Introduction
In Nigeria, the process of establishing a company involves a series of legal and financial considerations. One of the fundamental aspects of company formation is the determination of the company’s share capital. Share capital serves as a financial foundation and reflects the extent to which shareholders contribute to the company’s assets. This article delves into the concept of minimum share capital for designated companies in Nigeria, shedding light on its significance and implications.
Understanding Share Capital and its Significance
Share capital, in essence, represents the initial investment made by shareholders in a company. It not only contributes to the company’s financial strength but also determines the ownership structure and distribution of profits among shareholders. The Companies and Allied Matters Act (CAMA) provides the legal framework for share capital requirements in Nigeria.
Minimum Share Capital Requirements
The minimum share capital requirement varies based on the type of company being registered. While some categories of companies, such as small companies and non-profit organizations, enjoy flexibility in determining their share capital, designated companies are subject to specific minimum share capital requirements.
Designated Companies: A Closer Look
Designated companies are entities that engage in specific sectors or industries deemed strategic to Nigeria’s economic growth. These sectors include telecommunications, banking, insurance, and oil and gas. The rationale behind imposing specific and higher minimum share capital requirements on designated companies lies in ensuring their financial stability, risk mitigation, and the ability to meet regulatory standards.
Minimum Share Capital Requirements for Designated Companies
As per regulatory guidelines, designated companies are required to maintain a substantial minimum share capital to operate within their respective sectors. For instance, a company seeking to obtain a banking license must demonstrate the ability to meet a significant minimum share capital threshold as stipulated by the Central Bank of Nigeria (CBN). Similarly, insurance companies must satisfy the National Insurance Commission’s (NAICOM) prescribed minimum share capital requirement. See below the minimum share capital for all designated companies in Nigeria.
MINIMUM SHARE CAPITAL FOR DESIGNATED COMPANIES
| TYPE OF COMPANY | MINIMUM SHARE CAPITAL (N) | JUSTIFICATION |
| ISSUING HOUSE | 200 Million | Securities and Exchange Commission Guidelines on New Minimum Share Capital for Market Operators |
| BROKER/DEALER | 300Million | |
| TRUSTEE | 300 Million | |
| FUND/PORTFOLIO MANAGER | 150 Million | |
| STOCK BROKER | 200 Million | |
| STOCK DEALER | 100 Million | |
| CORPORATE INVESTMENT ADVISER (REGISTRAR) | 150 Million | |
| CORPORATE INVESTMENT ADVISER | 5 Million | |
| INDIVIDUAL INVESTMENT ADVISER | 2 Million | |
| MARKET MAKER | 2 Billion | |
| CONSULTANT (PARTNERSHIP) | 2 Million | |
| CONSULTANT (INDIVIDUAL) | 500,000 | |
| CONSULTANT (CORPORATE) | 5 Million | |
| UNDERWRITER | 200 Million | |
| VENTURE CAPITAL MANAGER | 20 Million | |
| COMMODITIES BROKER | 40 Million | |
| CAPITAL TRADE POINT | 20 Million | |
| RATING AGENCY | 150 Million | |
| CORPORATE/SUB BROKER | 5 Million | |
| ASSET MANAGEMENT (INTANGIBLE ASSETS) | 300 Million | |
| COMMERCIAL BANK WITH REGIONAL AUTHORIZATION | 10 Billion | CBN Scope and Standards Commercial Regulations 2020 |
| COMMERCIAL BANK WITH NATIONAL AUTHORIZATION | 25 Billion | |
| COMMERCIAL BANK WITH INTERNATIONAL AUTHORIZATION | 50 Billion | |
| MERCHANT BANK | 15 Billion | CBN Scope, Condition and Minimum Standard for Merchant Banks Regulation 2, 2010 |
| PAYMENT SOLUTION SERVICES (PSS) (As permissible under Super Agent, PTS and PSSP (combined)) | 250 Million | CBN Guidelines on licensing Framework/ Categorization for the Nigerian Payment System 2020 |
| SUPER AGENT (Agent Recruitment Management and other activities as specified in the Regulatory Framework for Licensing Super Agents in Nigeria | 50 Million | |
| PAYMENT TERMINAL SERVICE PROVIDER (PTSP) (POS Terminal Deployment and Services, POS Terminal Ownership, PTAD, Merchant/Agent Training and Support) | 100 Million | |
| PAYMENT SOLUTIONS SERVICE PROVIDER (PSSP) (Payment Processing Gateway and Portal, Payment Solution/Application Development, Merchant Service Aggregation and Collection) | 100 Million | |
| MOBILE MONEY OPERATION (E-Money Issuing, Wallet Creation and Management, Pool Account Management activities as permissible under Super Agent) | 2 Billion | |
| SWITCHING AND PROCESSING (Switching, Card Processing Transaction, Clearing and Settlement Agent Services, Non-bank Acquiring Services activities as permissible under Super Agent, PTSP and PSSP) | 2 Billion | |
