How to Set Up a Cooperative Society in Nigeria

Written By Christiana Charles-Iyoha 

 A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. (www.ica.coop).

 There are different types of cooperatives and they include:

1.  Primary cooperatives    - comprise natural persons.

2. Secondary cooperatives – group of cooperatives in a state, for example all the cooperatives in Lagos State under an umbrella.

3. Tertiary Cooperatives – the umbrella organization of cooperatives in a country for example, the Cooperative Federation of Nigeria

Primary cooperatives are further sub classified into:

• Multipurpose – is more of a group of companies. They are licensed to invest in any sector of the economy as well as operate as thrift and savings. (I suggest you go for multipurpose so you can carry out practically every legal activity within this platform).

• Thrift and Savings – mobilize savings within members and give loans to members. Some are quite daring as they give loans to non members at higher interest rates all in an attempt to increase the revenue base of the cooperative.

• Agricultural – limited to only agriculture. Usually a group or groups of farmers who come together to leverage agricultural loans.

• Housing – limited to providing housing at affordable rates to members.

Steps

1. The cooperative society must have at least ten or more natural persons as members.  XYZ that could be you or any interested person plus nine other members for a start. 

2. The cooperative society must have a name, for example Premium Thrift and Savings Cooperative; the Billionaires Multipurpose Cooperative

3. The cooperative society must write a letter of invitation for inauguration to the relevant cooperative office in your area.  Thereafter, officers from the Cooperative Area Office will visit your office for the inauguration, depending on the agreed time and date. All members of the cooperative especially the officers to be elected should be at the meeting.  In addition to being inaugurated, the members will be educated on how to run a cooperative.

The inauguration is a very vital process. It gives the cooperative society legal recognition by the government and consequently, formal registration depending on your performance. The registration at state level enables you to operate a wide range of membership drawn from anywhere in the globe.

4. The cooperative society must undergo a compulsory probationary period of six months.

5. The cooperative society must have a goal, for example – To become a prime multipurpose cooperative investing in and developing Nigeria as well as consolidating the financial and asset base of members.

6. The cooperative society must have a physical address – Depending on cost, choose a location that is easily accessible by members. For example, if more of your members are resident in a particular location, it will make sense to site the cooperative office in that location.

7. The cooperative society must have a fixed reasonable but regularly adjustable non-refundable entrance fees.  Entrance fees are very crucial.  They actually define membership of the cooperative. Any member who does not pay entrance fees is not a member. Entrance fees are used for inaugurating the society as well as administering the society. (I suggest N5, 000 if you are targeting high profile members.  A lower rate might discourage potential upwardly mobile members. However, entrance fees actually start from N1, 000 to any amount).

8. The cooperative society must have share subscriptions by members. All members must subscribe to shares and these can be spread over a period of time. This is usually the source of capital for investments and trading. (Depending on the financial profile of members, coupled with the goals and objectives, a cooperative society can have share subscriptions of between N100, 000 and N1, 000, 000.  This can be spread over a period of time and used for proposed investments.

9. The cooperative society must have monthly contribution, which is what members save up for at least six months to qualify them for loans.  Savings unlike entrance fees are refundable. – I suggest you peg your minimum monthly contribution at N1, 000.  That way, you will have a crop of members who can also contribute the share amount mentioned above.

10. Loans are usually double of whatever amount a member has saved up. This is usually the critical aspect of running a cooperative. Some members borrow and do not pay back.  Therefore, you will need to thoroughly scrutinize proposed members for financial credibility and integrity.

11. The Management Committee – Comprises the President, Secretary, Treasurer, Financial Secretary and Public Relations Officer.

12. As the cooperative grows, you will come up with other committees – loan, investment, disciplinary etc

Bank Accounts

I suggest two, one for entrance fees, and another for monthly contributions, share subscriptions and proceeds from investments. The catch is you open both a savings and a current account. Since the entrance fees are for inauguration and administrative purposes, I suggest you keep that in a savings account that has modules of a current account.

Lastly, the law stipulates that an Annual Statement should be prepared not later than 31^st March of the New Year succeeding the close of business on December 31^st.

You can visit any cooperative area office within your area for further enquiries on setting up a cooperative should you decide to do so.