Regulator Updates – Alliance Law Firm

FCCPC Issues Guidelines on Simplified Process For Foreign-To-Foreign Mergers With Nigerian Component

ALF — Fri, 22 Nov 2019 11:42:59 +0000

On 13 November 2019, the Nigerian Federal Competition and Consumer Protection Commission (FCCPC) published Guidelines on the Simplified Process for Foreign to Foreign Mergers with Nigerian Component (Guidelines).

Prior to the assent to the Federal Competition and Consumer Protection Act (“FCCPA”) on 5th of February 2019, Merger and acquisition was regulated by the Securities and Exchange Commission (SEC) pursuant to sections 117 – 130 of the Investments and Securities Act, 2007 (ISA). However, with the enactment of the FCCPA, mergers and acquisitiions are now regulated by the provisions of the FCCPA which provide for the establishment of the Federal Competition and Protection Commission (FCCPC) which is now saddled with the responsibility of reviewing all mergers and business combinations in order to ensure that they do not impede or distort the market.

The Securities and Exchange Commission (SEC) and Federal Competition and Consumer Protection Commission (FCCPC) recently issued joint guidance on submission of notifications for proposed mergers, acquisitions and other business combination notifications.

The FCCPA mandated FCCPC (to the exclusion of SEC) to set, publish and gazette thresholds applicable to all mergers and combinations, regardless of the size of the transaction i.e. whether large, medium or small. This new responsibility of FCCPC does not however abrogate the powers of SEC to regulate transactions involving public companies. The role of the Commission in relation to Mergers will now be in the exercise of its primary function as the regulator of the capital market. The regulatory purview of the Commission will be restricted to mergers and acquisitions by or involving public companies as well as transactions involving a change of shareholding of capital market operators. The review and approval by the Commission on mergers will be restricted to the objective captured in Section 121(1) (d) of the Investments and Securities Act, which is to ‘determine whether all shareholders are fairly, equitably and similarly treated and given sufficient information regarding the merger’ as well as other statutory mandates of the Commission. The Federal Competition and Consumer Protection Commission on the other hand will consider the anti-competitive effects of a transaction in a relevant market. It should be noted that the provisions and application of Sections 131-151 of the Investments and Securities Act, 2007 remain unaffected by the enactment of the Federal Competition and Consumer Protection Act. Consequently, the Commission will continue to enforce compliance with the takeover provisions and monitor acquisition of shares of public companies.

In a bid to address the issues emanating from the transition from SEC to FCCPC regime, SEC and FCCPC issued the Guidance to ensure seamless and continuous commercial transactions and market operations. Based on the Guidance, which became effective on 3 May 2019 (and is applicable until further notice/directive):

All pending notifications awaiting review by SEC will now be jointly reviewed by SEC and FCCPC.
All subsequent notifications/requests for approval are to be filed at FCCPC’s office in Abuja or with the SEC/FCCPC interim review desk office in Lagos or Abuja.
All applicable fees are to be paid to FCCPC.
Every complete application filed with SEC prior to the effective date of the Federal Competition and Consumer Protection Act and for which appropriate processing fees had been paid would be continued and completed.

The joint advisory provides some clarity on how companies should proceed in respect of current or potential transactions. This interim structure is not expected to extend indefinitely as the FCCPC is likely to issue more robust guidelines for the entire process. The FCCPA already includes some salient distinctions on the scope of mergers which is different from what was provided under the ISA and also gives the FCCPC powers to set thresholds for mergers. Companies are keen to see how the FCCPC will address such issues, but until then, the procedure remains largely the same.

In furtherance of its mandate, the FCCPA recently issued a guideline on the Simplified Process for Foreign to Foreign Mergers with Nigerian Component. The Guidelines, which is divided into nine (9) parts constitute a merger notification ‘form’ specifically for foreign-to-foreign mergers, indicating, among others, the type of information required regarding the merging parties, and mandatory supporting documentation to be provided and the applicable fees.

From all indications, taking a cue from other African jurisdictions, it seems these Guidelines are the first of their kind in Africa providing specific rules for (i) the treatment and notification of foreign-to-foreign mergers and (ii) outlining a simplified procedure for foreign-to-foreign mergers process in Nigeria.

Under the Guidelines, FCCPC undertakes to review foreign-to-foreign mergers under the simplified procedure within 15 business days, subject to the payment of an additional fee of NGN 5 million (approx. USD 13 800). However, the Guidelines is silent on the applicable number of days the review will take place should an applicant pay the normal fee provided in the Guidelines.

Under the Guidelines, the filing fees for foreign-to-foreign mergers are as follows:

Threshold	Filing fees
Merger with combined turnover of NGN 1 billion (approx. USD 1.4 million) or more (where turnover refers to domestic turnover of the merging parties)	The higher of: • NGN 3 million (approx. USD 8 300); or • 0.1% of the combined turnover
Merger where target undertaking has turnover of between NGN 500 million and NGN 1 billion (i.e. between approx. USD 1.4 million and USD 2.8 million)	NGN 2 million (approx. USD 5 500)
For a foreign-to-foreign merger to be reviewed under the simplified procedure (i.e. within 15 business days)	An additional NGN 5 million (approx. USD 13 800) is payable

The above filing fees must be interpreted in the context of the merger thresholds published in Government Notice 85 of 2019 which, essentially, provide that a merger is notifiable where the parties’ combined annual turnover in Nigeria in the preceding financial year is more than NGN 1 billion (approx. USD 2.8 million), or where the target’s annual turnover in Nigeria in the preceding financial year is more than NGN 500 million (approx. USD 1.4 million). The above filing fees are only applicable to foreign-to-foreign mergers. Another Guideline may be issued for merger threshold within Nigeria affecting Nigerian entities but for now, the merger threshold issued by the SEC prior to the enactment of the FCCPA is still operational.

A link to the Guideline can be found here:

http://fccpc.gov.ng/guidelines/mergers/

Highlights Of Discrimination Against Persons With Disabilities (Prohibition) Act 2019

ALF — Mon, 03 Jun 2019 11:54:34 +0000

INTRODUCTION

In the light of what appears to be a lack of appreciation for the rights of persons with disabilities within Nigeria, the imperative of having a special piece of legislation completely dedicated to addressing their rights had become long overdue.

President Muhammadu Buhari (GCON) recently signed into law, the Discrimination Against Persons With Disabilities (Prohibition) Act 2019 (hereinafter referred to as “the Act”) with the principal objectives of achieving full integration of persons with disabilities into the society and establishing a National Commission for persons with disability to cater for their socio-economic rights.

The Act generally reaffirms the equal status that persons with disabilities enjoy with persons without disabilities under the laws of the land and proceeds to create mandatory provisions for preserving that equality and ensuring that they benefit from a level playing field as far as is possible. With the rights of persons with disability being reinforced in this way, any form of discrimination against them is strictly prohibited and attracts sanctions under the Act. We now attempt to highlight some of the more significant provisions of this landmark legislation.

SCOPE OF APPLICATION OF THE ACT

The Act is applicable to the whole Federation without any exception.

MAJOR PROVISIONS OF THE ACT

Prohibition of discrimination
The Act prohibits any form of discrimination against any person on the grounds of disability and imposes penalties for breaches. For instance, where a body corporate discriminates against a person with disability, such a body corporate is liable to a fine of N1,000,000 (One million Naira) and, in the case of an individual, a fine of N100,000 (Hundred thousand Naira) or imprisonment of 6 months or both. This is without prejudice to the rights of the aggrieved person instituting a civil cause of action against the offender regardless of whether the criminal prosecution resulted in a conviction or acquittal.

In order to sensitize the general public about the value of persons with disability to society, the Federal Ministry of Information has been mandated to undertake public awareness programmes to inform the public about their rights, dignity, capability and achievements. See sections 1 and 2 of the Act.

