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  • Financial Management Strategies for Sustainable Growth in Nigeria’s Oil and Gas Industry

    Financial Management Strategies for Sustainable Growth in Nigeria’s Oil and Gas Industry

    Nigeria boasts over 37 billion barrels of proven oil reserves and is one of Africa's largest oil producers. Nigeria's oil and gas industry remains vital to its economy, comprising around 90% of the country’s export revenue and 60% of government earnings.

    Despite this, the sector grapples with significant challenges, from price volatility to regulatory shifts, which affect long-term stability and growth. For sustainable development, companies in Nigeria’s oil and gas sector need to adopt robust financial management strategies that can weather the industry's challenges.

    This article explores strategic financial management tactics that can drive sustainable growth, positioning firms to stand on par with the best global players in the industry.

    1.    Cost Management and Efficiency Optimization

    In managing cost and ensuring efficiency, oil and gas companies can adopt:

    Lean operations
    Adopting lean management principles has been shown to reduce waste by up to 25%, according to a McKinsey report. This operational efficiency is crucial in a high-cost industry, where companies operating with lean strategies report, on average, a 10% increase in profitability.

    Technology integration
    Investing in advanced technologies, such as data analytics, automation, and artificial intelligence, can enhance operational efficiency. Technologies that improve exploration and production processes, reduce downtime, and enhance supply chain management can significantly lower operational costs. Automation technologies also enable firms to address skills shortages, a significant challenge in Nigeria's oil and gas industry.

     

    Read More: Leveraging the Employee Compensation Act for Worker Safety in the Oil and Gas Industry

     

    2.    Diversification of Investment

    Practical means in which an energy company can diversify their investment portfolio includes:

    Expanding into renewable energy
    With global energy consumption increasingly favoring sustainability, Nigerian oil companies should invest in renewables like solar, wind, and biofuels. A diversified portfolio not only mitigates the risk of oil price volatility but also aligns with global sustainability goals. The global renewable energy market is projected to grow at a compound annual growth rate (CAGR) of 8.4% through 2030, making this a strategic move for companies aiming to be future-ready (Statista, 2023).

    Geographic diversification
    Investing in multiple geographic regions can help spread risk. Nigerian oil and gas firms should consider exploring opportunities in other oil-producing countries or regions with less regulatory risk. This geographic diversification can enhance revenue stability and provide new growth avenues.

    3.    Strategic Financial Planning

    Companies in the oil and gas industry can employ the following strategies in financial planning:

    Robust budgeting practices
    Effective budgeting practices are essential for financial sustainability. Companies should adopt zero-based budgeting, which allocates resources based on current needs rather than historical expenditures. This approach encourages efficient resource use and helps prioritize strategic initiatives.

    Scenario planning
    With oil prices ranging from $50 to $120 per barrel in the past decade, scenario planning helps companies model various price scenarios. Using this approach, firms can make informed financial decisions to weather price fluctuations

     

    Read more: Accounting for VAT in Manufacturing Industry: Cashflow and Compliance Challenges

     

    4.    Strengthening Capital Structure

    Maintaining a very strong capital structure can be done using the following:

    Optimal debt-equity ratio
    Companies should strive for a debt-equity ratio that reduces capital costs while allowing for financial flexibility. With historically low-interest rates, companies can leverage debt financing to fund growth initiatives.

    Attracting foreign investment
    Nigeria's oil and gas industry can benefit from foreign direct investment (FDI). To attract FDI, companies must demonstrate financial stability, compliance with regulations, and a commitment to corporate governance. Establishing joint ventures with international firms can also provide access to capital and advanced technologies. 

    As of 2024, the Nigerian oil and gas sector continues to attract significant foreign direct investment (FDI). Recent reports indicate that the sector secured approximately $3.5 billion in FDI in 2024. This investment is driven by joint ventures with international companies and ongoing efforts to enhance the sector’s infrastructure.

    5.    Risk Management Strategies

    Oil and gas companies can employ the following in managing their exposure to risks:

    Hedging against price volatility
    Given the cyclical nature of oil prices, companies should implement hedging strategies to protect against price fluctuations. Financial instruments such as futures contracts, options, and swaps can help stabilize revenues and ensure financial predictability.

    Regulatory compliance
    Staying compliant with local and international regulations reduces the risk of penalties and operational disruptions. Companies should invest in compliance programs and engage with regulatory bodies to stay informed about changes in legislation.

     

    Read More: Balancing Energy Demands and Environmental Responsibility

     

    6.    Environmental Sustainability and Corporate Social Responsibility

    This is another key aspect in fostering sustainable growth. Oil and gas companies should engage in:

    Sustainable practices
    Incorporating environmental sustainability into financial management is critical. Companies should invest in technologies and practices that reduce their environmental impact, such as flaring reduction initiatives and carbon capture and storage. Flaring costs the Nigerian economy $2.5 billion annually, and reducing flaring can significantly cut environmental and operational costs

    Community engagement
    Investing in local communities through corporate social responsibility (CSR) initiatives can enhance a company's reputation and build strong relationships. Engaging with communities can lead to a more favorable operating environment and reduced opposition to oil and gas projects.

    7.    Talent Management and Development

    Oil and gas companies should promote:

    Training and capacity Building
    The success of financial management strategies relies heavily on the workforce's capability. Investing in training and capacity building ensures that employees are equipped with the necessary skills to navigate the complexities of the oil and gas industry.

    Retention strategies
    To maintain a competitive edge, companies must implement strategies to retain top talent. Offering competitive compensation, career development opportunities, and a positive work environment can significantly reduce turnover and enhance organizational performance.

     

    Read More: Navigating Global Challenges Affecting Nigeria’s Manufacturing Industry

     

    Conclusion

    Nigeria's oil and gas sector brims with potential but faces an array of complex challenges that demand strategic financial management. From optimizing operations to managing risks and prioritizing sustainability, success in this sector requires informed decision-making and meticulous execution.

    At Stransact, we have partnered with leading players in the oil and gas industry, leveraging our deep expertise in assurance, audit, and consulting to support their growth and operational excellence. Our experience allows us to provide tailored insights and solutions that address the unique dynamics of this sector, helping companies navigate uncertainties while unlocking value.

    As the industry evolves, businesses must align their strategies with global standards and local realities. Whether you're looking to strengthen your capital structure, enhance compliance, or implement robust risk management frameworks, a trusted advisor with a proven track record in the oil and gas space can be the key to driving long-term success.

     

  • From Waste to Wealth: Why Nigerian Business Leaders Must Shift to a Circular Economic Model Today

    From Waste to Wealth: Why Nigerian Business Leaders Must Shift to a Circular Economic Model Today

    A circular economy is more than an environmental effort; it is a critical, climate-resilient strategy for securing Nigeria's future. Unlike the traditional linear economy—which follows a "take, make, dispose" approach leading to waste and resource depletion—a circular economy is designed to keep resources in use for as long as possible, minimizing waste by reusing, recycling, and regenerating materials.

    This shift is crucial, especially in Nigeria, where environmental challenges are becoming more pressing. Issues like water pollution from oil and gas operations, air pollution from industrial activities, and land degradation due to waste buildup aren’t just distant worries—they’re real problems affecting people’s health, jobs, and our shared natural resources. Transitioning from a linear economy, which often adds to these issues, toward a circular model can help us save resources, cut costs, and ease our environmental footprint.

    This article addresses the need to transition to a circular economy, the challenges, and opportunities it presents, and actionable steps for Nigerian businesses to embrace this model.

    Linear vs Circular Models

    What is a Linear Economy?

    Traditionally, Nigeria has followed a linear economy—a “take, make, dispose” approach. It’s a straightforward system where we extract resources, make products, and then discard them when they’re no longer useful. This model has supported our economy, but as Nigeria’s population grows and the demand for resources increases, it’s clear that this way of doing things just isn’t sustainable.

