Imagine youโve saved $50,000 from your job in Canada to start a tech company in Lagos. Youโre excited, motivated, and ready to make your mark.
But six months later, you find yourself drowning in unexpected fees, facing government shutdowns, and wondering where it all went wrong.
This scenario plays out for hundreds of diaspora entrepreneurs every year. The difference between those who succeed and those who fail is understanding regulatory compliance in Nigeria before they start โ not after.
In this article, we will highlight the 4 most costly compliance mistakes and explain how to avoid them.
ย
Mistake 1: Ignoring Tax Registration Requirements
One common mistake we see is when Nigerians in the diaspora begin operations before registering for taxes, thinking they can sort it out once the business is underway.
This mindset is a trap that can lead to back taxes, penalties, and disruptions in business operations.
To avoid this mistake, register for taxes before starting operations, obtain your Tax Identification Number (TIN) within 30 days of CAC registration, and set up automated tax payment systems. Be sure to file returns even if you have no income yet.
Pro tip: Use the FIRS online portal to register remotely. It takes 48 hours and costs less than โฆ10,000.
ย
Mistake 2: Overlooking Industry-Specific Licences
For some industries, simply having a CAC registration is not enough.
Diaspora Nigerians who assume that CAC registration is sufficient for legal operation without researching specific licenses can quickly face substantial regulatory fees.
Imagine starting a cosmetics company without registering with NAFDAC. Your business could be shut down, your goods seized (often resulting in destruction or non-return), and you may face regulatory tax audits and various legal charges.
To avoid these pitfalls, itโs crucial to research ALL industry-specific requirements before starting. Seek professional advice for regulated industries, apply for licenses before importing goods or commencing operations, and ensure you maintain active licenses with timely renewals.
ย
Mistake 3: Violating Nigerian Labour Laws
Another mistake we often observe is when diaspora Nigerians hire employees without understanding Nigerian labour laws and obligations.
They may base their hiring practices on assumptions or knowledge of foreign employment laws.
This oversight can lead to wrongful termination claims, inadequate pension contributions, and more.
As many entrepreneurs have learned, this can lead to judgments from industrial courts that can bankrupt your businesses.
To avoid this mistake, take the following steps:
- Register with the Nigeria Social Insurance Trust Fund (NSITF)
- Set up arrangements with Pension Fund Administrators (PFA)
- Understand minimum wage requirements
- Use proper employment contracts
- Implement correct termination procedures
ย
Mistake 4: Poor Record-Keeping and Documentation
For many Nigerians in the diaspora, a recurring error is poor record-keeping and inadequate documentation for regulatory compliance, which becomes even more challenging when managing businesses remotely.
Neglecting proper record-keeping can lead to the imposition of additional taxes, penalties, further investigations, and extra professional fees.
The best way to avoid this mistake is by implementing a simple digital document management system.
Some good tips here to do that well are to maintain separate files for each regulatory requirement, keep financial records for a minimum of 6 years, store documents in multiple locations (both cloud and physical), and ensure they are regularly backed up.
ย
Action Steps
Every day you delay proper compliance is a gamble with your businessโs future. The mistakes outlined here have destroyed countless diaspora businesses, but they donโt have to destroy yours.
We help you navigate Nigeriaโs challenging regulatory environment.
Contact us today and our team will help you understand and comply with relevant laws, regulations and industry standards, and minimise the risk of non-compliance and reputational damage.
|
Image by DC Studio