of Nigeria's Business Regulation

Nigeria is very open to foreign investment, and at the present time, when foreign direct investment is down, the government has taken several steps to encourage FDI. The Nigerian Investment Promotion Commission (NIPC) is able to offer incentives to new investors that include tax, tariff, and export-based incentives.

Free Zones have also been established with special conditions for businesses in several industries. If you’re considering opening up a business in Nigeria, here are some important business regulations to be aware of.

Registration and Compliance

If a foreign company decides to expand into Nigeria, it normally needs to establish a locally registered business entity. This entity can take several forms, including a private limited liability company (LLC), public limited company, company limited by guarantee, limited partnership, limited liability partnership; or a private unlimited company. A branch office is not a possibility in Nigeria.

Setting up a business in Nigeria can be somewhat challenging, but it still doesn’t take very long. Setting up an LLC can take as few as seven days, and the World Bank gives the country a good score of 83.6% for ease of starting a business. This process requires only seven procedural steps, including:

  • Reserving a unique company name with the Corporate Affairs Commission (CAC)
  • Preparing documents (memorandum, articles of incorporation), having them stamped by the Federal Inland Revenue Service (FIRS), and paying stamp duty
  • Signing the declaration of compliance before a Commissioner for Oaths or a Notary Public 
  • Registering the company with the CAC, paying registration fees, and receiving income tax and VAT registration numbers 
  • Creating a company seal (stamp)
  • Registering the owners for personal income tax with the Internal Revenue Tax Office
  • Register business premises with the appropriate state government and paying a business premises levy

Taxes and Investments

The corporate tax rate (CIT) in Nigeria is 30% for large companies (with gross turnover over 100 million NGN), 20% for medium companies (gross turnover of 25 million to 100 million NGN), and 0% for small companies (less than 25 million NGN in turnover).

Petroleum companies pay 50% CIT if they share production with the Nigerian National Petroleum Corporation (NNPC) and 65.75% if they don’t. VAT is 7.5%, and customs duties on imports range from 5-35% depending on the items imported. Withholding taxes for companies are 10% for dividends, 10% for commissions and consultancies, and 10% for royalties.

Social security contributions for employers total 11% on top of workers’ wages, and all companies must pay a 2% education tax on their assessable profits. However, companies established in free zones receive special incentives.

Businesses that engage in agribusiness, oil and gas, construction, light manufacturing, and solid mineral and metal processing can enjoy total exemption from taxes, levies, duties, and foreign exchange regulations. However, they must still prepare and submit tax filings.

Employment Laws

Employees in Nigeria work 40 hours per week and must be paid more than normal wages for overtime hours. They should receive an annual paid leave of at least six working days per year.

Nigerians are entitled to 14 paid public holidays per year. Maternity leave is granted for 12 weeks, half-paid by the employer, but there is no mandated paternity leave. Workers should be given notice of termination between one day and one month, depending on the length of their service.

Learn more about employee benefits in Nigeria

Intellectual Property

Copyrights in Nigeria last for 50-70 years depending on the type of material created. Trademarks can be registered for seven years and then renewed for 14-year periods and patents receive 20 years of protection.

Benefits of Doing Business in Nigeria

When any investor looks into doing business in a foreign country, they’ll always want to know the comparative advantages and disadvantages of setting up or investing there. 

Nigeria stands out in West Africa due to its more developed infrastructure compared to many of its neighbors, providing a solid foundation for business operations and growth. The country features a partially privatized economy that encourages private sector participation and fosters competition, making it an attractive destination for both local and international investors.

One of the key advantages of doing business in Nigeria is its advantageous tax system, which further enhances the business environment. Additionally, labor costs in Nigeria are notably affordable, offering companies a cost-effective workforce to support their operations.

With a large population and a burgeoning middle class, Nigeria presents a significant consumer market with access to regional markets across Africa. The fact that English is the official language greatly improves communication and facilitates smoother business interactions.

Furthermore, Nigeria allows for 100% foreign ownership of entities in most industries, giving investors the freedom to fully control their ventures. The country also boasts 42 free zones, which offer additional benefits such as tax holidays and the ability to repatriate 100% of profits and dividends.

Together, these factors create a compelling landscape for business opportunities, positioning Nigeria as a key player in the West African economic landscape.

Downsides of Doing Business in Nigeria

While the advantages of doing business in Nigeria are clear, there are also several disadvantages to mention. 

While Nigeria presents numerous business opportunities, it also faces significant challenges that potential investors should consider. One of the primary issues is the slow bureaucracy, which is often accompanied by a lack of transparency and moderately high levels of corruption. This can complicate the process of starting and operating a business, leading to frustrations for entrepreneurs.

