Starting a business in Lagos: What you need to know
ome to more than 21 million inhabitants and still growing at a rapid pace, Lagos is an energetic megacity. But don’t let the bustle put you off – it has ample opportunity for entrepreneurs.
Despite challenges with infrastructure, the city has made a name for itself as a home for startups and innovative tech companies, with the Yaba district boasting one of the largest concentrations of startups in Africa. In fact, tech is such a big part of the local ecosystem that Lagos is known as Silicon Lagoon.
Want to be a part of the quickly growing Lagos startup community? Informed by Startup Guide Lagos, here’s what you need to know to set up business.
Tech is such a big part of the local ecosystem that Lagos is known as Silicon Lagoon.
What is Lagos like to live in?
Lagos is one of Africa’s most vibrant urban centers, with a lively arts scene that includes Nollywood, Nigeria’s thriving film industry. The city was Nigeria’s political capital until 1991, when the seat of government moved to Abuja, and it’s also one of Africa’s largest commercial hubs.
As in many big cities, people can be rushed, stressed and sometimes rude. Because infrastructure is lacking, everyday activities can be a struggle. Broadband is not widely available in Lagos, and most people use 4G to access the internet.
The congestion is notorious, with commuters spending an average of thirty hours a week sitting in traffic. When choosing where to live or set up an office, consider your daily commute. There’s also a culture of lateness, so don’t expect meetings to be punctual.
Lagos is conservative compared to many Western cities and you should be respectful of Nigeria’s Muslim culture. Avoid revealing clothing and be aware that there are strict drug laws. Sexual relations between individuals of the same sex are outlawed in Nigeria, and LGBTQ+ visitors should avoid public displays of affection.
How are the people?
Nigerians love soccer (or football as it’s known here), and even bustling Lagos comes to a standstill when a major soccer match is in play. European league matches are popular, especially the English Premier League. Large crowds gather at dedicated viewing centers and in pubs to watch matches, and they’re a good opportunity to make new friends. Nigerians love expats who like soccer, and the bond is even stronger when you support the same team.
Foreigners may have an idea of Lagos as a dangerous and difficult city, but the reality is often pleasantly surprising. The average local is friendly and helpful, especially to foreigners, but be sure to stay in secure accommodation and remain alert.
Is Lagos affordable?
Lagos can easily be one of the most expensive cities in Africa. A three-bedroom apartment in a nice, safe neighborhood costs about ₦8.5 million ($22,700) per year. It’s also normal for middle-class households to employ domestic staff, such as a cleaner, nanny and perhaps a security guard.
Fresh food is more expensive than in the rest of Nigeria because most of it is transported to Lagos at high cost from other parts of the country. In contrast, imported items are cheaper than in other parts of the country because they enter Nigeria at the Lagos port.
Due to government subsidies, Nigeria is one of the cheapest places in the world for gas, at around ₦500 ($1.33) per gallon. A meal in a basic restaurant can be as low as ₦650 ($1.73), but there’s no shortage of upscale options in Lagos. A cappuccino costs around ₦1,000 ($2.67) and a local beer ₦350 ($0.93).
What do I need to know before I move to Lagos?
Safety is a key consideration, and you should start planning before you arrive. Be sure to book a reputable hotel ahead of time – this is not a place where you can just show up and figure it out.
The city’s Murtala Muhammed International Airport can be very rowdy, especially in the evenings when the majority of flights from Europe arrive. Dubious drivers have been known to take advantage of first-time visitors, so arrange for a pickup before traveling.
English is Nigeria’s official language and it’s the language of business in Lagos. Weather in here is hot and humid year-round, so bring light clothing. A yellow fever vaccination certificate is required, so be sure to get immunized and also ask your doctor about other suggested vaccinations such as hepatitis A, typhoid and rabies.
Most expats choose to live in Ikoyi, Victoria Island or Lekki, which are safe areas with high-quality properties. You can find cheaper but still secure options in Surulere, Ikeja and Gbagada.
Be cautious of scams – there have been cases of agents collecting rent from several prospective tenants for the same apartment and it can be very difficult to retrieve money even when the matter is reported to the police. Leases are usually for a year to start and the whole year’s rent is paid upfront, so make sure you have adequate cashflow.
