Doing business is tough, especially if you are in Nigeria – at least that is what local entrepreneurs say. Even the registration process seems to be made almost unbearable by both government and its agencies, particularly the Corporate Affairs Commission (CAC), investigation reveals.
Every enterprise in Nigeria is required by law to be registered with the Corporate Affairs Commission, and to comply with the relevant provisions of the Companies and Allied Matters Act, Chapter 59, Laws of the Federation of Nigeria 1990.80 percent of the registered companies in Nigeria are small and medium scale enterprises (SMEs) which are family owned and controlled. The corruption is so pervasive such that the CAC cannot effectively monitor the SMEs. Even when the CAC wants to do so, the politicians and business owners who have appointed to the CAC Board members often frustrate such laudable efforts.
According to the September 2002 World Bank Group report, the government has acted to reorient economic policy, stimulate non-oil Small and Medium Enterprise (SME) development, promote foreign investment, reform the financial architecture, and combat corruption.
These efforts and the momentum provided to the nation by the return of a democratic government are reflected in the “Improvement and Optimism Indexes” compiled by the World Economic Forum’s Africa Competitiveness Report (2000–2001), which ranks Nigeria fourth among 12 African countries in terms of improvement and first in terms of “optimism.”
However, many Nigerian entrepreneurs are not impressed.
For Ajibade Ogundimu, a fashion entrepreneur based in Lagos, registering his business was a big burden.
“For instance, I was asked to come back and I have returned to the CAC office several times after indicating name choice for my business. I also met some touts who promised to facilitate the process for me so I could get my business registered on time.”
This ignoble alliance between the political and business class has created a system where corruption is institutionalized and further entrenched through a network of family owned and controlled companies.
Thus the SMEs are inclined to do business with the politicians in the ‘Nigerian way’ because the politicians often influence how government contracts are awarded and how government officials are ‘settled’ through bribes and kickbacks. In a bid to stop this institutionalized corruption, the civilian government had to set up two special anti-corruption agencies; the Independent Corrupt Practices Corruption (ICPC) and the Economic and Financial Crime Commission (EFCC) but the effectiveness of these agencies in fighting corruption is being influenced by the ruling politicians.
Why bother registering with CAC?
Meanwhile, proper registration is one of the important things many small business owners neglect to their detriment. This is because a good number of them think it’s not important and some others who think it’s important assume it will be a very difficult task.
Okey Nwosu, a trader based in Aba confessed that he would never bother registering his business again. He was frustrated by the CAC processes that led to him loosing a business deal.
“Why should I bother to register again?” He queried.
However, the importance of registering a business cannot be over-emphasized. When it comes to doing serious business, many agencies will never take the entrepreneur serious if his/her company is not registered.
According to the tips offered by Edwin Ndubisi, people feel more comfortable paying for services and products into a corporate account with the name of an organization than paying into an individual account. The entrepreneur misses an important sale when a prospect changes his mind due to the bank account details. He thought it too risky because it was a sizable amount involved.
People feel if the account is in a corporate name, the organization can be traced if the transaction went foul. If you register your company, you can use the documents to open a corporate account with less stress.
The smallest firms have the lowest value added and the very large firms have a value added per worker that is significantly greater than other types of firms. Local firms have less than half the value added of firms with foreign equity, and firms owned by indigenous entrepreneurs have a lower value added than firms owned by entrepreneurs of non-African descent.
For Nigerian entrepreneurs, registering a business name can happen in two ways. One is to engage the services of a lawyer or adopt a do-it-yourself (DIY) strategy.
The CAC recognizes 3 professionals or a firm consisting of any 3 of these professionals: Lawyer, Chartered Accountant and Chartered Secretary. Only these sets of professionals can be accredited by the CAC to do business at the CAC on behalf of customers.
Accreditation numbers are assigned to CAC agents who meet certain requirements to undertake incorporation support services on behalf of people who need to do business with the CAC. Only lawyers, chartered secretaries or chartered accountants or firms comprising of any of these professionals can be accredited by the CAC.
The implication is that entrepreneurs can only do their own business name registration (not for any other person, if they are not an accredited agent). More so, only accredited agents can incorporate limited companies and trustees (church, club, association, etc.).
Ayokunle Bankole is an entrepreneur whose business is to register the businesses of other entrepreneurs. He is the founder of MyIncorporation.com.ng, an online platform dedicated to providing prompt and genuine company formation and registration support to Nigerians and Non-Nigerians desirous of doing business in Nigeria.
According to Ayokunle, “You cannot incorporate a trustee (whether a church or association) for N10,000. Apart from regular filing fees, you still have to pay for publication in 2 daily newspapers, make a corporate seal and pay some professional fee to your agent.”
This was the reply to someone who just started a church and thought of registering with the said amount.
For Minna Onomroba Abell, her challenge is how to change the name of an institute e.g. “Frontline Institute of Planners and Design” to “Institute of Planners and Design.”
“Changing the name of the institute might not be as easy as you think in the sense that CAC might have approved that name initially based on the word “Frontline”. Deleting that word gives it another meaning altogether, which may be queried by the approving officers.
It most instances, names of professional associations (or institutions) have prefixes such as yours – Frontline – to distinguish it from another. That’s why you have “Nigeria”, “National”, etc. as prefixes of some associations/institutions.
Where you have an association starting with the word “Institute” such as the Institute of Chartered Accountants of Nigeria, then you know appropriate approvals have been sought from a recognized body before CAC can approve of such a name.
How about re-registering a business that was registered over 30 years ago? According to our analyst, “If you registered your company in 1981, you don’t need to re-register it unless your company has been struck off (de-listed) from the CAC register for failure to file annual returns. If this is the case, you will have to write the CAC and comply with necessary documentation including the filing of annual returns.
However, if your company was blacklisted and subsequently delisted, you cannot re-register such company names.
The problem is that many Nigerian entrepreneurs are ignorant of these rules and are constantly either victims of frauds or they break the rules. This apparently constitutes a serious challenge to the economy. Many of these entrepreneurs are frustrated by the system and would rather not register their businesses if they could.
