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U.S. Department of State

Diplomacy in Action

2011 Investment Climate Statement - Nigeria


2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report
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Overview of Foreign Investment Climate

Nigeria is Africa's most populous nation with an estimated population of over 150 million. It offers investors abundant natural resources, a low-cost labor pool, and potentially the largest domestic market in sub-Saharan Africa. Despite these advantages, much of that market potential remains unrealized. Impediments to investment include delays in the passage of announced legislative reforms and the drafting of related implementing regulations, an inefficient property registration system, restrictive trade policies, inadequate infrastructure, arbitrary policy changes, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, and corruption.

Potential investors will need to understand the corruption risk involved in the Nigerian business environment and develop anti-bribery compliance programs that involve local staff and Nigerian partners. In at least three prominent cases between 2008 and 2010, local companies or government officials manipulated the judicial system or law enforcement agencies to exert undue pressure on international companies for commercial or personal advantage. In all three cases, Nigerian courts issued arrest warrants for senior private-sector officials, and Nigerian law enforcement agencies detained the officials with the understanding that such cases would end if they met certain conditions. The U.S. and other parties to the OECD Anti-Bribery Convention have more aggressively enforced anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act (FCPA). In 2010, two high-profile FCPA cases, involving bribes to Nigerian officials, led to the arrest of senior officials of these and other international companies. Addressing these due process issues – and other concerns listed in the World Bank’s “Doing Business” report – would encourage greater U.S. investment in Nigeria.

Potential investors will also need to cope with absent or poorly maintained power, telephone, water, road, and port infrastructure. Many investors must provide their own power, water, and access roads, and this situation undercuts local and international competitiveness. The deterioration in the state-owned, fixed-line telephone system has become so severe that only an estimated 15,000 fixed telephone lines function in the country, compared to an estimated 75 million cellular telephone lines. Most business operations employ cellular telephone or wireless Internet connections, although high-speed broadband connections are beginning to become more available in Lagos.

Security remains of special concern due to high rates of violent crime, kidnapping for ransom, and terrorism. Kidnapping for ransom has expanded beyond the Niger Delta where it originated to most of Nigeria’s southern states. A government amnesty contributed to a significant decline in attacks on oil installations and the associated kidnappings in the oil-rich Niger Delta region. However, attacks on off-shore oil platforms resumed in late 2010 that led to the kidnapping and/or injury and eventual release of three U.S. oil workers. Earlier in the year, a vehicle borne improvised explosive device disrupted a meeting of Niger Delta state Governors, killing bystanders. A smaller bomb subsequently exploded in the Niger Delta Development Corporation offices in Warri. Two car bombs linked with an alleged militant group spokesperson exploded during Nigeria’s fiftieth anniversary celebrations in the capital, Abuja, on October 1, killing twelve persons and injuring scores of others. Inadequate law enforcement compounds the country's high violent crime rate, kidnapping, terrorism, and sporadic outbreaks of communal violence due to ethnic and religious conflicts.

Military rule ended with the inauguration of a civilian administration in May 1999. Nigeria conducted its last general elections in April 2007, resulting in a civilian-to-civilian hand-over of power from former President Olusegun Obasanjo to President Umar Musa Yar'Adua. However, significant irregularities marred the presidential, gubernatorial, and national assembly elections, with many political candidates challenging the results in electoral tribunals and courts. The Supreme Court in December 2008 upheld President Yar'Adua's election. The courts overturned the announced results in nine of the 36 governors’ races, are still responding to appeals in two additional cases, and forced re-runs in others.

Dr. Goodluck Jonathan took the oath of office as Nigeria’s fourteenth Head of State on May 6, 2010, following the death of President Umaru Musa Yar’adua. Jonathan’s peaceful succession to the presidency ended several months of uncertainty during Yar’adua’s prolonged illness and absence from the country for medical treatment. The Nigerian military remained loyal to civilian rule and an orderly, democratic transition. National elections will occur in April 2011.