Accessibility of physical structures
Pursuant to sections 3 to 6 of the Act, persons with disability should be afforded lifts, ramps and other accessibility aids to enable access to all physical structures on an equal basis with others; similar access must be afforded in public buildings and road side walks. All planning approvals should have due regard to the needs of persons with disability including those with wheel chairs. A period of 5 years from the coming into effect of the legislation has been afforded already existing public buildings and structures which were formerly inaccessible to ensure that their buildings were accessible going forward.

In similar vein, all seaports, railways and airports are required to make adequate provision to facilitate ease of access by persons with disability, including the provision of functional wheelchairs; ensuring that they are accorded priority on queues and during boarding and dis-embarkment; and effecting the translation of information in a format appropriate to the person with disability present. See sections 13 to 15 of the Act.

Socio-economic rights
The right to free, inclusive and appropriate education and liberty for persons with disability is guaranteed under the Act. These rights contemplate inter alia that such persons are prohibited from being deployed for collection of arms; free education to secondary school level, provision of educational assistive devices, incorporation of braille, sign language and other skills in the curriculum of primary, secondary and tertiary institutions and subsidized education for special education personnel. See sections 17 to 20 of the Act.

With respect to healthcare, the Act prescribes free treatment for all persons with mental disability in all public institutions. Pursuant to enjoying these rights and privileges in full, it is advised that such a mentally disabled person should obtain a permanent certificate of disability under section 22 of the Act. The conditions for procuring such a certificate comprise evidence of mental disability and a recommendation by a doctor to that effect. Where mental illness arises during the course of treatment, a term of 180 days must elapse after the issuance of a temporary certificate of disability.

However, where a permanent certificate of disability is unlawfully issued or obtained, the offender is liable upon conviction to a fine of N200,000 (two hundred thousand Naira) or a term of imprisonment of 1 year or both.

Opportunity for Employment and Politics
The Act provides that a person with disabilities shall work on an equal basis with every other individual and has the right to an opportunity to gain a living by work freely chosen or accepted in the labour market and work environment that is open. See section 28 of the Act.

Furthermore, the Act stipulates that all public organizations are to reserve at least 5 % of employment opportunities for persons with disability. See section 29.

The National Commission for Persons with Disabilities
The Act establishes the National Commission for Persons with Disabilities as a corporate body with common seal and perpetual succession. Its responsibilities include policy formulation and implementation, public enlightenment, data collection and record-keeping of information regarding persons with disabilities, receipt of complaints from persons with disabilities whose rights have been violated and institution of schemes which promote the welfare of persons with disabilities.

CONCLUSION

The enactment of the Act is a statement of intent by the National Assembly and the Federal Government that Nigeria has turned a significant corner in the pursuit of establishing a more egalitarian society. Without a doubt, disabled members of our society have been denied a fair chance at competing effectively with others. Their rights have been frequently trampled upon and they have had to climb difficult hurdles just to enjoy rights that are otherwise protected under the Nigerian constitution.

As earlier indicated, the coming into effect of this legislation helps provide additional muscle to the enforcement of rights of persons with disabilities by ensuring specificity and enlargement of their rights. With the establishment of a National Commission, it is hoped that urgent steps would be taken to sensitize Nigerians about the rights of persons with disabilities and the tremendous value they could bring to the task of nation building. We also expect that the various penalties and sanctions embedded in the Act for violations of its provisions would be duly enforced as and when appropriate as we prepare to transit to an environment which nourishes a culture of respect, empathy and value for persons with disabilities.

CONTRIBUTORS:

ROSE ADAJI

IBIM O. DOKUBO

Review Of The New Federal High Court Asset Management Corporation Of Nigeria (AMCON) Proceedings Rules, 2018

ALF — Wed, 03 Apr 2019 12:28:29 +0000

1. Introduction

The Asset Management Corporation of Nigeria (AMCON) was established under section 1 of the AMCON (AMENDMENT) Act 2015 to, amongst other functions, acquire eligible bank assets from eligible financial institutions and to hold, manage, realize and dispose of eligible bank assets (including the collection of interest, principal and capital due and taking over of collateral securing such assets) under the Act.

In a bid to give effect to the AMCON Act, being a special enactment and to achieve its purpose of quick recovery of toxic assets of the Federal Government, the Federal High Court issued the AMCON Practice Directions 2013 pursuant to sections 254 of the 1999 Constitution as amended, sections 53 and 61 of the AMCON Act and order 57 rule 3 of the Federal High Court (Civil Procedure) Rules 2009. On the 1st March, 2013, the then Chief Judge of the Federal High Court, Ibrahim Auta, in exercise of the powers conferred on him by section 254 of the Constitution, section 44 of the Federal High Court Act, Sections 53 and 61 of the AMCON Act 2010, Order 57 Rule 3 of the Federal High Court (Civil procedure Rules), issued the AMCON Practice Direction, 2013 to guide the Courts in the effective handling of AMCON matters. A careful perusal of the Practice Direction, 2013 reveals a very comprehensive and well detailed provision, devoid of technicalities, aimed at quick and effective handling and disposal of AMCON matters. This Practice Direction alongside the AMCON (Amendment) Act, 2015 have been used over time for the determination of AMCON matters until 13th December, 2018 when the Chief Judge of the Federal High Court, Honourable Justice Adamu Abdu Kafarati, issued the Federal High Court Asset Management Corporation of Nigeria (AMCON) Proceedings Rules, 2018 (hereinafter referred to as “the AMCON Proceedings Rules, 2018” or “the AMCON Rules”) relying, inter alia, on the powers conferred upon him by section 254 of the 1999 Constitution as amended.

2. Objectives of the AMCON Proceedings Rules, 2018

Order 1 rule 1 of the AMCON Proceeding Rules, 2018 clearly states the objectives of the Rules; the main objective being to enable the Court deal with AMCON claims quickly and efficiently. The Judges of the Federal High Court are enjoined by Order 2 Rules 1 & 2 of the AMCON Rules to further the objectives of the Rules by active case management which includes doing any of the following:

i. Identifying the issues at an early stage;

ii. Deciding the order in which issues are to be resolved;

iii. Encouraging the parties to use an ADR mechanism;

iv. Encouraging parties to settle the whole or part of the case;

v. Fixing timetables and otherwise controlling the progress of the case;

vi. Dealing with as many aspects of the case as possible on the same occasion even when not scheduled;

vii. Making use of technology; and

viii. Giving directions to ensure that the trial of a case proceeds quickly and efficiently.

3. Major Provisions of the AMCON Proceedings Rules, 2018

A careful perusal of the AMCON Rules discloses the following as its major provisions:

i. Clear delineation of how actions are to be commenced by writ of summons, originating summons, originating motion or petition

All AMCON claims shall be commenced by writ of summons, originating summons, originating motion or petition or any other method provided under the AMCON Act and it explained the circumstances for their use.

ii. Lifespan of originating processes tagged claims

Order 3 Rule 8 of the AMCON Rules provides that an AMCON claim form shall be valid in the first instance for one year from the date of issue. The judge may upon application order a single renewal for a period not exceeding six months. An application for renewal is to be brought before the expiration of the claim form.

iii. Timeline for services of AMCON processes

Order 3 Rule 11 of the AMCON Rules is to the effect that AMCON originating processes shall be served on the other party within 7 days of its filing, default of which will attract a penalty as prescribed in the schedule to the AMCON Rules. A defendant is entitled to 5 days to reply if any.

iv. Default fee for each day of default for late filing of memorandum of appearance

Order 3 Rule 13 of AMCON Rules imposes a fine of N5,000 for each day of default in filing memorandum of appearance after 5 days allowed in Order 3 Rule 11(3) of the Rules.

v. Electronic filing provided for

The provisions relating to e-filing in the Federal High Court (Civil Procedure) Rules shall apply to all AMCON claims and any party represented by a legal practitioner is required to file a memorandum of appearance with comprehensive details of his phone numbers and email addresses; see Order 6 of the AMCON Rules. Also, where the parties undertake to serve the processes electronically, they shall file a certificate of service in the court.