Additionally, regional and internal political instability can create security concerns, impacting the overall business climate. The great distance from North American, Asian, and European markets further complicates trade and logistics, making it more challenging for businesses to engage in international commerce.

Moreover, Nigeria’s poor electrical infrastructure necessitates that many businesses generate their own electricity, adding to operational costs and complicating planning for growth. Lastly, restrictions and taxes on imports can hinder the availability of essential goods and materials, affecting supply chains and production efficiency.

International Expansion into Nigeria

Nigeria is a country with a massive population and abundant natural and human resources. This can make it a highly attractive market to enter and one that’s expected to grow steadily in the next five years.

When companies look into expanding into Nigeria, they’ll find that they have several options available to them, such as opening offices and hiring local staff. These options include:

Nigeria Employer of Record (EOR)

A final option for working with Nigerians is to hire them to work remotely without registering an entity at all. This can be done with the assistance of an EOR or Employer of Record, a service provider that already owns an entity in Nigeria.

It uses this entity to become the legal employer of local employees but hires them to work for its clients and handles all of their HR concerns, much like a PEO.

LEARN MORE

Recruitment Agencies

Recruitment agencies in Nigeria help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Nigerian labor laws.

For businesses looking to grow in Nigeria, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

LEARN MORE

Nigeria Professional Employment Organization (PEO)

A PEO or Professional Employment Organization might be a good service provider for a new business in Nigeria to partner with. The role of a PEO is to manage a company’s staff through a co-employment relationship.

The PEO essentially takes on the role of the company’s entire HR department and handles hiring, onboarding, payroll, benefits administration, and all other HR concerns on its behalf.

This relationship can allow a new company to employ workers compliantly in Nigeria without having to become expertly knowledgeable about the country’s labor laws.

LEARN MORE

Subsidiary Incorporation

Foreign investors looking to start businesses in Nigeria will need to register them as subsidiaries. Most investors will choose to set up either an LLC or a public limited company in this country.

An LLC is a good choice for smaller businesses that are just beginning their work in Nigeria. LLCs can be entirely foreign-owned and require a minimum of just two shareholders and two directors of any nationality. They must pay in a minimum share capital of just 10,000 NGN (about 6 USD) and can be set up in as few as seven business days.

A public limited company or PLC is a good choice for larger enterprises that may want to find public funding. To set up a PLC, you need at least two founders and require 500,000 NDN (about $300) in share capital though this increases dramatically if the company is to be entirely foreign-owned.

Branch Office / Representative Office Registration

While registering a branch of a foreign country is possible in many countries, this possibility does not currently exist under Nigerian law. However, a representative office is one way to get a foot in the door in Nigeria.

A representative office must be registered with the Corporate Affairs Commission (CAC) and follow strict guidelines. It may not perform any business activities or enter into any contracts. It may only work as a liaison or promotional office, conducting market research, or storing goods.

Its income must come entirely from the parent company, and as such, it will not pay taxes in Nigeria as it will generate no profits there.

Business Opportunities in Nigeria

Nigeria, often referred to as the “Giant of Africa,” presents a myriad of business opportunities across various sectors, fueled by its large population, abundant natural resources, and growing consumer market.

As Africa’s largest economy, Nigeria is experiencing a shift towards diversification, moving away from its traditional reliance on oil and gas. The agricultural sector offers significant potential, with opportunities in agribusiness, food processing, and export of cash crops such as cocoa and cashews.

Additionally, the technology sector is booming, with a vibrant startup ecosystem focused on fintech, e-commerce, and mobile solutions that cater to the needs of a tech-savvy population. Renewable energy is also gaining traction as the country seeks to address its power supply challenges, creating avenues for investment in solar and wind energy projects.

Business OpportunityReason for Opportunity
AgribusinessLarge agricultural base and increasing demand for food security and export potential.
Technology and FintechRapid growth in the tech sector, with a burgeoning startup ecosystem and high mobile penetration.
Renewable EnergyGrowing interest in sustainable energy solutions to address power supply challenges.
Real EstateUrbanization and population growth drive demand for housing and commercial properties.
HealthcareNeed for improved healthcare services and facilities presents opportunities for investment.
E-commerceIncreasing internet penetration and consumer preference for online shopping create a thriving market.
Tourism and HospitalityPotential for growth in domestic and international tourism, leveraging Nigeria’s rich cultural heritage.

These business opportunities in Nigeria are supported by a youthful population eager for innovation and change. Entrepreneurs looking to invest in Nigeria can leverage these sectors to not only achieve financial success but also contribute to the country’s economic development and diversification efforts.

Setting up a company or working with an EOR to hire local Nigerian workers are excellent way to take a step into this market and take advantage of the opportunities this dynamic country has to offer.

Are you interested in doing business in Nigeria? Remote People can help. Contact us today to assess your business needs and learn how we can assist you in achieving your objectives.