| UNIT MICRO FINANCE BANK (TIER 1) | Tier 1: 200 Million | CBN Regulations |
| UNIT MICRO FINANCE BANK (TIER 2) | Tier 2: 50 Million | |
| MICRO FINANCE BANK (STATE & FCT) | 1 Billion | |
| MICRO FINANCE BANK (NATIONAL) | 5 Billion | |
| PRIMARY MORTGAGE INSTITUTION | 2 Billion | |
| FINANCE COMPANY | 20 Million | |
| BUREAU DE CHANGE | 35 Million | |
| NON-INTEREST BANK (REGIONAL) | 5 Billion | |
| NON INTEREST BANK (NATIONAL) | 10 Billion | |
| INSURANCE BROKER | 5 Million | Nigerian Council of Registered Insurance Brokers Act, 2003 |
| LIFE INSURANCE | 8 Billion | National Insurance Commission Revised Regulations 2019 |
| GENERAL INSURANCE | 10 Billion | |
| COMPOSITE INSURANCE | 18 Billion | |
| GENERAL INSURANCE | 10 Billion | |
| COMPOSITE INSURANCE | 18 Billion | |
| RE-INSURANCE | 20 Billion | |
| UNIT MICROINSURER | 40 Million | Guidelines for Micro-insurance Operation in Nigeria 2018 |
| STATE MICROINSURER | 100 Million | Guidelines for Microinsurance Operation in Nigeria 2018 |
| NATIONAL MICROINSURER | 600 Million | Guidelines for Microinsurance Operation in Nigeria 2018 |
| TAKAFUL INSURANCE (GENERAL AND FAMILY TAKAFUL) | 200 Million | National Insurance Commission Regulations |
| PRIVATE SECURITY COMPANY/CONSULTANT | 10 Million | Guideline on Requirements for Registration of Private Guard Security Companies made Pursuant to Nigerian Security and Civil Defence Corp Act No. 2 of 2003 |
| PENSION FUND/ASSET CUSTODIAN | 2 Billion | National Pensions Commission Requirements for Licensing of Pension Fund Custodians (FEB 2005); National Pensions Commission Revised Minimum Share Capital Requirement for Licensed Pension Fund Administrators (April 2021); |
| CLOSED PENSION FUND | 500 Million | |
| PENSION FUND ADMINISTRATOR | 5 Billion | |
| LOTTERY | 5 Million | Section 2 (1), National Lotteries (Amendment) Regulation, 2007 |
| SPORTS LOTTERY | 30 Million | National Lottery Commission Circular |
| AIR TRANSPORT (INTERNATIONAL) | 2 Billion | Nigerian Civil Aviation Authority |
| AIR TRANSPORT (REGIONAL) | 1 Billion | |
| AIR TRANSPORT (LOCAL) | 500 Million | |
| AIR AMBULANCE/FUMIGATION/ PRIVATE JET | 20 Million | |
| AVIATION (GROUND HANDLING SERVICES) | 500 Million | |
| AVIATION (AIR TRANSPORT TRAINING INSTITUTIONS) | 2 Million | |
| AGENTS OF FOREIGN AIRLINES | 1 Million | |
| TRAVEL/TOURS | 30 Million | International Air Travel Agency (IATA) |
| AGRICULTURAL SEEDS, PRODUCTIONS, PROCESSING, MARKETING | 10 Million | NASA Cap 5, LFN, 2004 |
| SHIPPING COMPANY/AGENT | 25 Million | NIMASA Guidelines for Registration |
| CABOTAGE TRADE | 25 Million | |
| LIFE MICRO-INSURANCE | 150 Million | Guideline for Micro-Finance Operations in Nigeria (NAICOM), December, 2013 |
| GENERAL MICRO-INSURANCE | 200 Million | Guideline for Micro-Finance Operations in Nigeria (NAICOM), December, 2013 |
| FREIGTH FORWARDING | 5 Million | Registration of Freight Forwarding Regulation 2010 |
| PAYMENT SERVICE BANK | 5 Billion | |
| HEALTH MAINTENANCE ORGANIZATION (HMO)(NATIONAL) | 400 Million (Paid up) | National Health Insurance Scheme HMO Accreditation Guidelines |
| HEALTH MAINTENANCE ORGANIZATION (HMO)(REGIONAL) | 200 Million(Paid up) | |
| HEALTH MAINTENANCE ORGANIZATION (HMO)(STATE) | 100 Million (Paid up) |
Impact on Industry Growth and Investment
The concept of minimum share capital requirements for designated companies plays a vital role in fostering investor confidence, regulatory compliance, and industry stability. The higher capital threshold acts as a safeguard against insolvency risks, ultimately protecting the interests of stakeholders and consumers. Moreover, it ensures that companies are well-capitalized to navigate market fluctuations and honor their obligations.
Conclusion
The minimum share capital requirements for designated companies in Nigeria underscore the nation’s commitment to maintaining a stable and resilient business environment. These requirements are not just regulatory formalities; they are strategic measures aimed at fostering sustainable growth, investor protection, and sectoral development. Companies aspiring to venture into designated sectors must carefully assess the minimum share capital criteria and consider it an integral component of their business strategy.
In essence, understanding the implications of minimum share capital requirements for designated companies is crucial for entrepreneurs, investors, and stakeholders aiming to operate within Nigeria’s strategic sectors. By adhering to these regulatory standards, designated companies contribute to the nation’s economic vitality and position themselves for long-term success in the competitive landscape.