vi. Defects in documents to be treated as mere irregularities

Pursuant to Orders 7 and 16 of the AMCON Rules, the effect of non-compliance in commencing an action or at any stage of the proceedings may be treated as an irregularity and will not nullify the proceedings, any document, judgment or order made.

vii. Personal service of originating or other processes on the defendant not necessary

Under Order 8 Rule 3 of the AMCON Rules personal service of originating processes on the defendant shall not be necessary where the defendant undertakes in writing to accept service by his legal practitioner.

viii. Grant of default judgment by the Court in default of appearance or defense

Default judgment may be granted in default of appearance or defense by the trial court, as provided in Order 9 of the AMCON Rules. This default judgment may, however, be set aside if wrongly entered.

ix. Summary judgment procedure provided for

Where a claimant believes that there is no defense to the claim he may sue for recovery of a debt, a liquidated money demand or any other claim. Under this procedure i.e. summary judgment procedure under Order 10 of the AMCON Rules, the Claimant is required to file a motion on notice seeking summary judgment in a suit filed and setting out the grounds supported by a statement of claim and an affidavit stating that there is no defense to the claim and a written address.

x. Court to explore possibilities of settlement of the dispute

Order 11 rule 1 of the AMCON Rules provides that the court shall, in appropriate cases, grant not more than 21 days to parties within which to explore possibilities of settlement of the dispute.

xi. Parties to file respectively issues for determination

Before a matter proceeds to trial, Order 11 Rule 2(1) of the AMCON Rules provides that parties shall file their respective issues for determination. Sub – Rule (3) provides that where the parties have filed their respective issues for determination and the parties have not agreed on the issues for determination, or that the judge is of the opinion that the issues formulated by the parties do not adequately address the controversies between them, the judge may, in spite of the issues formulated by the parties, formulate appropriate issues for determination and such shall be the issues for determination at the trial of the matter.

xii. The court may grant interim orders

Under the provisions of Order 12 Rule 1(1)(a) – (p) of the AMCON Proceedings Rules, 2018 the court has powers to grant numerous interim orders stated thereunder including an order of interim possession under section 49 of the Act, an account-freezing order under section 50 of the Act, an interim order of injunction, an order to deliver up goods, an order restraining a party from dealing with any assets etc.

xiii. Mortgagee or Mortgagor may approach the court for reliefs

Under the provisions of Order 15 of the AMCON Rules a mortgagee or mortgagor, whether legal or equitable, or a person who is entitled to or who has property subject to legal or equitable charge or foreclosure may claim any of the reliefs stated thereunder. These include payment of moneys secured by the mortgage or charge, sale, foreclosure, delivery of possession, redemption, or re-conveyance.

4. Comparing the Practice Directions with the AMCON Rules

After a careful perusal of the provisions of both the AMCON Practice Direction, 2013 and the AMCON Proceedings Rules, 2018, it can be clearly seen that the latter incorporates the salient provisions of the former, while also making fundamental innovations. Some of those innovations are as follows:

i. The AMCON Rules allow for oral application for substituted service unlike the Practice Direction which stipulates that all legal arguments must be in writing.

ii. The AMCON Rules allow the judge to award claims/benefits not sought by parties. There was no such provision in the Practice Direction.

iii. The AMCON Rules allow the judge to make use of similar Rules when a particular matter is not provided for in it; but no such provision exists in the Practice Direction.

iv. The AMCON Rules give the judge full discretion of the conduct of the case notwithstanding the provisions of the Rules. There is no such discretion under the Practice Direction.

v. Defects in documents and proceedings are to be treated as mere irregularities and the court may allow such defects to be regularized or remedied on such terms as the court may direct.

5. Conclusion

It is important to note that the AMCON Proceedings Rules, 2018 did not repeal the AMCON Practice Directions, 2013. However, in view of the wide provisions made in the new Rules, the need to continue to have recourse to the Practice Direction may have become redundant. Indeed, the new 2018 Rules is an attempt to improve on the 2013 Practice Direction, which had been in use in the past five years.

We consider the period of 7 days for the service of AMCON processes, the period of 5 days for the Defendant to reply thereto, and the default fee of N5,000 for each day of default to be onerous. Although, we appreciate the reasoning behind these provisions, they may, ultimately, limit access to justice. It is hoped that, during future reviews of the AMCON Rules, the Bar would be consulted. Whatever may be its shortcomings, however, the AMCON Rules will no doubt be a good working tool for judges of the Federal High Court in the administration of justice in AMCON matters which come up before them.

CONTRIBUTORS:

THEOPHILUS OCHONOGOR

GABRIEL ONOJASON

AYO OLAIFA

Executive Order 7 Of 2019 On The Road Infrastructure Development And Refurbishment Investment Tax Credit Scheme

ALF — Fri, 01 Mar 2019 13:03:24 +0000

REVIEWING THE COMPANIES INCOME TAX (ROAD INFRASTRUCTURE DEVELOPMENT AND REFURBISHMENT INVESTMENT TAX CREDIT SCHEME) AND RELATED MATTERS

INTRODUCTION
Pursuant to the powers conferred on him by the Constitution of the Federal Republic of Nigeria and the provisions of section 23(2) of the Companies Income Tax Act (CITA)[1], the Nigerian President, Muhammadu Buhari, GCFR, recently signed into law, Executive Order No. 007 of 2019 to be cited as the Companies Income Tax (Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme) Order, 2019 (“EO7 of 2019” or “the Scheme”).

EO7 of 2019 comprises six paragraphs, with each containing several sub-paragraphs, and deal with issues ranging from establishment of a management committee charged with responsibility for implementing and administering the Scheme to the issuance of the road infrastructure tax credit itself.

The main objective of the Scheme is to accelerate road infrastructure development for balanced economic growth in Nigeria by granting approval to private sector entities to construct and refurbish eligible roads across the country in exchange for tax credits, which could then be applied against company income tax payable. Thus, the motivation for the Scheme derives from the desire to take advantage of private sector funding and discipline to enhance road infrastructure development in the country. The Scheme has a life span of ten years reckoning from the commencement of EO7.

Upon inauguration of the Scheme, the President[2] indicated that it would provide another opportunity to demonstrate the commitment of the administration to conceive, design, develop and deliver Public Private Partnerships (PPPs) with notable investors in order to close the road infrastructure gap in the transportation sector due to revenue shortfalls that have hampered government’s efforts to fully fund critical projects. The President further explained that through these innovative funding mechanisms, government would be able to address the challenges of project funding, cost variation and completion risks that have plagued the development of the nation’s critical roads infrastructure assets.

Under the Scheme, companies that are, for instance, disposed to spending their own funds on constructing roads to their factory and business locations, will recover their construction costs by paying reduced taxes, over a period of time. Consequently, the Scheme focuses on the development of eligible road infrastructure projects in an efficient and effective manner in order to create value for money and guarantee participants in the Scheme timely and full recovery of their construction/project costs by way of company income tax credits.

It bears noting that there are existing infrastructure tax credits provided by the Companies Income Tax Act (as amended) (“CITA” [3]) and the Pioneer status incentives granted under the provisions of the Industrial Development (Income Tax Relief) Act (“IDITRA”)[4]. Without doubt, some of the burning questions that may agitate the minds of potential and actual participants of the Scheme include whether participation under the Scheme would bar enjoyment of other infrastructure tax credits provided for under the CITA and whether there are any advantages that the terms of the Scheme offer in comparison with its predecessors? This article would attempt a review of the provisions of the EO7 of 2019, CITA and other infrastructural tax relief regimes, and their potential to accelerate infrastructural growth in Nigeria.

EXISTING TAX INCENTIVES ON INFRASTRUCTURAL DEVELOPMENT
In the past, government has intervened through, inter alia, trust funds and tax incentives to address Nigeria’s infrastructural deficit.

A company operating in Nigeria is expected to pay the rate of 30 kobo for every naira in respect of the total profits for each year of assessment.[5] Section 23 (2) of CITA generally empowered the President to exercise his discretion to exempt by order‐

(a) any company or class of companies from all or any of the provisions of this Act; or

(b) from tax all or any profits of any company or class of companies from any source, on any ground which appears to it sufficient.