    Key Features of the Linear Economy

    Resource Extraction: Nigeria’s rich natural resources—oil, minerals, timber—are continuously extracted, but this practice is not without consequences. Over-extraction leads to resource depletion, with the Nigerian Bureau of Statistics (NBS) reporting a 15% decrease in mineral resource outputs between 2010 and 2020.

    Production: Our factories and industries work hard to meet consumer demand, but in the process, a lot of by-products and potential resources are wasted. Many of these by-products could be repurposed to create new products, but instead, they’re treated as waste. For instance, in Nigeria’s palm oil processing industry, leftover palm kernel shells and husks are often discarded, even though they could be repurposed as biofuel or raw material for other industries, like cosmetics and animal feed.

    In steel manufacturing, slag—a by-product of metal extraction—often goes to waste, but it could be used in road construction or cement production. Similarly, in the food and beverage sector, organic waste from processing fruits, grains, and vegetables could be composted and turned into organic fertilizers, helping reduce the country’s dependence on chemical fertilizers.

    Consumption and Disposal: In Nigeria, many products are consumed without thought to what happens after they’re used. Without systems for recycling or repurposing, waste builds up rapidly. Lagos alone generates over 13,000 metric tons of waste every day, most of which ends up in landfills or is incinerated. This cycle of high consumption and poor waste management contributes significantly to air and land pollution and poses serious health risks, with issues like respiratory illnesses on the rise.

    Environmental and Economic Impacts

    Resource Depletion: Nigeria’s current approach to resources is running on borrowed time. Experts warn that our oil reserves might last only another 50 years at the current rate of extraction. This reality forces us to ask: What will future generations depend on if we drain our resources without a sustainable plan?
    Our reliance on gas flaring, which wastes valuable natural gas and pollutes our air, is just one example of how we’re squandering what we have. If we don’t change course and adopt more sustainable practices, we risk leaving behind a future with scarce resources and limited options for those who come after us.

    Waste and Pollution: With over 70% of Nigeria’s waste being mismanaged, the resulting pollution contributes to soil degradation, water contamination, and air pollution, with cities like Port Harcourt experiencing the infamous ‘black soot’ phenomenon. These issues aren’t just environmental—they have long-term health and economic costs, too.

    Energy Consumption: Nigeria’s reliance on fossil fuels for energy is a significant contributor to global warming, with the energy sector responsible for over 50% of the country’s greenhouse gas emissions.

    Economic Inefficiency: The linear economy is economically unsustainable. The World Bank estimates that Nigeria loses $8 billion annually due to poor waste management practices, funds that could otherwise be invested in economic growth and development.

    Circular Economy

    In contrast, the circular economy presents a sustainable alternative. It emphasizes a "closed-loop" system where resources are continuously reused, repaired, refurbished, and recycled, thereby minimizing waste and environmental impact.

    Key Features of the Circular Economy

    Designed for Longevity: Products in a circular economy are built to last, embracing durability from the start. Manufacturers consider not only the lifespan of a product but also its environmental footprint—opting for biodegradable options when possible, like paper-based packaging in place of nylon. For items like electronic gadgets, longevity means more than just durability. It includes the ability to repair, upgrade, and reuse devices, reducing the need for frequent replacements.

    Reuse and Refurbish: Reusing and refurbishing products can have a significant impact in regions like Nigeria, where the electronics market is growing, and refurbished devices are in high demand. By encouraging reuse and refurbishment, we’re not only extending the life of these products but also making technology more affordable and accessible. This approach aligns with the mindset that items can have a “second life” and that there’s value in what might otherwise be discarded.

    Recycling and Upcycling: Recycling initiatives, such as those led by the Nigerian Bottling Company, showcase the potential for converting waste into new, higher-value products, thereby reducing environmental impact.

    Sustainable Sourcing: Sourcing materials sustainably can dramatically reduce Nigeria’s environmental impact. More businesses are recognizing the importance of using materials that are renewable, recyclable, or biodegradable, aligning with international standards and reducing reliance on harmful materials. For example, Lagos has implemented a ban on nylon and Styrofoam to combat pollution and foster an eco-friendlier environment.

    Benefits of the Circular Economy

    Resource Efficiency: The circular economy reduces the need for virgin materials by reusing and recycling existing resources. This efficiency is crucial for Nigeria, where the demand for resources often outstrips supply.

    Environmental Impact: By minimizing waste and lowering emissions, the circular economy can help Nigeria achieve its climate goals, including its commitment to reduce greenhouse gas emissions by 20% by 2030.

    Economic Opportunities: Transitioning to a circular economy opens new avenues for innovation and business growth. The repair, recycling, and refurbishment industries alone could create millions of jobs in Nigeria, contributing to economic diversification.
    Consumer Benefits: For Nigerian consumers, a circular economy means access to higher-quality, longer-lasting products, and reduced costs through services like product take-back programs.

    Challenges of Adoption

    System Transition: Shifting from a linear to a circular economy in Nigeria will require significant changes in infrastructure, business models, and consumer behavior. For instance, the waste management infrastructure needs a complete overhaul to support large-scale recycling efforts.

    Economic Viability: Making circular practices economically viable in Nigeria presents a significant challenge. This transition will require substantial investments in technology, innovation, and infrastructure. The initial costs can be high, and businesses may be hesitant to adopt new models without clear financial incentives or support.

    Consumer Adoption: Educating and engaging Nigerian consumers about the benefits of a circular economy is crucial for its success. However, this is not without its challenges. Nigeria’s diverse population, with varying levels of education and access to information, makes it difficult to implement a nationwide campaign effectively. Additionally, there is a strong cultural preference for ownership over leasing or sharing, which can be a significant barrier to adopting service-based models

    Key Steps to Transition

    Develop Closed-Loop Supply Chains: Encourage Nigerian industries to use recycled or renewable materials in production, thus closing the loop on resource use.

    Promote Recycling and Resource Recovery: Invest in technologies that can effectively recycle materials or transform waste into valuable resources. The recent introduction of waste-to-energy projects in Lagos is a step in the right direction.

    Foster Collaboration: Collaboration between suppliers, customers, and stakeholders is essential. The Nigerian government’s Extended Producer Responsibility (EPR) policy is an example of how such collaboration can drive circular practices.

    Educate and Engage Stakeholders: Train employees on the advantages of the circular economy and educate Nigerian consumers about its benefits through public awareness campaigns.

    Implement and Monitor: Start with pilot projects to test circular economy models on a smaller scale, then develop standards to track progress and impact.

    Scale Up: Once successful models are tested, integrate them into broader business practices and supply chains. Engage in policy discussions to support regulations and incentives that promote circular economy practices.

    By focusing on these principles and strategies, businesses, governments, and individuals can contribute to a more sustainable and resilient economy that benefits both people and the planet.

    Benefits of Transitioning

    Economic Efficiency: Potential cost savings through improved resource use and reduced waste management costs.

    Innovation and Growth: The transition will drive innovation, creating new business models, products, and services that can contribute to Nigeria’s economic growth.

    Environmental Impact: Reduced waste, lower resource consumption, and decreased pollution.

    Customer Loyalty: As Nigerian consumers become more environmentally conscious, businesses that adopt circular practices are likely to see increased brand loyalty and customer retention.

    Conclusion

    The transition from a linear to a circular economy is not just a necessity for a sustainable future; it also demands a fundamental shift in how we approach business and accounting principles. By embracing circular principles, professionals can drive sustainable decision-making, reduce waste, and create long-term value.

    At Stransact, we understand the complexities and challenges that come with this transition. Our ESG consulting services are designed to help your business deeply understand and address these issues. We offer tailored solutions that not only solve immediate problems but also position your business to be future-thinking and agile. By partnering with us, you gain access to a team dedicated to staying ahead of future trends and actively shaping them. We are committed to helping you navigate the evolving landscape, ensuring that your business remains resilient, sustainable, and competitive in an ever-changing environment.

