Chinedu Nwachukwu, a 40-year-old graphic designer, stands near the bustling Corporate Affairs Commission (CAC) office in Abuja as he recounts his frustrations with the process of formalising his business in March 2024. Despite several years of operation, Mr Nwachukwu’s business remains unregistered – a reality he attributes to the inefficiencies and hidden costs of Nigeria’s business registration process.
“Though the official registration fee is as low as N10,000, by the time you add the cost of processing, hiring a lawyer, and other expenses, it goes up to N20,000 or N30,000,” he said. While CAC’s online registration platform allows entrepreneurs to register their businesses themselves, Mr Nwachukwu described the process as anything but seamless.
“At some point, frustration sets in,” he added. “You eventually have to seek legal help, even though the process is supposed to be simple and self-service.”
Many entrepreneurs like Mr Nwachukwu cannot realise the dream of formalising their businesses. CAC statistics boast over 2.5 million companies registered as of February this year, yet the road to registering small-scale businesses is fraught with bureaucratic delays and excessive fees.
The promise and reality In 2015, the CAC launched an online registration platform heralded as a transformative initiative to simplify business registration. Christopher Thomas, the founder of Skylight Property and Durable Homes in Abuja, thought the digital promise offered hope – until reality set in.
Mr Thomas, with architectural models and paperwork cluttering his desk, spoke candidly about his experience. “I paid all the fees online – name reservation, publicity, everything. It should have been easy,” he said.
However, weeks turned into months, and queries from the CAC continued to pile up. “Even after submitting all required documents and paying the necessary fees, I kept receiving queries,” he said. “It’s disheartening. I can’t even begin operations because the business isn’t officially recognised.”
Many small-scale traders and point-of-sale (POS) operators supported Mr Thomas’ story, as they struggled to justify spending a significant portion of their capital on registration fees.
“How do you tell someone starting with little capital to spend half of it on registration?” Mr Nwachukwu asked. “It’s not just unfair, it’s cruel.”
Hidden costs and delays
While the CAC advertises an accessible and affordable process, hidden costs and system inefficiencies paint a different picture.
Sitting close to the fence of the FCT High Court in Maitama, Odoh Alexander, a media services provider, said he has seen how the convoluted and opaque registration process cripples businesses.
“I’ve had clients wait months for approvals that used to take days,” he said, his voice tinged with exasperation. Behind him, stacks of registration forms sat untouched. “Sometimes you submit everything—business name, address, ID—and it just sits there. No updates, no progress.”
The delays, however, are just one part of the problem. The costs of navigating this inefficient system have driven many entrepreneurs to abandon the formal registration process.
“The official fees are reasonable,” Mr Alexander acknowledged. “But with network glitches and other inefficiencies, people are often forced to rely on agents. And agents charge three, sometimes four times the official rate.”
For many business owners, these additional costs are not just a minor inconvenience but a barrier to growth. Access to loans and grants, crucial for expansion, often requires proof of formal registration. Without it, many entrepreneurs miss out on opportunities that could make or break their businesses.
“I’ve seen people lose out on funding simply because their documents weren’t ready,” Mr Alexander said. “It’s heartbreaking.”
The CAC has long faced criticism for its cumbersome processes, which have left many entrepreneurs disillusioned. For countless individuals, the inefficient system either forces them to abandon their aspirations or operate informally, leaving vast segments of economic activity untapped and unregulated.
Policy challenges
In a sweeping move to regulate the informal economy, Nigeria’s CAC mandates the formal registration of all businesses, citing Section 863 of the Companies and Allied Matters Act (CAMA) 2020. The law explicitly states: “A person…shall not carry on business in Nigeria without being registered under this Act.”
Caught in the crosshairs of this directive are the small-scale Point of Sale (PoS) operators, a lifeline for cash transactions across the country. Initially exempted from registration, these operators now face an ultimatum: register their businesses or face sanctions.
In June, during a meeting between the CAC Registrar-General, Hussaini Magaji, and representatives from Fintech companies, the CAC issued a two-month deadline for the registration of over 1.9 million PoS terminals currently deployed nationwide. At the meeting, Mr Magaji emphasised that the policy was about compliance and protection.
“PoS operators have become frequent victims of fraud,” Mr Magaji explained, pointing to data from the Nigeria Inter-Bank Settlement System (NIBSS) that revealed PoS terminals accounted for 26.37 per cent of fraud cases in 2023.
However, the reality on the ground is far from straightforward. The CAC’s ambitious target to achieve full registration was unmet by July.
Operators struggled to navigate the bureaucratic maze of the registration process, which many described as slow and cumbersome.
The Association of Mobile Money and Bank Agents in Nigeria (AMMBAN), representing all PoS operators, called the policy unnecessary and burdensome. It said it was nothing but an attempt to target the informal sector with financial strain.
While the government frames these measures as steps to combat fraud and enhance financial transparency, PoS operators perceive it as an imposition that threatens to upend their livelihoods.
Reforms and opportunities
In the last decade, Nigeria has made significant efforts to enrich its business landscape, particularly through business registration.
In 2016, the country ranked 169th out of 190 economies on the World Bank’s Ease of Doing Business index. The low rank stems from entrepreneurs’ challenges with high costs, complex procedures, and inefficiencies.
However, recognising the economic impact of these issues, the government initiated reforms to streamline the process. By 2020, Nigeria climbed to 131st place, an improvement of 38 positions within four years. One of the key drivers of this progress was the CAC’s online registration platform, which eliminated much of the lengthy paperwork.
