It is usual for foreign technology that are not readily available in Nigeria to be transferred or licensed to a party in Nigeria. The transfer of foreign technology by a party abroad to a counterpart in Nigeria must satisfy important legal considerations as put in place by the applicable law which is the National Office for Technology Acquisition and Promotion Act, 1979 (“the Act”) which is being enforced by the National Office for Technology Acquisition and Promotion (NOTAP).
The transfer of foreign technology is regulated in Nigeria for the purpose of protecting national interests, ensure fair value for Nigerian counterparts in a foreign technology transfer agreement, promote local technology capability and control the outflow of foreign exchange.
What Constitutes Foreign Technology and Registrable Agreements
Foreign technology means technology invented, developed, or owned outside Nigeria and imported, transferred or licensed to a party in Nigeria. The transfer of technology from Nigeria to a counterpart outside Nigeria does not fall within the contemplation of the Act and therefore does not require registration with NOTAP.
The Act provides that every contract or agreement for the transfer of foreign technology to Nigerian parties is registrable if its purpose or intent is, wholly or partially, connected with any of the following:
- The use of trademarks
- The right to use patented inventions
- The supply of technical expertise in the form of the preparation of plans, diagram, operating manuals or any other form of technical assistance of any description whatsoever.
- The supply of basic or detailed engineering
- The supply of machinery and plant
- The provision of operating staff or managerial assistance and the training of personnel
- The monitoring, on a continuous basis, of the execution of any contract or agreement registered in accordance with the Act.
In practice, the above covers a wide arrange of commercial arrangements including software licensing, franchise agreements, management service agreements, consultancy agreements involving foreign expertise, technical know-how agreements, hotel management contracts, etc.
Registration and Consequences of Non-Registration
The registration of agreements or contracts transferring foreign technology to a counterpart in Nigeria is mandatory. The agreement must be submitted to NOTAP for registration no later than 30 days after the execution of the agreement by the parties. Where the agreement is presented for registration after 30 days, a penalty fee is usually applied in addition to other applicable registration fees. Upon presentation to NOTAP, the agreement would be reviewed by NOTAP and where it meets its requirements, it issues a certificate of registration.
NOTAP may exercise its discretion to refuse registration in cases where the technology is readily available in Nigeria, the price consideration is not commensurate with the market value of the technology, the agreement allows the foreign counterpart to have excessive control or unnecessary intervention in the Nigerian party’s operations, etc.
Non-registration of agreements transferring foreign technology into Nigeria is that no payment is allowed to be made in Nigeria to the credit of any person outside Nigeria by the authority if the Federal Ministry of Finance, the Central Bank of Nigeria, or any licensed Nigerian bank in respect of obligations under an unregistered registrable agreement, unless a certificate of registration is presented together with a certified copy of the agreement.
It is important to note that failure to register the agreement does not render the agreement illegal, null, void, or unenforceable between the parties but only prohibits the processing of payments to the foreign counterpart. Therefore, Nigerian banks will not process foreign exchange remittances for royalties, technical service fees, franchise fees, software license fees, or similar payments without NOTAP certificate of registration.
Conclusion
For foreign parties transferring foreign technology to Nigeria, it is important to take note of the foreign technology that is registrable with NOTAP and ensure that the technology transfer agreement is registered with NOTAP and a certificate of registration is issued by NOTAP.
The agreement must be drafted to ensure a balance between the interest of the foreign party and the Nigerian party to ensure that the agreement is accepted for registration by NOTAP. The agreement must also be presented for registration no later than 30 days after the execution of the agreement by the parties.
