Nonprofit organizations in Nigeria continue to record progressive growth in their response to charitable causes. Nigeria is a federal republic nation and the laws guiding the various types of nonprofits come from the English common law. This is largely resulting from being a former British colony. With charities having historic roots in British charitable practices and common law, Nigerian nonprofits are primarily shaped by the English legal tradition.
Also, charitable giving has evolved over time from individual charitable acts to corporate philanthropy e.g. corporate social responsibility. These nonprofits are predominantly established by church leaders, wealthy capitalists, individuals, artists, and even actors.
In this article, we will outline the types of nonprofits in Nigeria as well as the statutory laws governing their work.
- Charity in Nigeria is said to have historic roots in the charitable practices and common law of the Britain nation
- Nigeria has over 500,000 nonprofit firms. However, less than 100,000 are registered with the Corporate Affairs Commission (CAC)
- Nonprofits are not properly accounted for as a nation due to the lack of inadequate resources, information and statistics
Nonprofit organizations in Nigeria continue to record progressive growth in their response to charitable causes. Nigeria is a federal republic nation and the laws guiding the various types of nonprofits come from the English common law. This is largely resulting from being a former British colony. With charities having historic roots in British charitable practices and common law, Nigerian nonprofits are primarily shaped by the English legal tradition.
Also, charitable giving has evolved over time from individual charitable acts to corporate philanthropy e.g. corporate social responsibility. These nonprofits are predominantly established by church leaders, wealthy capitalists, individuals, artists, and even actors.
In this article, we will outline the types of nonprofits in Nigeria as well as the statutory laws governing their work.
What are the types of Nonprofits in Nigeria?
The various types of nonprofits in the country are governed by statutory laws. This comprises both associations with incorporated trustees and companies limited by guarantee. The two other recognized nonprofit entities are common law charitable trusts and unincorporated associations. We will provide a brief outline of these various nonprofits.
1. Association with Incorporated Trustees
These types of nonprofits are formed by an association of persons which appoints one or more trustees. Charitable entities under this act must be registered under Part F of the Companies and Allied Matters Act (CAMA) 2020. The trustees after registration are granted perpetual succession. They are also granted the power to sue and be sued on behalf of the organization as a corporate body.
Two forms of associations exist within the incorporated trustees. In the first form, the trustees are elected by any community of persons connected by customs, religion, kinship or nationality. The trustees in the second form are elected either by a person or association of persons created for any religious, educational, literary, scientific, social, cultural, or charitable purpose.
2. Company Limited by Guarantee
These types of nonprofits are formed to foster commerce, art, science, religion, sports, culture, education, research, and charity, among others in the country. The company uses its income and property to promote its objectives. Neither the income nor property of the company can be paid or transferred both directly or indirectly to company members unless permitted by CAMA (Companies and Allied Matters Act.)
3. Common Law Charitable Trust
Nigeria also practices unincorporated charitable trusts formed under traditional common law rules. A trust may be established either by the settlor inter vivos or by testamentary will.
4. Unincorporated Association
The Constitution of the Federal Republic of Nigeria also makes room for these types of nonprofits. It states that “Every person shall be entitled to assemble freely and associate with other persons, and in particular he may form or belong to … any association for the protection of his interests” (Constitution of the Federal Republic of Nigeria Section 40).
There are however specific restraints which are contained in Section 45 of the Constitution of the Federal Republic of Nigeria). As an unincorporated association, these nonprofits are not required to pay tax benefits.
As a liberal state, Nigeria grants its citizens as well as foreigners the permission to form, register, manage and run entities in the country. A foreigner is also given the freedom to register and own a corporate entity in the country without being a citizen. This makes Nigeria one of the few countries in Africa that grant such privileges.
What types of nonprofits are exempted from tax deductions?
Certain types of nonprofits are exempted from income tax. The Companies Income Tax Act exempts corporations engaged in public benefit activities from tax deductions. This includes
- The profits of charitable companies involved in ecclesiastical, liberal, or educational activities. This holds if the profits are not gotten through trade or business operations.
- The profits of any company created to promote sporting activities as far as these profits are solely deployed to foster such purposes.
Tax-deductible donations on the other hand are made to public benefits organizations listed in the Fifth Schedule of CITA. Individual donations are also not tax-deductible. Not-for-profit companies are however required to pay value-added tax (VAT).
Companies limited by guarantee may choose to apply to the President for an order absorbing them from whatever profits from any source.
How Many Nonprofit Entities are in Nigeria?
The National Bureau of Statistics reported that Nigeria has over 500,000 nonprofit firms. However, less than 100,000 are registered with the Corporate Affairs Commission (CAC). NBS also disclosed in its report that the sector contributed over 0.5% to the country’s Gross Domestic Product (GDP).
Conclusion
Over the years, Nigeria has witnessed an increase in the growth and number of charities. The various types of nonprofits in the country are primarily established by both individuals and organizations. These charity organizations are propelled by the need to solve some of the societal issues prevalent in the country.
However, the sector cannot be properly accounted for as a nation due to inadequate resources, information and statistics. Few research organizations and media platforms provide extensive information on the nonprofit industry in the country. This creates a haphazard system that may stand as an impediment to the growth of nonprofits in Nigeria.
The critical role of nonprofits can be seen in their capacity to create and foster the growth and advancement of a nation. This sector can not be ignored if Nigeria seeks to establish a robust economic and social system.
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