The Nigerian government (GON) embarked on a medium-term economic reform program in late 2003 called the National Economic Empowerment and Development Strategy (NEEDS) for 2003-2007. NEEDS focused on privatization, good governance, macroeconomic stability, anti-corruption, and public service reforms. The GON modified NEEDS to incorporate late President Yar'Adua's "Seven Point Agenda," which focused on power and energy, food security and agriculture, wealth creation and employment, mass transportation, land reform, security, and education. The GON has also embarked on an economic reform program christened “Vision 20:2020,” which aims to make Nigeria one of the top twenty economies in the world by the year 2020. President Jonathan has further modified the “Seven Point Agenda” to concentrate on the increased delivery of reliable power.

The GON also plans to reform how oil and gas business is conducted in Nigeria. In 2009, the GON introduced the Petroleum Industry Bill (PIB), which seeks to reform the oil and gas industry, deregulate the downstream sector, and introduce a formal mid-stream sector. Key industry concerns on the PIB include reasonable return-on-investments for shareholders vis-a-vis government take; protection for existing investments and agreements; and funding for mandated joint ventures. The uncertainty surrounding the PIB and the GON’s perceived unwillingness to amend certain parts of the Bill have contributed to a suspension of major new investments in Nigeria’s oil and gas sector. The PIB may not gain approval until early 2011. Failure to pass the Bill before the elections in April could lead to substantial additional delays.

Freedom of expression and the press is broadly observed, although most publications practice self-censorship on sensitive issues. The country's overall human rights record remains poor.

Nigeria’s Selected Indices and Rankings

The following table indicates Nigeria’s ranking according to various metrics of transparency and good governance in 2010:

Measure Index and Associated Ranking

Transparency International Corruption Index – 134

Heritage Economic Freedom Index – 106 (World); 15 (Region)

World Bank Doing Business Index – 137

MCC Govt. Effectiveness – 32%

MCC Rule of Law – 26%

MCC Control of Corruption – 37%

MCC Fiscal Policy – 80%

MCC Trade Policy – 45%

MCC Regulatory Quality – 52%

MCC Business Start-up – 42%

MCC Land Rights Access – 7%

MCC Natural Resources Management – 33%

Openness to Foreign Investment

The GON seeks foreign investment and has implemented various reforms to attract such investment. GON officials have loosened controls over foreign investment and have repealed or amended earlier military government decrees inhibiting competition or conferring monopoly powers on public enterprises. The protectionist tradition remains strong despite these actions, with trade policy remaining inconsistent and the GON prohibiting the importation of some goods, ostensibly to foster domestic production. The GON enacted the Domestic Content Act (LCA) in 2010 to further support domestic production. The LCA requires oil and gas production and service companies to use local resources for the delivery of some goods and services that are currently sourced from outside the country. Concerns about the LCA include its restrictive trade practices in violation of WTO agreements as well as technology transfer requirements that would violate a company’s intellectual property rights. Many local companies established to take advantage of the greater local participation provided for by the LCA have now suffered due to lack of new contracts caused by the delay in approving the PIB.

Legal Framework: The Nigerian Investment Promotion Commission (NIPC) Decree of 1995 allows 100-percent foreign ownership of firms outside the petroleum sector, where investment is limited to existing joint ventures or production-sharing agreements. Industries considered crucial to national security, such as firearms, ammunition, and military and paramilitary apparel, are reserved for domestic investors. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990. The decree prohibits the nationalization or expropriation of foreign enterprises, except in cases of national interest.

Nigerian laws apply equally to domestic and foreign investors. These laws include, the Nigerian Content Development in Oil and Gas Industry Act of 2009; Nigerian Minerals and Mining Act of 2007; Nigeria Extractive Industries Transparency Initiative (NEITI) Act of 2007; Central Bank of Nigeria Act of 2007, Electric Power Sector Reform Act of 2005; Money Laundering Act of 2003, Securities and Exchange Act of 1999, Foreign Exchange Act of 1995, Banking and Other Financial Institutions Act of 1991, and National Office of Technology Acquisition and Promotion Act of 1979.