The various tax incentives on infrastructure and funds established under legislation in Nigeria are as follows:

Pioneer status under the provisions of the Industrial Development (Income Tax Relief) Act
Rural investment allowance
The Companies Income Tax (Exemption of Profits) Order 2012
Road Trust Fund 2017
Presidential Infrastructure Development Fund 2018

Pioneer Status under the provisions of the Industrial Development (Income Tax Relief) ActPioneer status is a tax incentive which exempts the applicant company from corporate income taxes for an initial three-year period which is renewable for one or two years.[6]

Rural investment Allowance:

It is important to note that section 34 of the CITA contains provisions which aim to encourage companies to invest in rural areas and provide the infrastructure/facilities incidental to such investments, by way of government offering a rural investment allowance. However, a major reason for the ineffectiveness of this incentive scheme is the requirement for the relevant trade or business to be sited in a location that is at least 20 kilometres away from similar amenities provided by the government[7]. Also, the incentive does not permit companies to carry forward the allowance whenever it cannot be fully exhausted[8]. EO7 of 2019 doesn’t share these limitations. For the purpose of more clarity, the provisions of sections 34 and 40 of CITA are reproduced below:

Sections 34 and 40 (11) of CITA on Rural investment allowance:

(1) Where a company incurs capital expenditure on the provisions of facilities such as electricity, water, tarred road or telephone for the purpose of a trade or business which is located at least 20 kilometers away from such facilities provided by the government, there shall be allowed to the company in addition to an initial allowance under the Second Schedule to this Act an allowance (in this Act called “rural investment allowance”) at the appropriate per cent certain as set out in subsection (2) of this section of the amount of such expenditure:

Provided that where any allowance has been given in pursuance of this section, no investment allowance under section 32 of this Act shall be due or be given in respect of the same asset or in addition to the allowance given under this section.

(2) The rate of the rural investment allowance for the purpose of this section shall be as follows‐

(a) no facilities at all……………. 100%

(b) no electricity……………………. 50%

(d) no tarred road……………………15%

(e) no telephone………………………5%

(3) For the purpose of this section the rural investment allowance shall be made against the profits of the year in which the date of completion of the investment falls and the allowance or any fraction thereof, shall not be available for carry forward to any subsequent year whenever full effect cannot be given to the allowance owing to there being no assessable profits or assessable profits less than the total allowance for the year the investment was made.

Section 40(12) of CITA, however, provided that a company shall not be allowed to claim the investment tax relief for more than 3 years and the relief shall not be available to a company already granted pioneer status.

Save as has been stipulated in paragraph 4(15), E07 of 2019, which prevents a participant who has enjoyed a road infrastructure tax credit on an eligible road from benefiting from any other tax credit, capital allowance, relief or incentive on project costs incurred on an eligible road, there is no restriction as to how long the tax credit granted under EO7 of 2019 may be enjoyed.

The Companies Income Tax (Exemption of Profits) Order 2012
The Companies Income Tax (Exemption of Profits) Order, 2012 (the “Order”) was made by the President in exercise of his powers under section 23(2) of the Companies Income Tax (CIT) Act, Cap C21, Laws of the Federation of Nigeria, 2004 (as amended).

The Order was made on 27 April 2012, but was only made public on October 4, 2012. The Order had a commencement date of 27 April 2012 and was designed to be in force for 5 years from the commencement date.

Paragraph 3 of the Order granted qualifying companies a CIT exemption of 30% of the cost incurred in providing infrastructure or facilities of a public nature. Based on the paragraph, “infrastructure or facilities of a public nature” include: power (electricity); roads and bridges; water; health, educational and sporting facilities; and other facilities as may be approved from time to time by the Minister of Finance and published in the Federal Government Gazette upon the recommendation of the Federal Inland Revenue Service (FIRS).

The Order provided that the Infrastructure Tax Relief (ITR) will be granted in addition to the usual deductions allowed in respect of the costs incurred under the relevant provisions of the CIT Act, “and shall form part of the deductible expenses of the company”. In effect, the ITR was treated as an allowable expense to be deducted in arriving at assessable profits, and not as a relief to be set off against assessable profits. An ITR was claimed by a company in the assessment period in which the infrastructure or facility is provided.

To qualify for ITR, the relevant infrastructure and/or facilities must have been completed by the company and available for use by the company and the public or the community where the infrastructure/facilities are sited. However, the Order provided exceptions where public use is impracticable or an exemption is obtained from the Minister of Finance.[9]

Road Trust Fund 2017
The Federal Executive Council at its meeting on Thursday, 26 October 2017, approved the establishment of Road Trust Fund (RTF). RTF was conceptualized as a PPP initiative by Federal Ministry of Finance (FMF) and Federal Ministry of Power, Works and Housing (FMPWH). The aim is to incentivize private sector participation in the development of federal road infrastructure through a tax credit scheme.

RTF is a revision of the infrastructure tax relief (ITR) incentive under the erstwhile Companies Income Tax (Exemption of Profits) Order, 2012. ITR granted companies that incurred expenditure of public nature (including road construction), tax relief of 30% of the cost of incurred on providing the infrastructure. The relief is enjoyed via deduction from the income tax of the company.

Unlike ITR, RTF operated under a collective model to mobilize private capital from companies which were used to undertake road projects through stand-alone collective infrastructure funds using a special purpose vehicle. It involved financial intermediaries which were expected to promote RTF projects and solicit for funds from interested companies. The design and cost of the roads were approved by the FMPWH and also certified by the Bureau of Public Procurement (BPP).

Expected benefits for companies who took advantage of the Scheme include:

100% recovery of costs incurred on road infrastructure as tax credit against total tax payable over a three-year period
Accelerated depreciation to enable cost recovery in 3 years rather than 4 years for standard assets
Ability to intervene in roads critical to a company’s business
Some of the benefits of the RTF to the country include:

Increased funds for road development and accelerated road provision across the nation
Alternative funding to the government for road infrastructure development which will reduce pressure on the federal budget
Efficient delivery of road projects and reduction of project costs.[10]

Presidential Infrastructure Development Fund 2018
The federal government on May 17, 2018, announced the establishment of a Presidential Infrastructure Development Fund (PIDF), which is to be managed by the Nigeria Sovereign Investment Authority (NSIA).

The fund is to be invested specifically in critical road and power projects across the country.

The National Economic Council (NEC) has also authorised the initial transfer of $650 million to the NSIA from the Nigeria Liquefied Natural Gas (NLNG) Dividend Account, as seed funding for PIDF.

This initiative was to eliminate the risks of project funding, cost variation and completion that have plagued the development of the nation’s critical infrastructure assets such as the 2nd Niger Bridge, Lagos to Ibadan Expressway, East—West Road, Abuja to Kano Road, Mambilla Hydroelectric Power over the last few decades.[11]

REVIEW OF THE COMPANIES INCOME TAX (ROAD INFRASTRUCTURE DEVELOPMENT AND REFURBISHMENT INVESTMENT TAX CREDIT SCHEME) ORDER 2019
The E O 7 of 2019, to be cited as the Companies Income Tax (Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme) Order, 2019 approved a tax credit scheme to attract private sector involvement in the provision of road infrastructure assets across Nigeria. The Scheme is expected to be in force for a period of 10 years from its commencement; and the President of the Federal Republic has the power to amend the Order from time to time as may be deemed necessary. A participant in the Scheme can be any company registered in Nigeria, a pool of companies or institutional investors.

It is an Order comprising 6 paragraphs which deal with the recital to the order; the establishment of the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme; the Road Infrastructure Tax Credit; issuance of Road Infrastructure Tax Credit Certificate; utilization of the Road Infrastructure Tax Credit; the interpretation clause and citation. The order also contains two schedules. Schedule one deals majorly with the composition and functions of Scheme’s management committee; information required to be submitted to management committee by applicants seeking to be participants in the Scheme; requirements for issuance of the tax credit certificate and conditions for transfer of a tax credit certificate. Schedule two relates to the memorandum of understanding (template) which would be entered with participants after the President has approved an eligible road project.

