How to Buy a Business In Nigeria and the Due Diligence Checklist

Nigeria’s economy presents a mix of opportunities and challenges for entrepreneurs. Rather than starting from scratch, many are exploring how to buy a business in Nigeria to gain access to established customers, proven operations, and brand recognition. However, acquiring an existing company requires careful planning, legal compliance, and strategic execution. This article provides a step-by-step guide to help you navigate the process of buying a business in Nigeria and the requisite due diligence you need to carry out.

First Steps in Buying a Business

1. Understand Why You Want to Buy a Business

Before diving in, define your motivation:

• To enter a new industry quickly.
• To expand your existing company’s market share.
• To acquire technology, intellectual property, or distribution channels.
• To diversify your investments.

Why is this step important? Because having clarity will guide your search and negotiation strategy.

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2. Identify the Right Business Opportunities

Sources for acquisition targets in Nigeria include:

• Business brokers and M&A advisers who connect sellers and buyers.
• Networking within industries, chambers of commerce, and trade associations.
• Online platforms where SMEs list their businesses for sale.
• Direct outreach to businesses that fit your criteria.

Focus on industries that are resilient in Nigeria’s current environment, such as fintech, agriculture, FMCG, healthcare, logistics, and renewable energy.

3. Conduct Preliminary Screening

When evaluating potential businesses:

• Review their financial performance over the past 3–5 years.
• Assess brand reputation, market share, and customer loyalty.
• Consider operational risks (supply chain, staffing, technology).
• Check for regulatory exposure (CBN, NCC, NERC, NUPRC, etc.).

4. Perform Due Diligence

Due diligence is critical when buying a business in Nigeria. Key checks include:

• Corporate records — CAC filings, share registers, Articles of Association.
• Financial health — audited accounts, tax compliance, outstanding loans.
• Contracts — customer, supplier, and employee agreements.
• Intellectual property — registered trademarks, patents, and licences.
• Legal risks — pending litigation, regulatory breaches, or fines.
• Assets — land titles, equipment ownership, inventory accuracy.

Engage a legal, tax, and financial adviser to help uncover hidden liabilities.

5. Value the Business

Valuation methods in Nigeria include:

• Discounted Cash Flow (DCF) — projects future earnings and discounts them to present value.
• Comparable multiples — based on similar businesses recently sold.
• Asset-based valuation — assesses tangible and intangible assets.
• Balance Sheet Valuation – using the balance sheet value as the basis for the valuation
• Market assumptions – using market information as a basis for the valuation

Work with valuation experts to ensure you’re not overpaying.

6. Structure the Deal

When buying a business, deal structure is crucial:

• Share purchase — you acquire the entire company, including liabilities.
• Asset purchase — you buy selected assets without assuming all debts.
• Joint venture or partial stake — useful if the seller wants to remain involved.
• License purchase – In the case of financial institutions you have the option of buying jut the operating license while leaving out the assets and liabilities

Negotiate terms such as price, payment method (cash, deferred, or earn-outs), and post-sale commitments from the seller.

7. Navigate Tax and Regulatory Issues

• Nigeria’s Capital Gains Tax (CGT), VAT, and withholding tax rules under the 2025 Nigeria Tax Act will affect your acquisition.
• Sector-specific approvals may be required (e.g., CBN for banks, NCC for telecoms, NERC for power).
• Stamp duties may apply to transaction documents.

Consult a tax adviser to structure the deal in a tax-efficient way.

8. Negotiate and Sign Agreements

The key document is the Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA). It should cover:

• Purchase price and payment structure.
• Warranties and indemnities from the seller.
• Non-compete clauses.
• Employee transition and retention plans.
• Closing conditions and post-closing obligations.

9. Closing and Transfer

• Obtain board and shareholder approvals.
• Register share transfers or changes at the Corporate Affairs Commission (CAC).
• Notify and secure approvals from regulators (where necessary).
• Update contracts, bank mandates, and public records.