    Let us help you turn sustainability into a strategic advantage. Together, we can build a future where your business thrives while making a positive impact on the planet.

  • Doing Business in Nigeria: The Business Registration Process

    Doing Business in Nigeria: The Business Registration Process

    Starting a business in Nigeria requires a clear understanding of the regulatory landscape. In this guide, we’ll walk you through the steps involved in registering your business and obtaining the necessary permits to legally operate in the country. Whether you plan to work in oil and gas, manufacturing, agriculture, financial services, or the maritime sector, compliance with Nigeria’s legal framework is crucial for success.

    Watch Video on Youtube

    Step 1: Register Your Business with the Corporate Affairs Commission (CAC)

    The first step in establishing any business in Nigeria is registering it with the Corporate Affairs Commission (CAC). This applies to all businesses, regardless of their size or sector. CAC registration is a statutory requirement that gives your company legal recognition. This process is mandatory for both local and foreign companies operating within the country.

    Key Documents and Information Required for CAC Registration:

    • Proposed business name
    • Nature and objectives of the business
    • Details of directors and shareholders
    • Statement of share capital

    By engaging a reputable consulting firm like Stransact, the business registration process can be simplified. Once the application is submitted and approved, the CAC issues a Certificate of Incorporation for limited liability companies or Business Name Registration for sole proprietorships. This certificate is crucial, as it signals your company’s legal status to operate in Nigeria.

    Step 2: Obtain Industry-Specific Permits

    After incorporating your business, you may need additional permits depending on the sector you wish to operate in. If your business involves foreign shareholders, you must also obtain a Business Permit, which allows a company with foreign interests to operate without any regulatory disruptions.

    Here’s a look at sector-specific licenses:

    1. Food, Beverage, and Drug Manufacturing: Businesses in this sector must obtain licenses from the National Agency for Food and Drug Administration and Control (NAFDAC) to ensure compliance with public health standards.
    2. Insurance Services: If your company is engaged in the insurance sector, you will need approval from the National Insurance Commission (NAICOM) before you can operate legally.
    3. Telecommunications: Telecom companies are required to obtain licenses from the Nigerian Communications Commission (NCC) to operate in this highly regulated sector.
    4. Oil and Gas: Companies operating in the oil and gas industry must obtain additional permits from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), formerly known as the Department of Petroleum Resources (DPR).

    Each sector comes with its own set of specific requirements, and it’s important to ensure your company complies with all relevant regulatory agencies.

    Watch the Doing Business in Nigeria Series

    Navigating the Regulatory Landscape

    Operating a business in Nigeria can be complex due to the variety of regulatory bodies overseeing different industries. It is essential to conduct thorough research into the licenses and permits required for your business. Partnering with a firm like Stransact can help simplify the process, ensuring that your company is fully compliant and able to focus on its core operations.

    By following these steps, you’ll be well on your way to establishing a successful business in Nigeria. Stay tuned for the next episode in our series, where we’ll cover more insights to help you navigate the Nigerian business environment effectively.

  • Doing Business in Nigeria: Navigating Business Immigration in Nigeria

    Doing Business in Nigeria: Navigating Business Immigration in Nigeria

    As Nigeria continues to establish itself as a hub for business and investment opportunities in Africa, understanding the immigration landscape is crucial for anyone looking to work or set up a business in the country. This article offers insights into the process, requirements, and visa options for business travelers and entrepreneurs seeking to make Nigeria their next destination.

     

    Watch the Full Episode on Youtube

     

    Overview of Nigeria’s Immigration Regulations

    The Nigeria Immigration Service (NIS) is the regulatory body responsible for overseeing immigration matters in the country. As a government agency under the Federal Ministry of Interior, it operates in accordance with the Immigration Act of 2015, ensuring the smooth facilitation of immigration services to both visitors and residents.

    Types of Visas for Business and Work in Nigeria

    The Nigeria Immigration Service offers various visa categories tailored to different purposes. Below are some of the main types relevant to business travelers and professionals:

    1. Tourist Visa
      This visa is issued for short visits, including tourism and social activities. It is valid for up to 90 days.
    2. Business/Investor Visa
      Designed for individuals attending conferences, meetings, or exploring business opportunities in Nigeria. The visa is typically valid for 90 days but can extend up to five years depending on the specific need.
    3. Temporary Work Permit (TWP)
      This single-entry visa is intended for experts coming into Nigeria for short-term work assignments, valid for 60-90 days. However, it is extendable up to a cumulative period of 12 months.
    4. Subject to Regularization (STR) Visa
      Commonly referred to as an STR visa, this visa is issued to foreigners who are taking up long-term employment in Nigeria based on an expatriate quota granted to the hiring company. The visa allows multiple entries and also enables holders to bring in dependents.

    Visa on Arrival and Exemptions for African Citizens

    Recently, the Nigeria Immigration Service introduced a visa-on-arrival process, allowing business travelers and citizens from African countries (except ECOWAS members, who do not require a visa) to apply for entry into Nigeria upon arrival.

    Key Documentation for Nigerian Visa Applications

    The documentation required for a visa application will depend on the type of visa. Below are the general requirements for two of the most relevant visas:

    1. Temporary Work Permit (TWP)
      • Application letter
      • Valid international passport (minimum six months validity)
      • Resume and passport photos of the invited expert
      • Hiring company’s credentials such as certificate of incorporation, business permit, and company profile
    2. Subject to Regularization (STR) Visa
      • All documents required for a TWP visa
      • Invitation letter and valid expatriate quota position
      • Letter of employment and acceptance letter
      • Educational and professional credentials of the employee
      • Data page of the contact person (typically the signatory of the invitation letter)

    Processing Timeline and Recommendations

    Visa processing in Nigeria typically takes between two days to a week from the date of receipt of the application at the embassy. Given the complexity of immigration processes, it is often advisable to consult with reputable firms knowledgeable in immigration procedures and the local business landscape.

     

    Watch our Doing Business in Nigeria Series

     

    Conclusion

    Understanding the visa categories and immigration processes is essential for anyone looking to establish a business or work in Nigeria. The Nigeria Immigration Service, through its structured processes, ensures that the needs of different types of business travelers are catered to. At Stransact, we provide expert guidance on navigating these requirements and can help you secure the appropriate visa for your business needs.

    Need assistance with your Nigerian visa?

    Contact us at [email protected] to learn how we can assist in making your business immigration process smoother.

  • Doing Business in Nigeria: An Overview

    Doing Business in Nigeria: An Overview

    Nigeria, often regarded as a potential powerhouse in the global economy, boasts a population of over 200 million people, making it the most populous nation in Africa. As an emerging market, it presents vast opportunities for growth and investment, particularly in its manufacturing, financial services, technology, communications, and entertainment sectors. With its vast resources and a dynamic economy, Nigeria remains an attractive destination for entrepreneurs and investors alike.

    A Diverse and Rich Landscape

    Nigeria is composed of 36 states, along with a Federal Capital Territory in Abuja. Covering an impressive landmass of about 923,768 square kilometers, it is the 32nd largest country in the world and shares borders with Benin, Chad, Cameroon, and Niger. The country’s rich ethnic diversity is evident in its over 250 ethnic groups and 500 languages, with the Hausa, Yoruba, and Igbo being the largest groups. This cultural diversity not only enriches the country but also opens doors to a variety of market needs and opportunities.