Privatization: The Privatization and Commercialization Act of 1999 established the National Council on Privatization, the policymaking body overseeing the privatization of state-owned enterprises (SOEs), and the Bureau of Public Enterprises (BPE), the implementing agency for the designation privatizations. The BPE has focused on the privatization of key sectors, including telecommunications and power, and calls for core investors to acquire controlling shares in formerly state-owned enterprises. The BPE has raised over $4 billion since 1999 by privatizing and granting concessions for more than 140 enterprises, including cement manufacturing firms, hotels, a petrochemical plant, aviation cargo handling companies, and vehicle assembly plants. The Infrastructure Concession Regulatory Commission (ICRC), inaugurated in 2008, seeks to identify greenfield projects for the granting of concessions. The GON granted a concession for the Lagos-Ibadan Expressway, a major highway in the southwestern part of the country, to Bi-Courtney Highway Services under a Design-Build-Operate-Transfer scheme for 25 years. The GON also plans to use a Public-Private-Partnership Framework for future infrastructure construction.

The Power Sector Reform Bill of 2005 created the Nigerian Electricity Regulatory Commission (NERC), a power regulator with responsibility for tariff regulation and economic and technical regulation of the electricity supply industry. The NERC has issued 34 licenses to Independent Power Producers. A Multi-Year Tariff Order (MYTO) for the determination of tariffs for electricity generation, transmission, and distribution was implemented July 1, 2008. The Electric Power Sector Reform Act of 2005 has not been fully implemented. President Jonathan, however, removed many of the major roadblocks to implementation after he declared himself Minister of Power in 2010. The formal “road map” for the power sector establishes: market-based ratemaking; privatization of electricity distribution companies and generating plants; a bulk electricity purchaser; the commercialization of the national transmission company; a partial risk guarantee of a proposed $500 million sovereign wealth fund; and the Nigerian Electricity Liability Management Company (NELCOM). NELCOM is already completing the process of taking over the Power Holding Company of Nigeria’s (PHCN) stranded assets and liabilities. The GON also released $380 million in 2010 to cover PHCN liabilities.

The GON has substantially opened Nigeria's telecommunications sector. The Telecommunications Act of 2001 authorizes the Nigerian Communications Commission (NCC) to issue licenses to existing and prospective service providers. Nigeria’s state-owned telecommunications operator, Nigerian Telecommunications Limited’s (NITEL) mobile subsidiary, MTEL, and four private companies, MTN, Airtel, Globacom, and Etisalat, have mobile licenses. Globacom won mobile, fixed, and international gateway licenses as Nigeria's second national telecommunications operator in mid-2002. According to the NCC, the estimated total number of phone lines (both mobile and fixed line) in Nigeria at the end of August 2010 was 81.9 million with a teledensity of 58.52. This is an improvement from the September 2009 figure of 70.3 million lines and a teledensity of 50.24. The NCC awarded licenses for the 2.3GHz spectrum, through a competitive bidding process in May 2009, but later cancelled such licenses due to alleged violations of administrative procedures. The NCC will initiate a fresh bidding round, with full details expected soon. The NCC awarded three carriers in the 800MHz spectrum band to Visafone Communications in a competitive auction process in July 2007 that included Visafone Communications, GiCell Wireless Limited, Multilinks Telecommunication Limited, and TC Africa Telecoms Network Limited. Four licenses for a 10MHz lot in the 2GHz spectrum were also issued to Alheri Engineering Co. Limited, Celtel Nigeria Limited, Globacom Limited, and MTN Nigeria Communications Limited in March 2007.

