The cost of launching a startup in Lagos is very high as it’s the most expensive city in Africa. This is further compounded by the challenges of doing business in Nigeria.
From the 2020 World Bank Doing Business report, Lagos and Kano are Nigeria’s two largest business cities. The ease of doing business in Lagos has a 77 score while Kano has 23. The ease of business in Nigeria also contributed to this.
In 2020 Nigeria ranked 131 in the World Bank’s Doing Business report. This indicates an improvement compared to its 146 position in 2019 and 170 in 2016. Though the ease of business has improved in Nigeria, the cost of doing business has increased.
This invariably puts the cost of launching a startup in the country’s industrial hub: Lagos, on the high side. Despite this, startups are sprouting up every day in the city. If you are considering starting your business in this business-savvy state, here is what it will cost you to launch a startup in Lagos.
Corporate Affairs Commission (C.A.C.)
Having a C.A.C. is one of the steps to starting and owning a business. It is practised everywhere in the world. Consider a suitable business name and make a name reservation with the commission. This will cost ₦500. Choose the business name correctly as it is also your identity.
Afterwards, you can proceed with your registration. A company with over ₦1 million share capital will pay a fee of ₦10,000 per ₦1 million share.
For a non-indigenous company, your business must have at least ₦10 million shares. This must be within twenty-eight days of launching the business.
In Lagos, you pay rent for any form of business. This includes hawking. Some rented space fees are to the state government or private property owners. The high demand for business and living space also increased fees. This made some businesses cohabit in the same room to reduce business expenses. Notwithstanding, it remains expensive.
Before renting your business space in Lagos, you must consider the area or location. In Nigeria, the cost of renting a business space varies from one place to another. Here is a yearly breakdown of the fees for some viable business locations in Lagos. Ikeja (₦3-₦3.5million), Yaba (₦2-₦3million), Lagos Island (₦3-₦4million), Ebute Meta (₦400-₦1million), and Gbagada (₦800-₦1.3million).
For space sharing, location is also essential. For instance, in Lekki, for business space sharing, the least fee is ₦50,000 a month per person. Some can also be ₦500,000 per month. In Yaba, a coworking space costs between ₦75,000-₦150,000 quarterly. You can also check out Co-Creation Hub if you are considering workplace sharing.
This will be given to you after the registration of your business. Afterwards, you will register for the Value Added Tax and Withholding Tax at the Federal Inland Revenue Service (FIRS) office.
Businesses with over ₦100 million yearly pay 30% tax, while revenues that are ₦25 million – ₦100 million are 20%. Those with less than ₦25 million yearly are exempted.
The Lagos Internal Revenue Service is in charge of tax collection in Lagos. The tax rate is the same for both Nigerians and non-Nigerians. The tax depends on the business’s revenue. It is 7% while people earning above ₦3.2 million pay 24%.
In the case of a non-Nigerian, you must also register with Nigeria Investment Promotion Commission (NIPC). The body helps facilitate foreign investment: registration costs ₦15,000. Also, as a foreigner, you must apply for a business permit from the Ministry of Interior. This can take about two months.
On the side of miscellaneous expenses, the unstable electricity in the country means you’ll need to factor in the price of industrial generators, inverters, solar power, and others.