     

    Watch video on YouTube

     

    The Nigerian Economy: A Powerhouse in Africa

    According to the World Bank, Nigeria’s Gross Domestic Product (GDP) was estimated at  $362.81 billion in 2023, positioning it as the largest economy in Africa and 31st globally. The economy is steadily driven by key sectors, including agriculture, technology, telecommunications, entertainment, and manufacturing. As a resource-rich nation, Nigeria is blessed with valuable minerals such as crude oil, gold, iron ore, limestone, coal, and gemstones. These natural resources, especially the oil sector, contribute significantly to the economy, creating numerous avenues for investment and growth.

    The non-oil sectors, however, are becoming increasingly pivotal. Industries like agriculture, telecommunications, financial services, and technology are experiencing rapid growth, transforming Nigeria into an emerging market with broad investment potential.

    Government Support and Regulatory Framework

    For businesses operating in Nigeria, both the Ministry of Trade and Investment and the Ministry of Finance play critical roles in fostering a business-friendly environment. These ministries provide guidance, regulate key industries, and offer support to both local and foreign investors. Whether you’re venturing into the financial or non-financial sectors, understanding these regulatory frameworks is crucial for success.

    In terms of business regulation, the Corporate Affairs Commission (CAC) oversees the registration and regulation of businesses in Nigeria. Meanwhile, tax administration is handled by the Federal Inland Revenue Service (FIRS), which administers taxes such as Value Added Tax (VAT), Companies Income Tax, and Petroleum Profits Tax. Other important regulatory bodies include the Nigerian Customs Service, which governs import/export duties, and the Nigeria Immigration Service, responsible for migration and visa-related issues.

    A Thriving Financial Sector

    Nigeria’s financial sector is robust and diversified. It includes a well-established banking system, insurance firms, asset management companies, and capital markets. The Nigeria Stock Exchange (NSE) stands out as one of the largest in Africa, with a market capitalization of over $25 billion in 2023. This strong financial foundation provides opportunities for both local and international businesses seeking to expand and scale operations.

    Incentives for Investors: Free Trade Zones

    Nigeria also offers various Export Processing Zones (EPZs) and Free Trade Zones (FTZs) to encourage foreign investment. These zones provide businesses with incentives such as tax holidays, duty-free importation of goods, and other benefits. Such incentives are designed to attract businesses looking to establish manufacturing hubs or explore the vast export potential Nigeria offers.

    Navigating the Challenges and Maximizing Potential

    While Nigeria presents immense opportunities, businesses must navigate challenges such as economic volatility, fluctuating exchange rates, and the need for infrastructure improvements. Understanding these dynamics is essential to minimizing risks and maximizing the benefits of operating in the Nigerian market.

    Despite these challenges, Nigeria’s strategic location, vast resources, and large consumer base make it a compelling choice for businesses and investors. To succeed, it’s crucial to stay informed and leverage the support of government frameworks, regulatory bodies, and industry incentives.

     

    Watch video on YouTube

     

    Conclusion: Why Nigeria?

    With a growing population, expanding industries, and a resource-rich landscape, Nigeria holds vast potential for investors. Whether you’re entering the telecommunications industry, manufacturing, or financial services, the opportunities are abundant. By staying informed about regulations, market trends, and economic factors, businesses can effectively navigate the landscape and thrive in Nigeria.

  • Navigating Global Challenges Affecting Nigeria’s Manufacturing Industry

    Navigating Global Challenges Affecting Nigeria’s Manufacturing Industry

    The global manufacturing industry is a cornerstone of economic development, accounting for 16% of global GDP and employing 23% of the global workforce. This sector drives innovation, job creation, and economic growth. However, for Nigerian manufacturers, this sector faces substantial challenges, including foreign exchange volatility, power supply instability, and declining growth rates. 

    Recent data highlights that nominal GDP growth for the manufacturing sector in Q1 2024 fell to 8.21% year-on-year, a significant drop from 17.85% in the same period of 2023 and a dramatic decrease from the previous quarter’s 38.06%. This decline underscores the severe impact of these challenges.

    This article explores the key challenges facing the manufacturing industry and offer some strategies for navigating these obstacles effectively.

    FX Challenges

    The FX Crisis and Regulatory Pressures

    One of the largest challenges manufacturers in Nigeria face is navigating the foreign exchange crisis, worsened by restrictive government policies and fluctuating oil prices. The Central Bank of Nigeria (CBN) has imposed strict foreign exchange controls, making it difficult for manufacturers to source dollars to pay for imports. This has led to inflation, rising costs of production, and, in many cases, business closures.

    Strategies for Mitigation

    • Local Sourcing: To mitigate FX risks, manufacturers should explore local sources for raw materials and components.
    • Collaborating with Financial Institutions: Engaging with local banks for specialized FX schemes can help ease currency constraints.
    • Risk Management Practices: Businesses must implement financial risk management strategies, such as FX hedging, to better navigate regulatory hurdles and currency volatility.

    Read more: Strengthening Nigeria’s Manufacturing Industry with Independent Internal Audits

    Supply Chain Disruptions

    Globalization and Complexity

    Global supply chains have become increasingly complex, with manufacturers sourcing raw materials and required components from multiple countries A report by the United Nations Conference on Trade and Development estimates that 80% of global trade involves global value chains, highlighting the extent of international interdependencies. This complexity exposes manufacturers to significant vulnerabilities, as disruptions in one region can ripple across the entire supply chain.

    One notable example is the 2021 Suez Canal blockage. When the Ever Given, a massive container ship, became lodged in the Suez Canal, it halted approximately 12% of global trade for six days. This incident caused delays in the delivery of goods and raw materials, exacerbating existing supply chain challenges and highlighting the critical need for robust contingency planning. The blockage led to an estimated $9.6 billion in daily shipping losses, illustrating the far-reaching impact of supply chain disruptions.

    Strategies for Mitigation

    Read more: Why Nigeria Is Not Classified as a Hyperinflationary Economy

    Technological Advancements

    Industry 4.0

    The advent of Industry 4.0—characterized by the integration of digital technologies such as artificial intelligence (AI), machine learning (ML), and robotics into manufacturing processes—has revolutionized the industry. The global Industry 4.0 market was valued at $86 billion in 2020 and is expected to grow to $267 billion by 2026, reflecting widespread adoption.

    While global manufacturers are moving towards adoption of Industry 4.0 technologies, the Nigerian manufacturing industry lags due to the high cost of implementation and inadequate infrastructure.

    Challenges and Opportunities

    Strategies for Adoption

    Read more: AI Adoption: Redefining Efficiency and Innovation in Your Business

    Regulatory and Compliance Challenges

    Global Standards and Regulations

    Manufacturers operating in multiple countries must navigate a complex web of regulations and standards, including environmental regulations, labor laws, and trade policies. Compliance is essential to avoid legal penalties and maintain market access. In Nigeria, compliance with regulatory standards, such as the National Environmental Standards and Regulations Enforcement Agency (NESREA) guidelines, is increasingly emphasized.

    Globally, environmental regulations are tightening, with the Paris Agreement pressuring manufacturers to reduce carbon emissions. The global manufacturing industry contributes approximately 19% of CO2 emissions, underscoring the need for sustainable practices.

    Strategies for Compliance

    • Staying Informed: Keeping abreast of regulatory changes and trends in different markets is crucial. This can be achieved through industry associations, legal counsel, and regulatory agencies.
    • Cross-Functional Teams: Establishing cross-functional teams that include legal, compliance, and operational experts can ensure that regulatory requirements are integrated into business processes.
    • Sustainable Practices: Adopting sustainable manufacturing practices not only ensures compliance with environmental regulations but also enhances brand reputation and market competitiveness. Manufacturers should integrate sustainability into their core business strategies. This includes adopting energy-efficient processes, utilizing renewable energy sources, and reducing waste through recycling, engaging in sustainability reporting and circular economy practices. Compliance with environmental regulations can be achieved by staying informed about changes in legislation and implementing proactive measures. Partnering with environmental experts and investing in green technologies can also help manufacturers achieve their sustainability goals.