An attempt to provide more granular details of the various paragraphs in the Order appears below.

The Road Infrastructure Tax Credit (RITC)[12]

The Scheme entitles Participants[13] to utilize the project cost incurred in the construction or refurbishment of eligible roads as a credit against companies income tax that is payable. In doing so, Participants are afforded a single uplift equivalent to the prevailing Central Bank of Nigeria Monetary Policy Rate (MPR) plus 2% of the Project Cost[14]. And where such uplift is granted, it shall not constitute taxable income in the hands of the Participant or a Beneficiary[15].

Participants are at liberty to utilize this RITC from the relevant fiscal year in which the project is incurred, until it is fully utilized. However, the amount of RITC that may be utilized in any year of assessment shall be limited to 50% of the company’s income tax payable by the Participant for that year of assessment. Where there is any unutilised tax credit, it shall be available to be carried forward by the Participant to subsequent tax years.

However, as with similar schemes in the past, where a Participant takes benefit of the RITC under the Scheme, it shall not be entitled to claim any other tax credit, capital allowance, relief or incentive on the Project Cost incurred in respect of that Eligible Road[16] under any law in force in Nigeria.

Administration and Implementation of the Scheme

The responsibility for administering and implementing the Scheme belongs to the Road Infrastructure Refurbishment and Development Tax Credit Scheme Management Committee (“the Committee”) set up under EO7 of 2019.[17]Also, the Committee will approve the issuance of RITC certificates to Participants annually, in proportion to the Project Costs incurred by them in that year. Furthermore, the Committee is charged with the task of registering Participants under the Scheme. Other agencies of government have been empowered to play different roles under the Scheme and these other agencies are as follows:

Federal Ministry of Finance
The Federal Ministry of Finance is in charge of the establishment and maintenance of funds for the operations and management of all road projects executed under the Scheme.
Federal Ministry of Works
This Ministry has three major roles to play in relation to the Scheme and they are as follows:

Publication of the design and specification of Eligible Roads;
issuance of contract award letter following approval of road infrastructure development contract where it may be required; and
carrying out periodic quality control inspection exercises.
Bureau of Public Procurement (“Bureau”)
All costs and contractors would be scrutinized and approved by the Bureau in line with legal requirements. The Bureau will ensure that costs are not inflated and that unqualified contractors are not engaged for the projects.

Federal Inland Revenue Service (FIRS)
Under the Scheme, the FIRS is required to undertake the following major actions:

Issuance of certificates to Participants through the Committee;
maintenance of a registrar of Participants and Beneficiaries and a record of issued RITC certificates to Participants and Beneficiaries of the Scheme;
preparation of an annual return of all RITCs;
updating of the record of issued RITC certificates, de-registration of old Participants and issuance of new certificates to new Beneficiaries.

Eligible Participants[18]

The following identified class of entities is eligible to participate under the Scheme:

Companies (other than a corporation sole) registered under CAMA or any other law in force in Nigeria.
Pool of companies operating through a special purpose vehicle registered with and designated by Securities and Exchange Commission (SEC) for the purpose of the Scheme.
Institutional investors duly registered as a company or companies under Companies and Allied Matters Act of any other law in force in Nigeria.
The Road Infrastructure Tax Credit Certificate[19]
It is important to mention that Participants cannot benefit from the Scheme unless they have been issued with a RITC certificate. When the Committee has approved the Participant’s application for RITC, the FIRS shall then issue a RITC certificate to such Participant on an annual basis.

Application of Road Infrastructure Tax Credits (RITCs)

The following rules shall regulate the manner in which tax credits secured under the Scheme may be applied by a Participant to the payment of company income tax until fully utilized.

It bears mentioning from the outset that even where a company possesses a RITC certificate, no tax credit shall be applied for settlement of company income tax unless claimed by a Participant or Beneficiary[20] in its tax returns for the year of assessment.
Participants in the Scheme are entitled to recover the cost incurred by them in the construction or refurbishment of Eligible Roads as credit against companies income tax (“CIT”) payable. However, such companies are limited to utilizing the tax credit obtained to defray a maximum of 50% (fifty percent) of the CIT payable for the relevant year of assessment. However, that limitation is dispensed with where the Participant has been involved in the construction or refurbishment of Eligible Roads in Economically Disadvantaged Areas[21].
Participants are also entitled to a single uplift, equivalent to the CBN Monetary Policy Rate plus 2% of the Project Cost. This uplift will not be subject to tax.
A Participant is entitled to dispose of or transfer its RITC to other companies in the same manner a security may be sold in a relevant securities exchange.
An unused RITC within the year of assessment can be carried over by the Participant or Beneficiary to a subsequent tax year. This is clear departure from earlier tax relief measures which tend to impose timelines for their enjoyment[22].
Requirements to be fulfilled before a Private Company can benefit from the Scheme:

Registration and certification by the Committee as a Participant or representative of a Participant of the scheme;
designation as a Beneficiary under the Scheme;
provision of evidence of certification of the Project Cost by the Committee;
tax credit must be claimed by the Participant in its tax return for that year of assessment;
Evidence that the project is economically viable, cost efficient and can be completed in a timely manner (within 12 to 48 months).
Tradability and Registration of Road Infrastructure Tax Credit (RITC) Certificate

An exciting introduction by the Scheme is the ability of holders of the RITC certificate to trade it as a financial instrument on a relevant securities exchange and have same registered accordingly. Consequently, Participants are at liberty to undertake a disposal of the whole or part of their certificate to willing buyers on a relevant securities exchange in the same manner as they would shares, bonds and other securities. However, such sale must be reported to the Committee, which will then have to de-register the Participant and register the new Beneficiary.

Furthermore, where such Participant or Beneficiary indicates that it no longer wants the certificate for trade on the relevant securities exchange, it shall notify the Committee and provide evidence of its de-registration. EO7 of 2019 further states that the tax credit may qualify as an asset in a Participant’s or Beneficiary’s financial records and will have to comply with International Financial Reporting Standards (IFRS). However, although the essence of the Scheme is to offer tax credits to Participants, any gains arising from the disposal of the tax credit will be subject to tax.

POTENTIAL IMPACT OF THE ROAD INFRASRUCTURE TAX CREDIT SCHEME ON THE EASE OF DOING BUSINESS ENVIRONMENT
One of the major ways in which the Ease of Doing Business in any country may be incentivized is the interventionist role that government plays in providing an enabling environment and attracting private sector capital and discipline towards the acceleration and enlargement of infrastructural development; this then triggers direct industrial growth, with attendant positive impact on inflationary trends, employment rate, per capita income and other growth indices.

Arguably, the RITC Scheme under review is a welcome introduction into our tax regime; aimed at enabling interested Participants better manage their tax obligations in such a way that guarantees an upward growth trajectory for profits, goodwill and corporate citizenship. Some of the more apparent improvements on previous tax relief systems include:

Better articulated framework for the administration, implementation and control of a tax credit scheme, which specifically delineates the scope of power, authority and obligations of the different stakeholders and what their limitations are. There is clarity of purpose and vision.
Characterization of tax credits obtained under the Scheme as tradable securities, which has never been an attribute of similar schemes in the past. This quality makes a tax credit a potential asset on a company’s balance sheet which could prove pivotal in balance sheet management.
The absence of any limitation as to how long a tax credit may be utilized. In other words, a tax credit may continue to be carried forward until fully utilized by a Participant or Beneficiary.
Ability of a Participant or Beneficiary to apply the tax credit secured to defray up to 100% of its company income tax payable in a year of assessment, if the tax credit was obtained in relation to a road infrastructure construction or refurbishment concerning an Economically Disadvantaged Area[23]. This would otherwise not be available to a Participant or Beneficiary whose tax credit arose out of a road project constructed or refurbished in other areas.
The Scheme is a specific road infrastructure tax credit initiative designed to consolidate expansion of road infrastructural development in Nigeria on a scale that has, perhaps, not been experienced before.
There is clarity and no conflict with previous tax relief schemes. For example, the provisions of EO 7 of 2019 provides that “A participant entitled to a Road infrastructure tax credit on an eligible road shall not be entitled to claim any other tax credit, capital allowance, relief or incentive on the project cost incurred in respect of that eligible road project under any law in force in Nigeria, in addition to the Road Infrastructure tax credit”[24]. The implication of this is that a Participant or Beneficiary of a RITC cannot claim any other infrastructural tax incentives existing under any law in Nigeria using the same Eligible Road Project.
POTENTIAL CHALLENGES WITH THE SCHEME
Without question, the Scheme represents a bold step towards closing the road infrastructural gap in the country. However, we anticipate that its implementation would not be without some teething challenges, which, unless addressed, could limit the promise that it offers. The Committee may need to, through recommendations and proposed amendments to the President, secure clarity around some critical aspects of the Scheme. Some of the more topical areas have been discussed below:

The definition of “Eligible Road” seems to be within the exclusive discretion of the Minister of Finance[25]. Potential investors, participants and beneficiaries have no way of planning ahead or budgeting under the Scheme as they all have to await the pleasure of the Minister on the choice of roads to select for the purpose. Is the Scheme specifically for federal roads or are state roads also contemplated, given that states and local governments are also entitled to a share of company income tax revenue?
Reckoning that road infrastructural development is usually a capital intensive exercise, chances are that companies may, from time to time, consider debt as an option for raising required funding in order to ultimately enjoy tax credits. There does not appear to be any consideration for borrowing and its related costs as a component of “Project Costs”[26]. While it is arguable that the intention of the uplift (plus two (2) percent of the Project Cost) may be to compensate for borrowing cost or time value of money expended, suffice it to state that it may not sufficiently address the accruing costs on borrowed funds which apply on an ongoing basis. As presently constituted, potential investors may be circumspect about deploying debt as an option under the Scheme.
It would appear that the life span of the Scheme is ten (10) years[27] from the date of commencement of the EO7 of 2019 i.e. 25th January, 2019. Thus, the presumption is that Participants or Beneficiaries under the Scheme would cease to enjoy tax credits after 25th January, 2029 or thereabouts. If this is the intention of the Scheme that would mean that only companies that can complete their road infrastructure projects before that expiration date would be attracted to the Scheme. The question may arise; what would happen to uncompleted projects by that date or unutilized tax credits?
In the event that a Project Cost is not approved, how will the associated costs be treated? In practice FIRS takes the rebuttable view that unapproved costs are also not allowable for tax purposes.[28]
While the Scheme may have provided for the procedure to be followed before tax credits can be issued, it has not taken care of what remedies are open to aggrieved participants or beneficiaries who, having satisfied all requirements for such issuance, are, nevertheless, denied tax credit certificates; or scenarios in which such tax certificates have been issued but are still not honoured by relevant agencies of government. The provision for arbitration in the Memorandum of Understanding may not be a one-size-fits-all resolution mechanism for disputes especially when the associated costs of arbitration are capable of eroding whatever gains may have been secured under the Scheme.
The preparedness of the government of the day to respect the letters and spirit of the EO7 of 2019 as a veritable tool for re-energizing development of Nigeria’s road infrastructure assets is critical to the success of this intervention.
CONCLUSION
It is the expressed intention of the Federal Government of Nigeria to provide adequate facilities for the free mobility of people, goods and services throughout the federation, for the purpose of national integration and protecting the rights of citizens to engage in legitimate economic activities concerned with the production, distribution and exchange of wealth, goods and services[29]. Thus, the establishment of this Scheme is a step in the right direction.

One of the critical success factors for any government policy is the political will to committedly honour the letters and spirit of the policy framework it has, itself, designed for execution. The absence of sincerity of purpose exhibited by some leaders in this respect has frequently led to policy summersaults or abandoned and uncompleted projects; or where completed, such projects have proven to be of substandard quality.

Many public utilities and industries, typically, perform below optimal efficiency and revenues levels owing to the stereotypical mindset that government resources belong to all and to no one in particular. In other words, there is a stark absence of ownership commitment in so far as government assets are concerned. It is in the light of this dismal performance of public sector-managed projects and services and the astronomically high cost of executing them, that it is always a breath of fresh air when government breaks from its stranglehold on construction of public/social infrastructure by inviting private sector partnership to deliver on socio-economic services that it has perennially failed in.

Typically, in PPP arrangements, the private partner is compensated through either: User-based payments (i.e., toll roads, airport or port charges), availability payments from the public authority [i.e., PFI] etc. or a combination of the above. In user-based payment structures, the government or public authority often needs to provide some financial support to the project to mitigate specific risks, such as demand risk, or to ensure that full cost recovery is compatible with affordability criteria and the public’s ability to pay. Government support mechanisms can take many forms, such as contributions, investments, guarantees and subsidies, but they should be carefully designed and implemented to allow for optimal risk allocation between the public and private sectors. When government support is present, the objective is to increase private capital mobilization per unit of public sector contribution.[30]

It is the earnest expectation of the authors that government would continue to observe international best practices in partnering the private sector mindful of the imperative of using the Scheme to promote ease of doing business in Nigeria. The Scheme has not been conceptualized as a charity or philanthropic venture. On the contrary, it has been designed to directly profit Participants by improving their capacity to enhance value for their stakeholders.

If well managed, it could signpost a fresh beginning towards addressing the debilitating road infrastructure deficit apparent in every part of Nigeria. Early indications suggest that it may have begun to attract the interest of serious minded investors, who have the pedigree to take on gigantic projects and execute them with distinction.[31] Government must continue to act consistently and with integrity in the implementation of the Scheme in order to gain and sustain the trust of the private sector even more.

THIS ARTICLE WAS JOINTLY AUTHORED BY SIMEON OYAKHILOME OKODUWA AND ROSE ADAJI, BOTH OF WHOM CARRY ON PRACTICE AT ALLIANCE LAW FIRM.

CONTRIBUTORS: CHISOM SAM-OBASI AND DOYIN FADARE

REFERENCES:

[1] Companies Income Tax Act; CAP C21, Laws of the Federation of Nigeria(LFN), 2004

[2] https://www.vanguardngr.com/2019/01/buhari-signs-executive-order-7-to-tackle-roads-infrastructure/ accessed on 11th February, 2019.

[3] Companies Income Tax Act, CAP C21 LFN, 2004

[4] Please see list of additional 27 industries/products granted pioneer status by the federal executive council on Wednesday, august 2, 2017 via https://www.vanguardngr.com/2017/08/fec-approves-27-new-industries-pioneer-status/ accessed on 15/2/2019.

[5] See section 40 of CITA

[6] See https://pwcnigeria.typepad.com/files/pwc-regulatory-alert_pioneer-status_august-2017.pdf accessed on 15/2/2019

[7] Section 34(1) , CITA

[8] Section 34(3), CITA

[9]Victor Onyenkpa, Newsflash on The Companies Income Tax (Exemption Of Profits) Order, 2012 website

http://www.mondaq.com/Nigeria/x/203002/Corporate+Tax/Newsflash+On+The+Companies+Income+Tax+

Exemption+Of+Profits+Order+2012 accessed on 11th February , 2019

[10] FG introduces infrastructure tax credit scheme through Road Trust Fund, [website] https://blog.deloitte.com.ng/fg-introduces-infrastructure-tax-credit-scheme-through-road-trust-fund/ accessed on February 11, 2019

[11] Lekan Paul. FG Establishes Presidential Infrastructure Development Fund, https://www.abusidiqu.com/fg-establishes-presidential-infrastructure-development-fund/ accessed on February 11, 2019

[12] See Paragraph 2, EO7 of 2019

[13] A “Participant” is defined under paragraph 5; EO7 of 2019 to include companies (other than corporate soles) registered under CAMA, a pool of companies under a Special Purpose Vehicle designated by SEC to operate under the Scheme and institutional investors registered as companies under CAMA.

