Navigating the Legal Landscape: Essential Steps to Establishing an NGO in Nigeria
Every day, individuals across the country are inspired to start a nonprofit (non-governmental organisation) to help the needy and address causes they are passionate about with the ultimate aim of changing lives and improving communities. As with any endeavour starting a nonprofit requires some initial considerations including understanding the regulatory landscape for forming and operating one.
One distinction between a nonprofit and a business is that nonprofits are owned in trust. That is there is really no owner of a nonprofit. It is owned in trust by a collective (two or more individuals) usually called a Board of Directors or Trustees for the benefit of society. The Board are volunteers – not paid and should not be. This is an important aspect to understand as you plan to start a nonprofit organisation. As the founder, you can be recognised as one but not the owner. Another difference that should be emphasized is the non-profit nature of non-governmental organisations i.e. profits cannot be shared unlike businesses with shareholders, nonprofits have stakeholders.
Before formally registering a nonprofit, it is crucial to note that citizens have a right under the Nigerian constitution to set up initiatives or help the needy or vulnerable without registration. This right is called freedom of association. It guarantees the ability of citizens to come together and help themselves (cooperatives) or others (foundations or traditional nonprofits). However, if as an organisation you want to be able to receive grants, donations without paying tax 0n these incomes, enter into a contract in the organisations name, open a bank account for the organisation or benefit from other services provided by government such as waivers then registration is required.
Since the purpose of the nonprofit is what determines if it qualifies for registrations, there are few questions to consider.
- What is the problem or need we are trying to address?
- How are we going to address this?
- Are there organisations already doing this? If yes, what gaps remain?
- Do we have skills needed to run the organisation?
- Where will the money to run the organisation come from?
Do we really need to register or just support existing organisations? This is one big question that should be answered but not without a thorough evaluation of the landscape. Founding a nonprofit can be attractive but it comes with regulatory obligations. The following organisations and major laws are relevant*:
Regulatory Obligation | Organisation | Law |
Registration | Corporate Affairs Commission (CAC) | Companies and Allied Matters Act |
Tax | Federal Inland Revenue Service (FIRS) | Companies and Income Tax Act, Value Added Tax, Finance Act, Personal Income Tax Act, levies etc. |
Countering of terrorism financing and money laundering. | Special Control Unit on Money Laundering | Terrorism Finance Act Money Laundering Act |
Health Insurance | National Health Insurance Scheme | National Health Insurance Act |
Pensions | National Pensions Commission | National Pensions Act |
See https://nnngo.org/wp-content/uploads/2024/03/Civil-Society-Regulatory-Frameworks-in-Nigeria-Final.pdf for a comprehensive list of laws, there are about 53 laws, policies and regulations guiding the nonprofit sector in Nigeria.
For the above laws there are weekly, monthly, quarterly and annual submissions that are expected of a registered organisation. In essence once you register with these organisations there are reporting requirements that must be met failing which there are penalties under the law.
Now that you have an idea of the what the laws look like. Let us now discuss briefly the essential steps to founding a nonprofit. To start with, you will need a name. The name would have to be researched for availability on the CAC website. You also have the opportunity of reserving the name for 48 working days. While at this you will need to draft a mission and vision. This is important in articulating your organisation’s purpose.
To achieve the vision and mission, a structure is needed, this will need to be written out in what is called a constitution or Articles of Incorporation. In this document, you will need to state the governing structure, roles and how they will function. It is important that at this point you have already identified the Board members and that decisions on whether to register or not, development of vision and mission and drafting of the constitution are also done together with minutes of meetings properly documented as this will be needed as part of registrations (Board resolution to register). Included in the Constitution will also be clauses to dissolve the organisation if need be. As soon as this is ready, you are set to approach the CAC either through an accredited agent or self-service. Note that registrations are done online through the CAC portal. There are applicable fees to be paid.
To be conferred the nonprofit status, registration with the FIRS is important. For new organisations registering from 2023, a tax identification number (TIN) is automatically generated upon CAC registration, but organisations still need to visit any tax office close to their office for proper registration. As soon as the TIN number is available new organisations can then approach SCUML for registrations online. Without a SCUML certificate, a bank account in the name of the organisation cannot be opened. Once these three major registrations are completed, you are now ready to hit the ground running usually with volunteers. Remember though that as soon as you start having paid staffs, your will need to register with PENCOM and NHIS.
Guiding the activities of your Board will be the Code of Corporate Governance for Nonprofits which is now under consideration by the Financial Reporting Council and should be issued by the Minister of Trade soon.
In the meantime, have fun starting a nonprofit and thank you for offering to help!
This article is intended for general guidance only. While every effort has been made to provide accurate and current information at the time of publishing, the changing nature of laws, policies and regulations may mean that this material cannot be relied upon in specific situations. We recommend you consult with a lawyer on your legal needs where they arise. The author is not responsible for any errors or omissions.
About the author
Oyebisi, B. Oluseyi is an experienced Development Consultant and Executive Director of a national peak body for nonprofits- Nigeria Network of NGOs. He is an expert trainer and has provided training and capacity building to support national and international NGOs for more than two decades. He has successfully developed numerous projects and initiatives and secured funding from DFID (Now FCDO), USAID, European Union, Commonwealth Foundation, Open Society Foundation, Google, Meta, Techsoup and several high-profile grant-making foundations with combined value in excess of millions of dollars. A former Civicus Board member and current Board Secretary at the International Center for Not-for-Profit Law. He was on the Google Impact Challenge as a judge. He delivered the Google.org Master Class on Nonprofit Management at the 2021 Google for Africa event. Wrote the civil society index and philanthropy report for Nigeria and was recognised by UNICEF as the founder of the Rural Voices of Youth Initiative.