CORPORATE AFFAIRS COMMISSION PROHIBITS DENOMINATION OF SHARE CAPITAL IN FOREIGN CURRENCY
The Corporate Affairs Commission (CAC) has prohibited entities seeking to do business in Nigeria from denominating their share capital in any currency other than the Nigerian Naira. Prior to this prohibition, the CAC permitted companies to denominate their share capital in foreign currencies, predominantly the United States Dollars.
The primary beneficiaries of a foreign currency denominated share capital were foreign entities who sought to do business in Nigeria as they preferred a currency they were familiar with and which enjoyed global recognition and more stability than the Naira.
It appears that the rationale for the prohibition of the denomination of share capital in foreign currency lies in the April 2015 circular of the Central Bank of Nigeria (CBN) titled “Currency Substitution and Dollarisation of the Nigerian Economy”, wherein the CBN reiterated that the Naira is the only legal tender in Nigeria.
The CBN in the circular had stated as follows:
“…it is illegal to price or denominate the cost of any product or service (Visible or Invisible) in any foreign currency in Nigeria and no business offer or acceptance should be consummated in Nigeria in any currency other than the Naira.”
Going forward, companies seeking to do business in Nigeria must have their share capital denominated in the Naira irrespective of the nationalities of its shareholders. However, it is not clear if companies already registered with share capital in foreign currency will be affected by this policy.