[14] “Project Costs” are defined under paragraph 5; E07 of 2019 as any expenditure incurred by a participant for the construction or refurbishment of an eligible road but as certified by the Scheme’s management committee. In other words, the committee shall exercise a discretion as to what costs may be allowed as part of “Project Costs”.

[15] Pursuant to paragraph 5; EO7 of 2019 a “Beneficiary” means a company appointed by a Participant to utilize the whole or part of the road infrastructure tax credit initially issued to such a Participant under the Scheme or a person who has purchased the rights to utilize the said tax credit.

[16] See Paragraph 5; EO7 of 2019 where “Eligible Road” has been defined to mean a road approved by the President as eligible for the purpose of the Scheme upon recommendation by the Minister of Finance, which is subsequently notified to the participant and then published.

[17] See Paragraph 1; EO7 of 2019

[18] See note 13

[19] See Paragraph 3; E07 of 2019

[20] See note 15

[21] See note 16

[22] Section 40(12) CITA

[23] Pursuant to paragraph 5; EO7 of 2019 “Economically Disadvantaged Area” means an area in any geopolitical zone/state designated as “Economically Disadvantaged” by the President upon the advice of the Minister of Finance, who, for this purpose, shall have regard to matters including the average income level of the inhabitants vis-a-vis the minimum wage, the availability of infrastructure and volume of economic activity.

[24] See Paragraph 4(15) of E07 of 2019

[25] See note 19

[26] See note 14

[27] See Paragraph 1(3); EO7 of 2019

[28] Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme

https://pwcnigeria.typepad.com/files/pwc-tax-alert_road-infrastructure-development-scheme_jan2019.pdf accessed on February 11, 2019.

[29] See Recital to EO7 of 2019

[30] Aliyu Idris & Ors, Public Private Partnership in Nigeria and Improvement in Service Delivery: An appraisal; OSR Journal Of Humanities And Social Science (IOSR-JHSS) Volume 10, Issue 3 (Mar. – Apr. 2013), PP 63-71e- ISSN: 2279 – 0837, p-ISSN: 2279 – 0845. http://www.iosrjournals.org/iosr-jhss/papers/Vol10-issue3/L01036371.pdf

Learning Some Of The Nuances Of Patents Registration In Nigeria

ALF — Fri, 15 Feb 2019 13:09:39 +0000

Introduction

A patent is an exclusive grant or right issued by the relevant government authority within a country in order to ensure the protection of new inventions, developments, technical solutions or improvements which are considered to have created a positive modification in the way(s) the earlier inventions were made or utilized. Patent rights are like any other property rights which allow the inventor to benefit from his or her own invention. Invention means a solution to a specific problem in the field of technology[1]. These rights, just like every other intellectual property right, were first outlined in Article 27 of the Universal Declaration of Human rights[2], which sets forth the rights and benefits derivable from the protection of moral and material interest resulting from authorship of any scientific, literary or artistic production.[3]

The value of a patent is to then accord the inventor an exclusive market monopoly for a defined period of time towards maximizing the potential commercial benefits accruable from the invention. The patent thus incentivizes the inventor; providing fertile ground for enhanced productivity and the creation of more inventions.[4]

In the course of registering patents in Nigeria, some stakeholders i.e. inventors, professionals and the like, have internalized certain myths, which have no grounding in law and the practice of registering patents. This article seeks to inter alia, engage the process and importance of patents registration, and demystify some of the emerging stereotypes associated with the process, some of which actually impede the speedy completion of registration.

Brief summary of the process involved in the registration of patents In Nigeria

It is important to note that the law applicable to the registration of patents in Nigeria is the Patents and Designs Act of 1970.

The Patents and Designs Act provides that a patent may be granted for an invention where:[5]

The invention is new.
It constitutes an improvement upon a patented invention and is also new. It does not matter that such invention is similar to an earlier one. What matters is that the new invention satisfies all the requirement of novelty[6]. Once these two conditions are satisfied, the Invention will be deemed patentable.[7]
It is capable of industrial application (useful).
Inventions, the publication of which may discourage immoral or offensive behavior (although not expressly provided for in the Act). The TRIPS Agreement (Article 27.2) further specifies that members may exclude from patent protection certain kinds of inventions, for instance, inventions, the commercial exploitation of which would contravene public order or morality[8].

To ensure that a patent in Nigeria is duly registered, the first step is to confirm that the innovation has not already been patented, by conducting a search.

The under listed items are the requirements involved in processing the registration of patents in Nigeria[9]:

A petition or request for a patent signed by the applicant or his agent and containing the applicant’s full name and address[10];
A specification which includes a claim or claims in duplicate; plans and drawings, if any, in duplicate;
In appropriate cases, a declaration which is signed by the true innovator requesting that he/she be mentioned as such in the patent and giving his name and address[11];
A signed power of attorney or authorization authorizing an agent to act on behalf of the owner of the innovation in cases where the application is made by an agent[12];
An address for service in Nigeria in cases where the applicant’s address is outside Nigeria[13];
Payment of the prescribed fees[14].
Once an application for the registration of a patent is granted, the patent is valid for 20 years[15].

Some of the nuances that have become associated with the process of patent registration have proven to be merely clogs in the wheel of the registration process. We have sought to engage the more prevalent ones only in the succeeding paragraphs.

An inventor needs not conceal details of the invention in order to avoid intellectual theft.

Some Nigerian inventors wrongfully assume that the legal requirement to fully disclose details of one’s invention in the specification of claims form, plans and drawings, inadvertently exposes one’s invention to intellectual theft. Nothing could be further from the truth.

Indeed, the correct position is that, in the course of ensuring compliance with the legal requirement to fully disclose the details of one’s invention in the requisite forms, one is, in fact, afforded legal protection from intellectual theft. This is because under intellectual property law, the issuance of a patent gives the applicant (Inventor) the exclusive right over the invention[16]. This in turn bars third parties from making, selling, importing and utilizing any patented invention except with the consent of the inventor or after a period of twenty years from the date of conclusion of the filing of a patent application may have elapsed.[17]

Prospective applicants are therefore encouraged to rest, assured in the irrefutable knowledge that, they suffer no risk of theft if they disclose full details of their invention, and to take advantage of patents registration by fully disclosing those details, as failure to do so is what may, in reality, expose one’s invention to intellectual property theft.

Protection for innovators through registration under the Patents and Designs Act was reinforced in the case of Arewa Textiles Plc .v. Finetex Ltd.[18], where the Court of Appeal held to the effect that the right to apply for letters of patent with respect to an invention was not a mere moral adjuration but a duty under section 24(1) of Patents and Design Act to register assignment, transfer or interest held in a patent, if an inventor desires the protection of the law. This decision was followed in the case of Bedding Holdings Limited v INEC & 5 Ors [19].

In this case, the plaintiff was a limited liability company registered in Nigeria and specializing in the general fabrication and manufacture of products such as Transparent Ballot Boxes and Collapsible Polling Booths. The plaintiff contended that it had acquired patents rights over the process and application of Direct Data Capture machines for the compilation and collection of various biometric information. The first defendant is the federal government agency responsible for the conduct of elections in Nigeria while the 4th to 6th defendants were companies engaged by the 1st and 2nd defendants to procure Direct Data Capture machines and related items required to compile the Nigerian Voters’ Register.

The plaintiff filed the suit at the Federal High Court, Abuja seeking special damages in the sum of N17,258,820,000.00 (Seventeen Billion, Two Hundred and Fifty Eight Million, Eight Hundred and Twenty Thousand Naira Only) and alternatively, injunctive orders protecting its intellectual property rights and general damages of N20,000,000,000 (Twenty Billion Naira).The defendants denied infringing any rights and the 4th defendant counter claimed for the revocation of the patient rights.

Dismissing the counter claim of the 4th and 6th defendants, judgment was entered in favour of the plaintiff as he had proved his case from the preponderance of the evidence before this court. While he tendered evidence to show that he has the right to the said intellectual property, none of the defendant’s claimed to have any. Some of the defendants’ also did not even adduce any evidence in this case, to show that they did not infringe seriously on the plaintiffs two patented products.