    Read more: Comprehensive Review: Deduction of Tax at Source (Withholding) Regulations 2024

    Market Volatility and Competition

    Global Economic Fluctuations

    Economic instability, fluctuating commodity prices, and shifting trade policies can create significant uncertainty for manufacturers. These factors can impact demand, production costs, and profitability. Intense global competition and the need for continuous innovation pose significant challenges for manufacturers. Companies must differentiate themselves through unique value propositions and innovative products to stay ahead of competitors.

    Strategies for Resilience

    • Agile Business Models: Developing flexible business models that can adapt to changing market conditions is essential. This includes diversifying product lines and exploring new markets.
    • Financial Hedging: Utilizing financial instruments such as futures contracts can help manufacturers hedge against commodity price volatility.
    • Customer Relationships: Building strong relationships with customers through reliable service and quality products can provide a stable revenue base even during economic downturns.
    • Research and Development: To foster innovation, manufacturers should create a culture of continuous improvement and encourage collaboration across departments. Investing in research and development (R&D) is crucial for developing new products and improving existing ones. Building strategic partnerships with technology providers, startups, and research institutions can also accelerate innovation. Understanding customer needs and preferences through market research and customer feedback can guide product development and ensure market relevance.

    Read more: Accounting for VAT in Manufacturing Industry: Cashflow and Compliance Challenges

    Sustainability and Environmental Responsibility

    Consumer and Regulatory Pressure

    There is increasing pressure from consumers, governments, and stakeholders for manufacturers to adopt sustainable practices and reduce their environmental footprint. This includes minimizing waste, reducing emissions, and adopting circular economy principles.

    Strategies for Sustainability

    • Eco-Friendly Processes: Implementing energy-efficient technologies and processes can reduce environmental impact and lower operational costs.
    • Sustainable Sourcing: Ensuring that raw materials are sourced sustainably and ethically can enhance brand reputation and meet regulatory requirements.
    • Circular Economy Initiatives: Developing products that can be easily recycled or repurposed can contribute to a circular economy and reduce waste.

    Conclusion

    Navigating the myriad challenges in the global manufacturing industry requires a multifaceted approach. By embracing technological advancements, diversifying supply chains, ensuring regulatory compliance, and adopting sustainable practices, manufacturers can build resilience and drive long-term success. As the industry continues to evolve, those who can adapt and innovate will be best positioned to thrive in an increasingly complex and competitive global market.

    At Stransact Chartered Accountants, our mission is to help businesses navigate change with confidence and empower them for the future. Our industry expertise equips us to provide tailored solutions that address the complexities of today’s manufacturing landscape. From optimizing supply chains and integrating advanced technologies to ensuring regulatory compliance and fostering sustainability, we are dedicated to supporting your business through every challenge.

    Partner with us to leverage our deep understanding of the manufacturing sector and benefit from our comprehensive advisory services. Together, we can turn challenges into opportunities and position your business for enduring success in an increasingly competitive global market.

     
  • Balancing Energy Demands and Environmental Responsibility

    Balancing Energy Demands and Environmental Responsibility

    There is need to strike a balance between meeting energy needs and upholding responsible business practices and environmental responsibility in a rapidly changing regulatory landscape.

    This aligns with the Environmental, Social, and Governance (ESG) concept in the oil and gas sector.

    In balancing energy demands and environmental responsibility, it has been obvious that Nigeria’s energy demands have surged, driven by a rapidly growing population and expanding industrial base. With over 200 million people and a burgeoning economy, Nigeria is not only Africa’s largest economy but also one of its most energy-dependent nations. The oil and gas sector, responsible for nearly 90 per cent of export earnings and over 60 per cent of government revenues, plays a pivotal role in meeting these energy demands. However, alongside this, the pressure to adhere to ESG criteria has intensified globally and locally.

     

    For oil and gas companies operating in Nigeria, the challenge lies in striking a balance between meeting energy needs and upholding environmental responsibility in a rapidly changing regulatory and societal landscape.

    Nigeria’s electricity consumption is projected to grow from 40 Terawatt hours (TWh) in 2023 to over 300 TWh by 2040, driven by urbanisation, industrialisation, and population growth. With power shortages a frequent occurrence, businesses and industries remain heavily reliant on diesel and gas-powered generators to keep operations running.

    For oil and gas companies, the pressure to ramp up exploration, production, and supply is relentless, as they are essential players in the country’s energy security. However, rising environmental concerns mean that meeting this demand cannot come at the expense of sustainability. The energy sector, contributing over 70 percent of greenhouse gas emissions in Nigeria, is under increasing scrutiny.

     

    Globally, ESG has become the benchmark for responsible business practices, and Nigeria is no exception. Regulatory bodies, from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), are increasingly aligning national energy policy with global ESG standards. In 2021, the federal government launched the Nigerian Climate Change Act, targeting net-zero carbon emissions by 2060. For oil and gas companies, navigating these expectations, while still meeting Nigeria’s significant energy needs, it is a tightrope walk that requires innovative approaches and a commitment to long-term environmental goals.

    Top-level executives within Nigeria’s oil and gas sector are aware that balancing energy production with environmental responsibility is not a choice but a necessity. Several strategies can help the industry meet this dual mandate:

    Investment in carbon reduction technologies is no longer optional. Carbon Capture and Storage (CCS), already implemented by global players like Shell and Chevron, is becoming a vital tool in Nigeria. CCS technologies can potentially reduce up to 65 percent of CO2 emissions from gas flaring—one of Nigeria’s most significant environmental challenges. The NUPRC’s mandate for companies to reduce flaring by 2025 means companies must invest in CCS or face heavy fines and reputational risks.

     

    Similarly, methane emissions—another potent greenhouse gas—are a critical focus. Recent data suggests that over 100,000 metric tons of methane is released annually from oil and gas operations in Nigeria. Detecting and repairing methane leaks through advanced AI-driven solutions could save the industry billions while ensuring ESG compliance.

    Oil and gas companies must diversify energy portfolios by incorporating renewable energy sources like solar, wind, and biofuels. TotalEnergies, for example, has already committed to installing 1 GW of renewable energy capacity across its African operations by 2025. Nigeria, blessed with abundant solar resources, could become a leader in renewable integration, thereby reducing reliance on traditional fossil fuels.

    Hybrid energy systems, where renewable energy complements oil and gas operations, can lower carbon footprints while maintaining production efficiency. This shift is not only environmentally responsible but economically viable as global investors are increasingly leaning towards funding companies with strong ESG portfolios.

     

    Read More: Leveraging the Employee Compensation Act for Worker Safety in the Oil and Gas Industry

     

    Oil and gas production is water-intensive, a critical concern in a country like Nigeria, where water resources are already under pressure. The industry uses over five billion barrels of water annually for extraction, refining, and transportation. Companies must implement sustainable water management practices, including recycling wastewater and reducing freshwater usage.

     

    Additionally, protecting biodiversity in areas of operation—especially in Nigeria’s sensitive Niger Delta—will be a key factor in maintaining community relationships and meeting environmental obligations. Partnerships with environmental agencies for land restoration and wildlife preservation will further solidify a company’s ESG credentials.

    Transparency in ESG practices is crucial for gaining the trust of stakeholders, including regulators, investors, and communities. Globally, 81% of oil and gas companies now publish sustainability reports, yet in Nigeria, this number is far lower. Only 25% of Nigerian oil and gas firms have comprehensive ESG reports in place. This gap presents both a challenge and an opportunity.

    Detailed and credible ESG reporting that undergoes third-party verification will not only build trust but also differentiate companies in a competitive market. Investors, particularly from Europe and the US, now prioritise ESG performance, with some placing it as a pre-requisite for capital allocation. Meeting these expectations is critical for Nigerian firms looking to expand their global footprints.