The inefficiency of the Nigerian healthcare system is a major issue – the World Health Organization has ranked the country’s healthcare among the world’s worst. With this in mind, it’s recommended to take out private insurance with a licensed Health Maintenance Organisation and consider an international plan that will repatriate you in the case of major illness.
Do I need a visa? What about a work permit?
In early 2020, Nigeria made significant changes to its visa process, including expanding its categories of visas from six to 79 classes and the introduction of an e-visa, with an aim of improving the business environment and boosting tourism.
Foreign citizens who plan to work in Nigeria need to obtain both a Subject to Regularization (STR) visa and a Combined Expatriate Residence Permit and Aliens Card (CERPAC). Before leaving your home country, you will need to sign an employment contract with a company in Nigeria, complete an online application for an STR visa through the Nigerian Immigration Service and provide the Nigerian embassy in your country with a printed copy of the application and all other required paperwork, including proof of payment of the application fee.
It takes around four weeks to get the STR visa, which is valid for 90 days. When you have it, you can travel to Nigeria and complete the visa application. From within the country, you need to apply for regularization at the National Immigration Service, where you will be issued a CERPAC. The card is valid for an initial period of two years, after which it can be renewed. Nigeria also issues single-entry temporary work permits for foreigners who intend to carry out short-term work.
It can be challenging to do business in Nigeria, but the country is becoming more efficient.
How do I start a company in Lagos?
It can be challenging to do business in Nigeria, but the country is becoming more efficient. It placed 131 in the World Bank’s Doing Business 2020 report, fifteen places higher than in 2019 and 39 places higher than in 2016.
To register in Nigeria, a foreign company must have a minimum authorized share capital of ₦10 million ($26,655). You must register with the Corporate Affairs Commission (CAC) within 28 days of commencing business. You’ll need to propose a company name, provide details of the directors, shareholders and nature of business, submit your articles of association and pay a stamp duty and fee. Reservation of a name is ₦500 ($1.33) and registration of a company with share capital of more than ₦1 million has a fee of ₦10,000 ($26.65) per ₦1 million or part thereof.
You should receive a Tax Identification Number within two weeks of registering your business with the CAC. Register for Value Added Tax and Withholding Tax at the nearest Federal Inland Revenue Service (FIRS) office. You will also need to register with Nigeria Investment Promotion Commission (NIPC), a statutory body that promotes foreign investment. Download and complete the form, pay ₦15,000 ($39.98) online and then send the completed form, evidence of incorporation and proof of payment by mail to the NIPC office.
Every new company wholly owned by foreigners must also apply to the Ministry of Interior for a business permit. Expect the whole business registration process to take around two months for a routine application.
Co-Creation Hub is an affordable coworking space that supplies entrepreneurs, developers and freelancers with support and resources. If you’re looking for potential partners or an entry into the local ecosystem, rent a desk here or attend some of the many events.
What are taxes like in Lagos?
The Lagos Internal Revenue Service collects personal income tax, which is assessed using graduated rates from 7% to a maximum of 24% for those earning more than ₦3.2 million ($8,530). Non-residents are subject to the same rates as residents and Nigeria has double taxation treaties with various countries.
Companies pay income tax through FIRS and you should receive a tax number when you register your business. Businesses with an annual profit of more than ₦100 million ($26,6548) pay 30% tax, and those with profit between ₦25 million ($66,637) and ₦100 million pay 20%. Companies with less than ₦25 million annual profit are exempt from paying tax.
Nigeria’s VAT rate is 7.5% and local governments collect taxes and levies for services including sewage and refuse disposal.
How do I handle money in Lagos?
To open a personal or business bank account, you’ll need a resident permit, passport photos, proof of address and valid photo ID. Some banks may ask for a letter from an employer or references. Having a reference who holds an account at the same bank can speed up the application process.
A minimum cash deposit is required, which can be as low as ₦2,000 (around $5), and most banks issue ATM cards. Accounts have a monthly charge, but it is usually less than ₦375 ($1).
Medium and big businesses usually accept local and international credit cards, but cash is the main form of payment in Lagos and you’ll need it for everyday expenses such as meals in casual restaurants or items from small shops and markets.
Ready to start up in Lagos? Learn more about the key players and find valuable resources in Startup Guide Lagos.
Written by Sam Olukoya.
Repackaged by Hazel Boydell.
Header photo by: Omotayo Kofoworola