The GON made a third attempt at privatizing NITEL and MTEL in February 2009. The preferred bidder, New Generations Telecommunications consortium, led by the Nigerian firm GiCell and reportedly including China Unicom of Hong Kong and Minerva Group of Dubai, missed the deadline for making its 30 percent or USD750 million down payment on November 4. This payment was to be followed in 60 days by the final payment or balance of USD1.75 billion for a total purchase price of USD2.5 billion. The GON granted New Generations Telecommunications a 20-day extension on November 5 after it had requested for a 30-day extension shortly before the expiration of the deadline. The GON had earlier made unsuccessful attempts to privatize NITEL in 2001 when the preferred bidder, Investors International Limited of London failed to pay its bid price of USD1.317 billion, and in 2006 when the preferred bidder, Transnational Corporation (Transcorp) could not come up with USD750 million needed to acquire 75 percent of NITEL.

The NCC commenced the unified licensing regime in May 2006, awarding the first batch of unified licenses to four telecommunications service providers. The unified license permits telecommunications companies to offer services across-the-board in telecommunications, including fixed line, wireless, data services, and so forth. This licensing regime marks the end of the five-year exclusivity incentive granted the mobile telephone licensees in 2001. Telecommunications deregulation has led to the issuance of licenses for fixed wireless networks, internet services, and VSAT (very small aperture terminal) satellite telecommunications equipment services. However, the GON's hefty fees and infrastructure deficiencies, such as inadequate power supply, slow the impact and implementation of these technologies.

The ICT sector received a boost in 2010 when two broadband cables, from Glo-One and MainOne, landed in Lagos. Current bandwidth in Nigeria is through the SAT-3 cable of 350 gigabits. The Glo-One and MainOne cables will increase the broadband capacity by 2.5 terabits and 1.92 terabits, respectively, for a total of almost 4.77 terabits for the entire country. Both cables provide broadband data and internet capacity, which will increase the country's Internet density and capacity. They are expected to reduce the cost of broadband to a fraction of the current cost. A fourth broadband cable, WACCS, a consortium of 13 companies led by MTN, will likely land in Lagos in early 2011, increasing broadband capacity by an additional 5.12 terabits, bringing total capacity to 9.89 terabits.

The GON has worked hard to modernize and open the civil aviation sector. The GON signed the U.S.-Nigeria Air Transport (Open Skies) Agreement in 2000. The GON signed a U.S.-Nigeria Airs Marshals Memorandum of Understanding in April 2010 authorizing the introduction of U.S. Air Marshals on U.S. flights to and from Nigeria. Shortly thereafter, the Nigerian Civil Aviation Authority earned U.S. Federal Aviation Administration Category 1 flight safety status in August 2010. This designation will allow domestic airlines to operate their own flights between Nigeria and the United States. Finally, the Ministry of Aviation has authorized additional U.S. airlines to operate new routes between the U.S. and Nigeria. As a result of these security, safety, and commercial developments, direct flights will exist between four major cities in the U.S. and Nigeria, facilitating increased trade, investment, and tourism in 2011 and beyond.

Conversion and Transfer Policies

The Foreign Exchange Monitoring Decree of 1995 opened Nigeria's foreign exchange market. Nigeria adopted a Wholesale Dutch Auction System (WDAS) in February 2006, in accordance with its plan to liberalize the foreign exchange market. The WDAS provides greater control of the foreign exchange market, although the Central Bank still retains its supervisory role over the market.

Foreign companies and individuals can hold non-naira-denominated accounts in domestic banks. Account holders have unlimited use of these funds, and foreign investors are allowed unfettered repatriation of capital. There is a $4,000 quarterly Personal Travel Allowance for foreign exchange and a $5,000 quarterly Business Travel Allowance per individual for naira-denominated accounts. Foreign exchange for travel is usually issued in cash by commercial banks while some authorized dealers also issue pre-paid credit cards for use on ATM machines worldwide. Purchase of foreign exchange for business purposes, such as for importing equipment and raw materials, and for paying school fees abroad, must be routed through banks, Nigeria’s only licensed foreign exchange agents. This can only be done with proper documentation, such as filling out the Form M and presenting copies of the certificate of incorporation of the company.