    No company can succeed without the support of its host communities. For Nigerian oil and gas firms, contributing to local communities through job creation, infrastructure development, and social investments is essential. The Niger Delta, home to the majority of Nigeria’s oil reserves, remains a region plagued by underdevelopment, despite decades of oil extraction.

     

    Companies like Seplat and Oando have made great strides by investing in education, healthcare, and local enterprise initiatives. However, more needs to be done. Companies must implement proactive community engagement strategies that go beyond philanthropy and focus on long-term social investments, ensuring communities benefit from the wealth generated by the industry.

    Compliance with national and international environmental standards is essential for maintaining operational licences and avoiding legal penalties. Beyond compliance, Nigerian oil and gas companies should take an active role in advocating for policies that promote sustainability. Collaborative efforts with government agencies, NGOs, and industry associations can help shape a regulatory environment that balances growth with environmental protection.

    As Nigeria’s oil and gas industry navigates the complex terrain of rising energy demand and increasing ESG pressures, the stakes have never been higher. Stakeholders, from investors to regulators, expect nothing less than oil and gas firms’ commitment to sustainable practices. Companies that adopt innovative solutions, embrace transparency, and invest in renewable energy will lead the charge into a new era of energy production—one where meeting energy needs and protecting the environment go hand in hand.

     

    As Nigerian firms meander the murky waters of ESG in Oil and Gas and balance energy demands and environmental responsibility, Stransact Chartered Accountants and Audit, an RSM correspondent firm in Nigeria, is geared to help businesses in the oil and gas industry navigate these complexities. Through our ESG advisory, reporting, technology and audit services, we guide our clients in balancing growth with environmental and social responsibility. As the global and local focus on ESG intensifies, Stransact is here to help our clients build trust and achieve sustainable success.

     

    Source: The Nation

  • How Cybersecurity and Data Privacy Drive ESG Strategies in Nigerian Businesses

    How Cybersecurity and Data Privacy Drive ESG Strategies in Nigerian Businesses

    In today’s increasingly digitized world, data privacy has emerged as a crucial element in the broader context of Environmental, Social, and Governance (ESG) strategies. Historically, data privacy was viewed primarily as a compliance issue, but as businesses globally accelerate their digital transformation, it has become a critical driver of trust, accountability, and sustainability.

    Now more than ever, Nigerian businesses, particularly those in financial services, telecommunications, and e-commerce, must navigate the complex relationship between digital growth and responsible data management.

    Data Privacy: A Rising Concern for Nigerian Businesses

    Nigeria’s digital economy is rapidly expanding. According to the National Bureau of Statistics (NBS), the Information and Communication Technology (ICT) sector contributed about 17.47% to Nigeria’s GDP in Q1 2023. As more companies leverage digital platforms to enhance operations and customer experiences, the volume of personal data collected, stored, and shared has soared. However, this rapid digitalization comes with heightened risks of data breaches, cyber-attacks, and misuse of sensitive information. In 2022 alone, the Nigerian Communications Commission (NCC) reported over 3,834,244 cyberattacks targeting Nigerian enterprises, emphasizing the need for robust data protection frameworks. 

    Data breaches not only result in financial losses but also erode trust—trust that is paramount for businesses in sectors like banking, telecom, and fintech, which rely heavily on customer confidence. For executives in these industries, protecting personal data is no longer just a regulatory requirement; it is a fundamental pillar of a company’s ESG commitment and a strategic imperative to foster customer loyalty and brand credibility.

    Why Data Privacy Should Be a Core Part of ESG

    In Nigeria, stakeholders—from investors to customers—are increasingly demanding transparency and accountability in how companies manage data. ESG, which measures a company’s impact on the environment, its relationships with stakeholders, and its governance practices, has evolved to include data privacy as an essential factor in assessing corporate responsibility. According to the Global Reporting Initiative (GRI), privacy-related disclosures are now a key aspect of sustainability reports.

    By integrating data privacy into their ESG frameworks, Nigerian businesses can:

    • Strengthen stakeholder trust: A commitment to responsible data handling reinforces public trust, which is crucial in sectors such as finance and telecom, where customer data is vital to operations.
    • Enhance long-term sustainability: Ensuring data privacy safeguards not only regulatory compliance but also contributes to a company’s long-term resilience and market competitiveness.

    Integrating Data Privacy into ESG Strategies: Practical Steps

    1. Reducing Environmental Impact Through Data Efficiency
      Nigerian businesses, particularly those in data-intensive sectors, must adopt energy-efficient IT infrastructure and data storage practices. Data centers, notorious for their high energy consumption, can significantly reduce their carbon footprint by leveraging green technologies such as cloud computing and energy-efficient servers. For example, using cloud-based solutions has been shown to reduce energy consumption by up to 84% compared to traditional data centers. 
    1. Promoting Social Responsibility Through Ethical Data Use 
      With the proliferation of digital services, businesses must ensure ethical handling of personal data. Nigerian consumers are becoming increasingly conscious of how their data is used. Research shows that 80% of Nigerian consumers would cease engaging with a brand after a data breach. Companies must establish transparent data management practices, allowing users to control their data, request deletions, and access privacy settings easily. This proactive approach aligns with the social responsibility component of ESG, fostering stronger community ties and consumer confidence.
    1. Governance: Strengthening Data Protection Frameworks 
      Strong governance is key to ensuring compliance with data privacy regulations. Nigerian firms need to go beyond simply adhering to the NDPA. Establishing robust internal data governance policies, appointing dedicated Data Protection Officers (DPOs), and conducting regular compliance audits should be a priority. Ensuring board-level oversight on data privacy can mitigate risks and prevent regulatory penalties. A well-governed approach positions firms to be more resilient against cyber threats and data mishandling.

    Strategies for Building Trust through Data Privacy

    1. Empowering Users and Employees 
      Businesses should enable users to take control of their data. Offering user-friendly privacy controls and promoting data literacy, both internally and externally, will cultivate a culture of trust. Internally, continuous employee training on data privacy best practices is vital for minimizing human error, which accounts for a significant proportion of data breaches.
    1. Strengthening Data Security 
      Protecting personal data from breaches and unauthorized access is central to maintaining trust. Nigerian businesses, particularly those in sectors like banking and telecom, must adopt advanced data security protocols, such as encryption, multi-factor authentication, and real-time cyber threat monitoring systems. Nigeria experienced 20% of Africa’s total cyber-attacks in 2022, underscoring the need for proactive security measures. 
    1. Driving Transparency Through Regular Reporting 
      Nigerian executives must lead by example by promoting transparent data management policies. Regular ESG reports should include detailed privacy practices, third-party audits, and updates on compliance with regulations such as NDPR and GDPR for global businesses. Transparency is a powerful tool for earning the trust of investors, customers, and regulators alike.

    The Role of Technology in Data Privacy

    Emerging technologies can be a double-edged sword in data privacy. While tools like Artificial Intelligence (AI) can help predict and mitigate risks, they can also introduce new privacy concerns if not managed ethically. Nigerian firms should adopt AI responsibly, ensuring compliance with privacy regulations. Blockchain technology also offers promising solutions, particularly in securing and verifying data transactions, but businesses must ensure that its use aligns with NDPR standards.

    Our Role as a Data Protection Compliance Organisation (DPCO)

    At Stransact, we understand the complexity of data privacy challenges and the need for businesses to maintain the highest standards of compliance while fostering growth. As a Data Protection Compliance Organisation (DPCO) accredited by the National Data Protection Agency (NDPA), we offer a comprehensive suite of services, including:

    • Data Privacy Audits and Assessments: Ensuring compliance with NDPR and global standards.
    • Technology Advisory & Consulting: Helping businesses implement secure, energy-efficient data management systems that align with ESG goals, including cloud infrastructure, AI integration, cloud computing, and more. Click here to find our technology services brochure 
    • Data Protection Officer (DPO) Services: Providing expert guidance to develop and manage effective data privacy frameworks.
    • ESG Reporting: Assisting clients in incorporating data privacy into their ESG disclosures to build stakeholder trust and demonstrate commitment to responsible governance.