In a report by the presidential council, Nigeria’s ease of doing business satisfaction score increased from 5.45 in 2021 to 5.69 in 2023. However, critics say such improvement in two years is unexpectedly low compared to the efforts pushed to make business operations more efficient in the country.
Experts have advocated optimising the CAC registration to be accessible via mobile devices, enabling entrepreneurs in rural areas to register businesses without travelling to urban centres.
Many entrepreneurs in the informal sectors would be encouraged to register their businesses once the government can streamline the process in terms of intermediate fees and registration expenses. By simplifying the online processes, many entrepreneurs will bypass the need for third-party facilitators, which discourages many entrepreneurs due to high charges.
When this reporter asked how the registration process could be eased for entrepreneurs in the informal sector, Paul Alaje, a chief economist at SPM Professionals, a finance and business development firm, explained the need for better integration between the CAC and other governmental agencies.
“While Nigeria has made significant strides—especially since the ease of doing business reforms in 2018 and 2019, there’s still a long way to go,” Mr Alaje said. “When you compare our system to those of other countries, it’s evident that we are still behind.”
He explained that one major obstacle is the lack of collaboration between the CAC and other essential sectors, including finance and regulation.
In other countries, business registration is integrated with other governmental processes such as tax registration, social security, and bank account creation. This collaboration creates a seamless process for entrepreneurs to start and operate businesses without unnecessary delays or additional paperwork.
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Though CAC tries to make things easy by introducing online registration, he said the delays in approval and unnecessary technicalities make things difficult.
“It’s not just about convenience,” he continued.
“It’s about removing barriers small businesses face, particularly those who can’t afford professional fees. If we don’t do this, we risk discouraging entrepreneurs, which will ultimately hurt Nigeria’s overall business environment.
“It’s about creating an environment where people feel empowered to register and start businesses without facing a maze of bureaucracy. Until that happens, we’ll continue to see entrepreneurs hesitate, and ultimately, the number of businesses being registered will remain low,” Mr Alaje added.
Reforming Nigeria’s Business Registration System
When CAC transitioned to an online business registration system in 2015, it was heralded as a game-changer for Nigerian entrepreneurs. But almost a decade later, the process remains riddled with challenges, sparking calls for urgent reforms to make it more accessible, especially for small businesses and rural entrepreneurs.
In his paper, “Why the Corporate Affairs Commission Needs Reform,” policy analyst Chike Eze highlighted the hurdles many business owners face in navigating the registration system. His paper summarises that the adoption of the online process was meant to simplify registration, but instead, it has become a bottleneck for many entrepreneurs.
One major recommendation is to streamline the approval process through automation. According to Mr Eze, automating the registration workflow would improve efficiency and enhance transparency. This is particularly crucial in a system often criticised for its reliance on third-party agents, whose involvement adds unnecessary financial burdens on already overstretched entrepreneurs.
Fintech platforms like Mintyn, which help entrepreneurs register their businesses, have echoed this sentiment. In a report, Mintyn called for the process to be more user-friendly, particularly for individuals in rural areas who may lack the digital literacy needed to navigate the system.
The conversation around reform doesn’t stop at improving the registration process. Mr Alaje called on the federal government to support formalised businesses through financial incentives. “A policy that offers tax relief, grants, or low-interest loans to registered businesses would encourage more entrepreneurs to comply,” Mr Alaje said.
He also urged a review of the Companies and Allied Matters Act (CAMA) 2020 to ensure its provisions align with the realities faced by Nigerian entrepreneurs. “A supportive legal framework is essential,” Mr Alaje argued. “It’s not just about mandating registration; it’s about creating an environment where businesses can thrive.”
CAC reacts to alleged registration bottlenecks
Reacting to the alleged bottlenecks, the spokesperson of the CAC, Dominic Inyang told this reporter via phone call that the agency has no bottlenecks.
“Which bottleneck? How can you use the word bottleneck? Bottleneck where? My brother, no, you can’t use such a word now,” he said, asserting that CAC’s services were transparent and user-friendly.
He emphasised that complaints often arose from applicants who failed to follow the detailed instructions provided on the commission’s website.
“Most of the people you are talking about will not probably read the instructions. Once your submission is not compliant, there must be a query. That’s the truth,” he explained.
According to Mr Inyang, the CAC system was functioning optimally, and any contrary reports were unfounded.
“Whatever information they’ve given you, I debunk it. It is not the true position of things,” he insisted.
When asked why many applicants felt compelled to hire accredited agents to process their registrations, Mr Inyang attributed this to personal choice, not necessity.
“Our laws are very clear. In the past, it was mandatory to use a lawyer, an accountant, or a chartered secretary. Now the system is so seamless you can do it yourself online,” he said.
He clarified that while accredited agents are available, their use is optional. “It is your choice. If you want to use them, that’s purely up to you. But there’s no requirement mandating their involvement,” he reiterated.
Mr Inyang further outlined the simplicity of the CAC’s self-service system, likening it to creating an email account. “You can log on to our website, input your details step by step, and register your business without needing external assistance. However, you must follow the instructions carefully to avoid queries,” he advised.
On the issue of tax payments during registration, Mr Inyang stressed that CAC had no involvement in tax collection.
“You don’t pay any tax to CAC. Tax matters are handled by the Federal Inland Revenue Service (FIRS). Our mandate is strictly to register companies, organisations, and NGOs,” he explained, reiterating that tax issues fall entirely outside the commission’s purview.
This report was produced as part of the Liberalist Centre’s Journalism for Liberty Fellowship project with funding support from Atlas Network.