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10 percent withholding tax). Companies must provide evidence of income earned and taxes paid before receiving remittances from Nigeria. Money transfers usually take not more than 48 hours if the necessary documentation is provided. The law requires all transfers to be made through banks.

Expropriation and Compensation

The GON has not expropriated or nationalized foreign assets since the late 1970s. A U.S.-owned waste management investment expropriated by Abia State remains the only known U.S. expropriation case in Nigeria.

Dispute Settlement

Investment Disputes: Nigeria's civil courts handle disputes between foreign investors and the GON as well as between foreign investors and Nigerian businesses. The courts occasionally rule against the GON. However, the settlements in these cases are not always expeditiously paid. Nigerian law allows the enforcement of foreign judgments after proper hearings in Nigerian courts. Plaintiffs receive monetary judgments in the currency specified in their claims. A U.S. supplier of fuel for the Nigeria Airways state airline, which went into liquidation in 1997, received full payment for its share of the liquidated assets in August 2010. The Nigerian legal system took a long time to resolve this case, but the U.S. supplier expressed satisfaction with the outcome.

Legal System: Nigeria has a complex, three-tiered legal system composed of English common law, Islamic law, and Nigerian customary law. Most business transactions are governed by "common law," as modified by statutes to meet local demands and conditions. The Supreme Court sits at the pinnacle of the judicial system and has original and appellate jurisdiction in specific constitutional, civil, and criminal matters as prescribed by Nigeria's Constitution. The Federal High Court has jurisdiction over revenue matters, admiralty law, banking, foreign exchange, other currency and monetary or fiscal matters, and lawsuits to which the federal government or any of its agencies are party. The Nigerian court system does not have enough court facilities, lacks computerized document-processing systems, and poorly remunerates judges and other court officials, all of which encourages corruption and undermines enforcement. Debtors and creditors rarely have recourse to Nigeria's pre-independence bankruptcy law. Entrepreneurs generally do not seek bankruptcy protection in Nigeria’s business culture. Claims often go unpaid, even in cases where creditors obtain a judgment against defendants. A U.S. financial institution in Nigeria has been involved in a ten-year legal dispute with a former client. The U.S. financial institution has won three separate civil judgments against the former client and is still defending itself against a criminal case brought by a former Attorney General on behalf of the former client.

The public increasingly resorts to the court system and is more willing to litigate and seek redress. However, use of the courts does not automatically imply fair or impartial judgments. The World Bank's publication, "Doing Business 2011," which surveyed 183 countries, ranked Nigeria 97 out of 183 countries on the enforcement of contracts, compared with its 2010 ranking of 94 out of 183 countries surveyed. In addition, the report revealed that contract enforcement required 40 procedures spanning an average of 457 days and a cost averaging 32 percent of the value of the contract, compared to contract enforcement in OECD countries that required 30.6 procedures spanning an average of 517.5 days and averaging 19.2 percent of the cost of the contract, and sub-Saharan African countries that required 39.1 procedures spanning an average of 639 days and averaging 50 percent of the contract. The average time to enforce a contract is somewhat better than that for OECD countries, but the average cost of the value of the contract is almost twice that for OECD countries.

Alternative Dispute Resolution: The Arbitration and Conciliation Act of 1988 (the Act) provides for a unified and straightforward legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation. The Act created internationally competitive arbitration mechanisms, established proceeding schedules, provided for the application of the UNCITRAL (United Nations Commission on International Trade Law) arbitration rules or any other international arbitration rule acceptable to the parties, and made the Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention) applicable to contract enforcement, based on reciprocity. The Act allows parties to challenge arbitrators, provides that an arbitration tribunal shall ensure that the parties are accorded equal treatment, and ensures that each party has full opportunity to present its case.

Performance Requirements/Incentives

Nigeria regulates investment in line with the World Trade Organization's Trade-Related Investment Measures (TRIMS) Agreement. Foreign companies operate successfully in Nigeria's service sector, including telecommunications, accounting, insurance, banking, and advertising. The Securities and Exchange Act of 1988, amended and renamed the Investment and Securities Act in 1999, forbids monopolies, insider trading, and unfair practices in securities dealings.