    In a digital-first world, data privacy is not only a regulatory obligation but also a strategic opportunity to build trust and gain a competitive edge. By integrating privacy into your ESG strategy, your business will not only comply with regulations but also inspire confidence among stakeholders, ensuring long-term success in the Nigerian market and beyond.

  • Capital Gains, Crypto, and Compliance: Understanding SEC’s Incubation Programs and Tax Implications

    Capital Gains, Crypto, and Compliance: Understanding SEC’s Incubation Programs and Tax Implications

    The Nigerian Securities and Exchange Commission (SEC) recently announced significant advancements in its regulatory approach to digital assets through its Accelerated Regulatory Incubation Program (ARIP) and Regulatory Incubation (RI) Program. These programs, which aim to foster innovation while ensuring investor protection, have now granted “Approval-in-Principle” to two digital asset exchanges and admitted five firms to test their models and technologies.

    This development marks a critical step towards integrating digital assets into the Nigerian capital market, but it also raises some important tax considerations, particularly relating to some of the amendments introduced by the Finance Act 2023.

    SEC’s Regulatory Incubation Programs: A Catalyst for Innovation

    The SEC’s ARIP was introduced to strategically onboard firms that had begun operations before the release of the Rules on Virtual Assets Service Providers in May 2022. The focus of the ARIP is to fast-track the onboarding of Virtual Assets Service Providers (VASPs) and other Digital Investment Service providers (DISPs) who want to register with the SEC.

    The RI Program, on the other hand, is designed to assess the business models of new digital assets (Fintech) firms, testing innovative products, services, and technologies in a controlled environment via basic but limited regulations. RI is aimed at innovators who have been assessed and considered eligible for SEC regulation, but for which no rules currently exist or for which amendment of current rules are required.

    These initiatives are characterized by the increasing use of Distributed Ledger Technology (DLT) in the creation and trading of crypto assets. The participating firms under these programs, such as Busha Digital Limited and Quidax Technologies Limited, operate digital assets exchanges that facilitate cryptocurrency trading with fiat currencies. Others, like Trovotech Ltd and Wrapped CBDC Ltd, focus on offering platforms for tokenizing real-world assets and introducing stablecoins pegged to the Nigerian Naira (₦).

    The programs are designed to ensure that these digital assets and platforms operate within a secure and regulated environment, paving the way for broader adoption in the Nigerian financial ecosystem.

    Tax Implications Under the Finance Acts 2023

    While the SEC’s programs are a leap forward for the digital assets space in Nigeria, they also bring to the fore some critical tax considerations.

    Capital Gains Tax (CGT)

    The Finance Act 2023 included digital assets {Cryptocurrencies, Non-Fungible Tokens (NFTs), etc} as part of qualifying assets for CGT purpose. This means that any gains realized from the disposal of these digital assets would be subject to CGT.  The tax rate for capital gains in Nigeria is currently 10%, and this applies to both individuals and corporate entities. 

    This underpins the need for robust tax reporting and compliance mechanisms to ensure that CGT is accurately assessed and remitted on all capital gains from digital assets. The CGT Act requires that entities should compute CGT on all chargeable assets disposed, pay the tax computed and file self-assessment returns at least twice yearly (i.e. not later than ‘30 June’ and ‘31 December’).

    For example, taxpayers who hold ‘tokenized real estate investments’ offered by platforms like HousingExchange.NG Ltd and Dream City Capital, must account for CGT on any capital gains realized from the disposal of these digital tokens. Similarly, the capital gains from trading cryptocurrencies on exchanges like Busha and Quidax would also be subject to CGT.

    Other Related Taxes

    There are provisions for the taxation of income derived from digital platforms, including income from staking, lending, trading of various forms of digital assets and other decentralized finance (DeFi) activities. For firms operating under SEC’s regulatory incubation programs, it is essential to navigate these tax obligations carefully.

    The Nigerian tax law requires that all income derived by corporate entities (with Nigerian Income Tax Presence – either via local incorporation, Permanent Establishment or Significant Economic Presence) from digital assets must be reported and taxed in Nigeria, where such income is deemed to be derived from Nigeria.  However, individuals who are Nigerian residents earning income (other than capital gains) from digital assets may be assessed to Personal Income Tax in Nigeria on their global income, whether such income is realized locally or from international sources. This underscores the importance of compliance with Nigeria’s tax laws and the need for digital assets firms and business owners to establish clear tax strategies that align with their business models and objectives.

    Regulatory and Tax Compliance

    As digital assets continue to gain traction in Nigeria, the intersection of regulatory oversight and taxation will become increasingly significant. The SEC’s ARIP and RI programs are a step in the right direction, providing a structured framework for the introduction and regulation of digital assets in the Nigerian capital market. However, the success of these programs will largely depend on the ability of participating firms to continuously ensure compliance with the relevant regulatory requirements and tax obligations.

    For digital assets exchanges, offering platforms, and custodians, this means not only adhering to SEC’s guidelines but also ensuring full compliance with the extant tax provisions.  Firms must implement robust tax reporting systems, maintain accurate records of all transactions, and ensure timely payment of taxes, including CGT, VAT, and income tax.

    Balancing Innovation with Compliance

    The ongoing efforts of SEC to regulate digital assets through its ARIP and RI programs reflect a commitment to fostering innovation while safeguarding the interests of investors. As these programs evolve, they will likely serve as a model for other regulatory jurisdictions looking to integrate digital assets into their financial markets.

    However, as the digital assets landscape in Nigeria expands, so too will the complexity of the tax and regulatory environment. For firms operating in this space, the key to success will lie in balancing innovation with compliance, ensuring they not only seek to exploit the opportunities presented by digital assets, but also keen to fulfilling their obligations under Nigerian law. By doing so, they can contribute to the growth and stability of the Nigerian capital market, paving the way for a new era of financial innovation and inclusion.

    Empowering Businesses for the Future

    As the digital asset landscape in Nigeria continues to evolve, the intersection of innovation, regulation, and taxation becomes increasingly complex. At Stransact, we understand the unique challenges businesses face in navigating this dynamic environment. Our team of tax, regulatory, and advisory experts is well-positioned to guide firms through the intricacies of compliance while fostering growth and innovation.

    We offer tailored solutions that go beyond mere compliance—by deeply understanding your business needs, we help you seize new opportunities while mitigating risks. Whether you’re a digital asset provider seeking regulatory clarity or a business looking to optimize tax strategies under the Finance Act 2023, our holistic approach ensures you remain competitive in this rapidly changing landscape.

    Let us empower your business with forward-thinking strategies and expert guidance that drive success and sustainability for the future. Together, we’ll help you navigate the challenges of today and thrive in the opportunities of tomorrow.

  • The Legal Propriety of Ungazetted Acts or Regulations in Nigeria

    The Legal Propriety of Ungazetted Acts or Regulations in Nigeria

    Law-making in Nigeria is strictly the primary function of the legislative arm of government, whether at federal or state level.  This function is enshrined under the broad heading – “Legislative Powers” in section 4 of the 1999 Constitution of the Federal Republic of Nigeria, as amended (the Constitution).  Section 4(1) of the Constitution provides that:

    “The legislative powers of the Federal Republic of Nigeria shall be vested in a National Assembly for the Federation which shall consist of a Senate and a House of Representatives”

    The Constitution further outlines the procedures for making of laws which typically begins with the first stage, where the bill is presented before the constituted legislative body through to the final stage when the President assents. In line with the provisions in section 58 of the Constitution, the President’s signing of a bill into law gives legal force or effect to such Law or Act.  Also, where an Act gives anybody or a committee the inherent power to make regulations, rules or policies to operate such Act, such regulations, rules, or policies are deemed legally effective if made by the designated person or committee.