Details of inventions must not be publicly disclosed before filing an application for patent registration:
Despite the legal requirement to make a full disclosure in the course of applying for Patent Protection by specifying claims and drawings, this should in no way, manner or form lead one to making the mistake of publicly disclosing details of one’s invention before the registration of the patent[20]. Therefore, publication by oral disclosure, by document or by prior use will invalidate novelty and render the product unpatentable[21]. A clear distinction between these two scenarios needs to be internalized from the outset.

However, an exception to the above rule is where an inventor, over the course of an official exhibition, displays his invention within a period of 6 months before filing the patent application[22].

3. Ideas are not patentable but there are no requirements to have an actual prototype
Under the laws of patent registration, ideas cannot be patented. As a result, inventions submitted for patent registration must be supported with a detailed written description of the invention such that a specialist in the field to which the invention pertains can understand the realities of the said idea.

This is not to suggest that ideas are not valuable. It is of course, undeniable that an idea is an essential first step towards any invention; obviously, nothing will happen without an idea which makes ideas a valuable tool for any innovation. Ideas are not monetarily valuable and without some identifiable manifestation of the idea, there can be no intellectual property protection obtained and no exclusive right will flow. The advisable means to protect an idea would be by executing a confidential and non-disclosure agreement at the early stage of an invention for the purposes of protecting such idea. However, if such agreement is breached, one could only sue for breach of contract. So, the goal of an invention should be to go beyond the level of an idea and progress to towards something concrete that will amount to an invention.

4. Patents on plants, Animals or other biological processes cannot be obtained in Nigeria
The Registry for Patents, Trade Marks and Designs does not grant patents in respect of plants, animals, varieties and biological processes for the production of plants. However, this is not the position in foreign jurisdictions like South Africa, Kenya and the United States of America.

See Section 1 (4) of the Patents and Designs Act, Chapter 344, Laws of the Federation of Nigeria, 2004 which provides as follows:

(4) Patents cannot be validly obtained in respect of-

plant or animal varieties, or essentially biological processes for the production of plants or animals (other than microbiological processes and their products);
(5) Principles and discoveries of a scientific nature are not inventions for the purposes of this Act[23]

Obtaining a patent in a foreign jurisdiction does not amount to the protection of the invention in Nigeria
In view of the fact that patents are territorial in nature, it is important to note that each country owns its patents. In light of that, an inventor who registers a patent in a foreign country but fails to register same in Nigeria cannot sue for infringement of his patent in Nigeria. To sue for infringement of patents in Nigeria, any patent obtained from a foreign jurisdiction must also be registered in Nigeria.

However, this is different where the foreign country is a convention country to Nigeria. So long as there is in force an order declaring a country to be a convention country, a patent application or a design application in Nigeria, if an earlier corresponding application for the protection of an invention or the legislation of a design has been made in that convention country, shall be treated as having been made on the date when that earlier application was made. However, such earlier application must be made, in the case of an invention, twelve months before the date of application in Nigeria; while for designs, more than six months from the day of application in Nigeria[24].

Provided that this subsection shall not apply where the earlier application was made.

Where an inventor has filed an international application under the Patent Cooperation Treaty, the Trademarks, Patents and Designs Registry in Nigeria shall rely on the International Search Report thereby providing an opportunity for the inventor to save search fees.

In other words, after the filing of an international patent registration application in line with the requirements of the Patent Corporation Treaty, an international search report will be issued to the applicant/ inventor. In the circumstance, the patent registry in Nigeria would then consider same as an evidence of a prior art.

In a nutshell, it bears reiterating that the above issues are critical elements for individuals or companies to bear in mind before or during the course of undertaking patents registration in Nigeria. Failure to comply with these rules could lead to non-registration of such designs and even in cases where such designs are already registered, the Court could render such registration null and void[25].

THIS ARTICLE WAS WRITTEN BY BLESSING AJUNWO-CHOKO

[1] WIPO, Intellectual Property Handbook ([WIPO 2004 2nd edn], WIPO Publication NO.489(E))18.

[2] United Nations Universal Declaration of Human Rights 1948.

[3] The importance of intellectual property (Patent, Copyrights and Trademark) was first recognized by the two fundamental intellectual treaties administered by World Intellectual Property Organisation (WIPO), the Paris convention for the protection of industrial property in 1883, and the Berne convention for the protection of literary and artistic works in 1886.

WIPO believes that Intellectual property is native to all nations and relevant in all cultures, and has proven to have contributed to the progress of societies. The great Africa-American chemist and inventor, George Washington Carve, born in the 1960s recognized the truth of this message. Carve is the inventor of crop rotation method for conserving nutrient in soil and he also discovered hundreds of new use for crops such as peanuts, which created new markets for farmers in United States of America.

[4] Section 2(2) of the Patents and Designs Act, Cap P2LFN 2004 accords statutory protection on the right of the true inventor. The section provides that the true inventor is entitle to be named as such in the patent, whether or not he is the statutory inventor and the entitlement in question shall not be modified by a contract.

Section 2(4) of the Patents and Designs Act states that where an invention is made in the course of employment or in the execution of a contract for the performance of specified work, the right to patent in the invention is vested in the employer or as the case may be in the person who commissioned the work. Provided that where the inventor is an employee, then if his contract of employment does not require him to exercise any inventive activity but he is making the invention through the use of data or means which his employment has provided or put at his disposal or the invention is of exceptional importance, he is entitled to fair remuneration taking into account his salary and the importance of the invention.

[5] Section 1(1)(a)&(b) of the Patents and Designs Act states that an invention is patentable :

If it is new, results from inventive activity and is capable of industrial application; or
If it constitutes an improvement upon a talented invention an also is new, results from inventive activity and is capable of industrial application.
[6] F.O. Babafemi, Intellectual Property: The law and Practice of Copyrights, Trademarks, Industrial Designs in Nigeria (1st edn, Justinian Books ltd.2007) 354.

[7] James Oitomen Agbonrofo v. Grain Haulage and Transport Ltd [1998] f.h.c. 1. 236.

[8] WIPO, Intellectual Property Handbook ([WIPO 2004 2nd edn], WIPO Publication NO.489(E))18

[9] Section 15(1), Patents and Designs Act

[10] Section 15(1)(i) & (ii), Patents and Designs Act

[11] Section15(1)(b)(ii), Patents and Designs Act

[12] Section 15(1)(b)(iii), Patents and Designs Act

[13] Section 15(1)(a)(ii), Patents and Designs Act

[14] Section 15(1)(b)(i), Patents and Designs Act

[15] Section 7(1), Patents and Designs Act

[16] Sections 6(1) and 19, Patents and Designs Act; See further Dyktrade Ltd v. Omnia Nig. Ltd. [2000] 12N.W.L.R.(Pt. 680)8.

[17] Section 25(1) of the Patents and Designs Act provides that the rights of a patentee or design owner are infringed if another person, without the licence of the patentee or design owner, does or causes the doing of any act which that other person is precluded from doing under Sections 6 or 9 of the Act, as the case may be.

[18] Arewa Textiles Plc v. Finetex Ltd. [2003] 7 N.W.L.R. (Pt. 819) 322

[19] Beddings Holding Limited v INEC &5 Ors (2014) 3CLRN

[20] Section 13(3), Patents and Designs Act

[21]F.O. Babafemi, Intellectual Property: The law and Practice of Copyrights, Trademarks, Industrial Designs in Nigeria (1st edn, Justinian Books LTD. 2007) 350.

[22] Section 13(4), Patents and Designs Act

[23] Lindley J. in the case of Fox v. Kensington and Knightsbridge Electric Lighting Co. Ltd (1891) 8 R.P.C. 277, stated that “An invention is not the same thing as a discovery. When Volts discovered the effect of an electric current from the battery on a frog’s leg, he made a great discovery, but no patentable invention”.

[24] Section 27(2), Patents and Designs Act

[25] Section 22, Patents and Designs Act