To meet performance requirements, foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the Corporate Affairs Commission, procure appropriate business permits, and register with the Securities and Exchange Commission (SEC), when applicable. Manufacturing companies sometimes must meet local content requirements. Expatriate personnel do not require work permits but remain subject to "needs quotas" requiring them to obtain residence permits that allow salary remittances abroad. Larger quotas exist for professions deemed in short supply, such as deepwater oilfield divers. U.S. companies often report problems obtaining quota permits. The Local Content Act of 2009 restricts the number of expatriate managers to five percent of the total number of personnel for companies in the oil and gas sector.

The GON maintains many different and overlapping incentive schemes. The Industrial Development/Income Tax Relief Act Number 22 of 1971, amended in 1988, provides incentives to pioneer industries deemed beneficial to Nigeria's economic development and to labor-intensive industries, such as apparel. Companies that receive pioneer status may benefit from a non-renewable, 100-percent tax holiday of five years (seven years, if the company is located in an economically-disadvantaged area). Industries that use 60 to 80 percent of local raw materials in production may benefit from a 30-percent tax concession for five years, and investments employing labor-intensive modes of production may enjoy a 15-percent tax concession for five years. Additional incentives exist for the natural gas sector, including allowances for capital investments and tax-deductible interest on loans. The GON encourages foreign investment in agriculture, mining and mineral extraction (non-oil), oil and gas, and the export sector. In practice, these incentive programs meet with varying degrees of success.

Technology Transfer Requirements: The National Office of Industrial Property Act of 1979 established the National Office of Technology Acquisition and Promotion (NOTAP) to facilitate the acquisition, development, and promotion of foreign and indigenous technologies. NOTAP registers commercial contracts and agreements dealing with the transfer of foreign technology and ensures that investors possess licenses to use trademarks and patented inventions and meet other requirements before sending remittances abroad. In cooperation with the Ministry of Finance, NOTAP administers 120-percent tax deductions for research and development expenses if carried out in Nigeria and 140-percent tax deductions for research and development using local raw materials. As mentioned earlier, the recently passed Domestic Content Act of 2010 (DCA) contains technology transfer requirements that violate a company’s intellectual property rights.

NOTAP has shifted its focus from regulatory control and technology transfer to technological promotion and development. With the assistance of the World Intellectual Property Organization (WIPO), NOTAP has established a patent information and documentation center for the dissemination of technological information to end-users. The center seeks to commercialize institutional research and development with industry.

Import Policies: Import tariffs provide the GON its second largest, although much less significant, source of revenue after crude oil exports. The GON issued the 2008 to 2012 Common External Tariff (CET) Book that harmonizes its tariffs with its West African neighbors under the Economic Community of West African States (ECOWAS) Common Economic Tariff (CET), in September 2008. The 2008 to 2012 CET has five tariff bands, including: 1) zero duty on capital goods, machinery, and essential drugs not produced locally; 2) five percent on imported raw materials; 3) 10 percent on intermediate goods; 4) 20 percent on finished goods; and 5) 35 percent on goods in certain sectors. The GON reduced import duties on a number of items, including rice, cigars, and manufactured tobacco. In November 2010, officials also conducted a review of the import prohibition list, resulting in the removal of textiles, toothpicks, and cassava from the import prohibition list. They also increased the age limit on imported used vehicles from 10 years to 15 years. Items that remain banned include: frozen poultry; pork; beef; pasta; fruit juice in retail packs; soaps and detergents; refined vegetable oil; beer and non-alcoholic beverages; and plastics.