    Official Gazetting of Legislation 

    Official gazetting of laws upon assent by the President has become a conventional and administrative process of making laws in Nigeria. Official gazettes are primary sources of law published by federal, state, or local governments to disseminate new legislation, regulations, and decisions of governmental bodies.  The essence of this administrative process is principally to create public awareness about such Acts, Regulations, and Policies. The official gazette serves as proof of the existence and authenticity of a law.

    While it is a settled conventional and administrative principle that all regulations, ordinances, etc made under an Act are required to be published in the Official Gazette, the pertinent question is: What happens to Acts, Regulations, and Ordinances that are not gazetted? What is their legal force or validity?

    The Legal Basis for Ungazetted Laws in Nigeria

    Ungazetted laws or regulations are legal enactments that have not been officially published in the Federal or State Government Gazette.  While the gazette proves the existence and authenticity of a law or regulation, failure to gazette does not necessarily invalidate such a law or regulation.  Also, where a Principal Act provides that a Minister or any other person can make regulations or rules for the operation of the Act, such regulations if duly made by the Minister or other designated person in line with the process outlined in the Principal Act shall have full legal effect and force. These apply to tax legislations also.

    However, whether an ungazetted law is enforceable depends on several legal principles and precedents, which are considered below.

    Constitutional Provisions

    The 1999 Constitution of the Federal Republic of Nigeria (as amended) is the supreme law in Nigeria. As such, any law or regulation that is inconsistent with the Constitution becomes null and void to the extent of the inconsistency.  Section 1(3) of the Constitution states thus:

    “If any other law is inconsistent with the provisions of this Constitution, this Constitution shall prevail, and that other law shall to the extent of the inconsistency be void.”

    However, the Constitution itself does not mandate that laws must be gazetted for such laws to be enforceable or effective, though certain statutes require this for official recognition.  Therefore, it would be an aberration to hold the view that Acts or Regulations must be gazetted before being considered legal or effective. Such a view contradicts the provisions of the Nigerian Constitution.

     

    Download the full article

     

    Interpretation Act, Cap I23, LFN 2004

    The Interpretation Act governs how statutes and subsidiary legislations are to be interpreted and gives guidance on the operation of laws in Nigeria.  Section 2 of the Interpretation Act stipulates that the operation or commencement of a law may be determined by its publication or by another mechanism specified in the law itself.  Section 2 provides that:

    1. “An Act is passed when the President assents to the Bill for the Act whether or not the Act then comes into force.
    2. Where no other provision is made as to the time when a particular enactment is to come into force, it shall, subject to the following subsection, come into force-
      • in the case of an enactment contained in an Act of the National Assembly, on the day when the Act is passed;
      • in any other case, on the day when the enactment is made. 
    3. Where an enactment is expressed to come into force on a particular day, it shall be construed as coming into force immediately on the expiration of the previous day “

    The above provisions imply that a signed law or regulation becomes effective on either “the day it is passed” or “on any other date or in line with any other provision that is stipulated in the law or regulation”. Once effective, such law or regulation then becomes legally enforceable.  This means where the law or regulation does not stipulate that publishing it in the official gazette will be a pre-condition for its enforceability, then failure to gazette it should never affect its validity or legality.

     

    Read More: New Withholding Tax Regulations Explained

     

    Judicial Decisions on Ungazetted Laws

    Judicial decisions form part of the secondary law-making process in Nigeria.  They help with the interpretation of laws. The courts have ruled about the propriety of ungazetted laws in Nigeria as represented in the cases below:

    • Uwaifo v. Attorney-General of Bendel State (1982) LPELR-3448(SC)

    In this case, the Supreme Court of Nigeria held that laws take effect from the date specified for their commencement and not necessarily from the date of publication in the Gazette unless the law expressly states that gazetting is a pre-condition for its operation. The implication of this ruling is that: failure to gazette a law does not automatically invalidate it unless the law specifically stipulates so.

    • Afolabi v. Governor of Oyo State (1985) LPELR-215(SC)

    The Supreme Court held that administrative orders, policies, or laws that have not been gazetted could still be valid, provided they meet all other requirements of due process and do not conflict with statutory or constitutional provisions. Gazetting, while important for public notice, is not always a pre-condition for validity.

    • Chief Felix Ogunmade & Ors v. Federal Republic of Nigeria (2003) LPELR-2327(SC)

    The court ruled that the failure to gazette a regulation may render it unenforceable against the public unless there is evidence that the public was made aware of the regulation through other means. This therefore implies that if the public is overwhelmingly aware of any regulation or law that is not gazetted, the presumption of enforceability is then deemed valid.  The principle of fairness in the enforcement of laws implies that the public should have access to laws that govern their conduct.

     

    While it is agreed that the publication of a law or regulation in an official gazette gives authenticity to such law or regulation, this does not extinguish the fact that where a law or regulation was not made by following the due process as contained in the enabling statute, publication of such law or regulation in an official gazette does not make it valid or legal.  This was the decision of the Tax Appeal Tribunal in Check Point Software Technologies B.V Nig Ltd v Federal Inland Revenue Service where the Tribunal declared the Income Tax (Country-By-Country Reporting) Regulations, 2018 as void, invalid, or illegally made regulations.  This decision was on the premise that ‘the Regulations’ was not made by the FIRS Board, which is the body empowered by the enabling statute to make such regulations.

    Finance Act 2023 and Deduction of Tax at Source (Withholding) Regulations 2024

    • The Finance Act 2023

    The Finance Act 2023 (FA 2023) was signed into law by former President Muhammadu Buhari on 28 May 2023, and was meant to take effect on the same day.  However, President Bola Ahmed Tinubu subsequently issued an executive order in July 2023, upon his assumption of office to postpone the commencement of the FA 2023 to 1 September 2023.

    Though the FA 2023 has not been published in the official gazette since it was signed into law by the President, the various Tax/Regulatory authorities as well as taxpayers and the general public have continued to fully apply the provisions of the Act.  This, therefore, underscores the fact that an Act or Regulation does not need to be gazetted before it is considered legal or valid, except where a law specifically provides otherwise.

     

    • Deduction of Tax at Source (Withholding) Regulations 2024

    The Deduction of Tax at Source (Withholding) Regulations 2024 (WHT Regulations 2024) was made by the Minister of Finance based on the powers conferred on him by the enabling statute.  The WHT Regulations 2024 was expressly set to commence on 1 July 2024.  However, since its publication by the Federal Ministry of Finance, an official gazetted copy has not been published.

    This halt in the administrative procedure of publishing the Regulations in the official gazette has been misconstrued by some tax administrators as a basis for invalidating the ‘WHT Regulations 2024’.  Their argument is that ‘the New Regulations’ lacks proper legal force just because it has not been gazetted.  Nonetheless, it is clear from our comprehensive analyses presented above, that such a view is purely a fundamental misconception that is contrary to the extant provisions of the Nigerian Constitution and all available judicial precedents.

    Conclusion 

    An ungazetted law or regulation is not automatically illegal or invalid in Nigeria except a legislation specifically provides that gazetting such law or regulation would be a pre-condition for its legality or validity.  The date of commencement of a law is crucial in determining its enforceability; meanwhile, gazetting is merely an administrative or conventional process that is used to notify the public, but is not relevant for determining the law’s inherent legality.  Judicial precedents have affirmed that the failure to gazette a law or regulation does not necessarily invalidate it, but may only affect its enforceability where such failure has denied the public the reasonable opportunity of being aware of the said law or regulation.