10. Post-Acquisition Integration

Buying a business is just the beginning. Success depends on:

• Smooth integration of staff, processes, and culture.
• Retaining key employees and customers.
• Aligning technology systems and compliance processes.
• Monitoring performance against the acquisition plan.

Common Mistakes to Avoid when buying a business

• Skipping due diligence to save time or money.
• Overpaying due to inflated seller expectations.
• Ignoring sector-specific regulatory approvals.
• Neglecting tax implications under the new 2025 reforms.
• Failing to plan for post-acquisition integration.

Buying a business in Nigeria in 2025 can be a faster and less risky route to growth than starting one from scratch. However, it requires thorough due diligence, sound valuation, and expert legal and tax advice. With the right guidance, you can acquire a profitable, well-structured company that provides immediate returns and long-term growth potential.

Due Diligence Check List for Buying a Business in Nigeria

1. Corporate & Legal Records

• Certificate of Incorporation and CAC filings (Annual Returns, changes in directors/shareholders).
• Updated Memorandum & Articles of Association.
• Share register (confirm who legally owns the company).
• Board resolutions and shareholder approvals.
• Licences, permits, and sector-specific approvals (CBN, NCC, NERC, NUPRC, NAFDAC, SON, etc.).
• Litigation history — pending, ongoing, or threatened cases.
• Intellectual property registrations (trademarks, patents, copyrights).

2. Financial Records

• Audited accounts for past 3–5 years.
• Management accounts (latest YTD).
• Bank statements and reconciliations.
• Loan agreements, overdrafts, security documents, guarantees.
• Fixed assets register and depreciation schedules.
• Inventory records (with valuation methods).
• Evidence of hidden or off-balance sheet liabilities.

3. Tax Compliance

• Tax Identification Number (TIN).
• Tax clearance certificates (last 3 years).
• VAT, PAYE, WHT, and Company Income Tax filings.
• Records of Capital Gains Tax (if past disposals occurred).
• Any unresolved disputes with FIRS or state tax authorities.
• Compliance with new 2025 Nigeria Tax Act provisions.

4. Commercial & Contracts

• Major customer and supplier contracts (duration, renewal, termination clauses).
• Franchise, distribution, or agency agreements.
• Lease agreements for offices, factories, or warehouses.
• Partnership or joint venture contracts.
• NDAs, MOUs, Heads of Terms with third parties.
• Warranty or indemnity obligations still outstanding.

5. Employment & HR

• List of employees, salaries, benefits, tenure, and positions.
• Employment contracts and offer letters.
• Pension compliance (PenCom) and contributions.
• Industrial Training Fund (ITF), NSITF compliance.
• Staff disputes, union agreements, or claims.

6. Assets & Operations

• Property ownership (C of O, Deeds of Assignment, Survey Plans).
• Vehicle logbooks and licences.
• Plant, machinery, and equipment records (condition and ownership).
• IT systems, licences, and cybersecurity practices.
• Insurance policies and claims history.
• Environmental and safety compliance documents.

7. Market & Commercial Risks

• Competitive positioning (market share, growth trends).
• Customer concentration (dependency on few large clients).
• Supplier concentration and risks.
• Reputation checks (press, social media, industry feedback).

8. Integration & Transition

• Handover arrangements from seller (training, support period).
• Non-compete agreements with seller and key staff.
• Retention of key employees (especially managers).
• Change of control clauses in contracts (triggered if ownership changes).

Questions Buyers Should Ask the Seller

1. Why are you selling the business now?
2. What are the biggest risks facing the business in the next 12–24 months?
3. Are there any debts, liabilities, or disputes not recorded in the accounts?
4. What approvals will I need from regulators to take over operations?
5. Will you provide transitional support after the sale?

Pro tip: Ask for digital data room access (Dropbox, Google Drive, or a professional platform) so you can review all documents systematically and flag missing items.