The Nigerian Customs Service (NCS) and the Nigerian Ports Authority (NPA) maintain exclusive jurisdiction over customs services and port operations. Nigerian law allows importers to clear goods on their own, but most importers employ clearing and forwarding agents. Many importers under-invoice shipments and engage in currency arbitrage to minimize tariffs and lower their landed costs. Others ship their goods to ports in neighboring countries, such as Benin and Togo, after which they are transported overland. The GON implements a destination inspection scheme whereby all imports are inspected upon arrival into Nigeria, rather than at the ports of origin. The GON announced guidelines for the scheme in 2006 and awarded seven-year contracts to three companies to act as inspection agents at Nigeria's seaports, border posts, and airports. The companies are Cotecna, SGS, and Global Scan. The exclusive contract will expire by 2012, if NCS officials have completed training on the new scheme and on the handling of the scanning machines, to be handed over to the NCS at the expiration of the contract.

Shippers report that efforts to modernize and professionalize the NCS and the NPA have reduced port congestion and clearance times. These efforts include an ongoing program to achieve the stated goal of 48-hour cargo clearance, particularly at Lagos' Apapa Port, which handles over 40 percent of Nigeria's legal trade. Nevertheless, bribery of customs and port officials remains common, and smuggled goods routinely enter Nigeria's seaports and cross its land borders. Efficient functioning of concessioned container terminals has significantly reduced container ship wait times, but the final release of containers still can take four weeks or longer due to delays in NCS container-processing and clearing.

Export Incentives: The GON has abolished most export incentives. However, the Nigerian Export Promotion Council continues to implement the Export Expansion Grant (EEG) scheme to improve non-oil export performance. The Nigerian Export-Import (NEXIM) Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these practices remain underused. NEXIM’s Foreign Input Facility provides normal commercial terms of three to five years (or longer) for the importation of machinery and raw materials used for generating exports. Agencies meant to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption. Nigeria's high production costs because of inadequate infrastructure also leave Nigerian exporters at a disadvantage. The Dangote Cement Company will likely become a major recipient of the EEG as soon as it completes its domestic capital expansion projects and implements its plan to export large volumes of domestically manufactured cement to ECOWAS countries.

Government Procurement: The GON awards contracts under an open-tender system, advertising tenders in Nigerian newspapers and a “tenders” journal, and opening the tenders to domestic and foreign companies. Procurement has become slightly more transparent, but corruption persists in the awarding of government contracts. Procurement for capital projects is often subject to over-invoicing, which permits improper payments or kick-backs to private and public sector officials. Many U.S. companies claim they are disadvantaged in obtaining GON contracts, even when they appear to have presented the best bids in technical and financial terms. Unsuccessful U.S. bidders sometimes allege collusion between foreign competitors and key GON officials

The Bureau of Public Procurement, the successor agency to the Budget Monitoring and Price Intelligence Unit (BMPIU) after the enactment of the public procurement legislation in May 2007, acts as a clearinghouse for government contracts and procurement and monitors the implementation of projects to ensure compliance with contract terms and budgetary restrictions. Procurements above N50 million (about $333,333) are subject to full "due process," as the process is called. Some of the 36 states of the federation have also passed public procurement legislation in their states.

Visa Requirements: Investors sometimes encounter difficulties acquiring entry visas and residency permits. Foreigners must obtain entry visas from Nigerian embassies or consulates abroad, seek expatriate position authorization from the NIPC, and request residency permits from the Nigerian Immigration Service. Investors report that this cumbersome process can take from two to 24 months and cost from $1,000 to $3,000 in facilitation fees.

Right to Private Ownership and Establishment

The GON supports competitive business practices and protects private property in accordance with the NIPC Decree of 1995.

Protection of Property Rights

The GON recognizes secured interests in property, such as mortgages. The recording of security instruments and their enforcement are subject to the same inefficiencies as those in the judicial system. In the World Bank's publication, "Doing Business 2011," Nigeria was ranked 179 out of the 183 countries surveyed for registering property, requiring 13 procedures and an average of 82 days at a cost of 20.9 percent of the property value. According to the report, property registration in OECD countries requires an average of 4.8 procedures, an average of 32.7 days, and a cost of 4.4 percent of property values, while in sub-Saharan African countries it requires an average of 6.5 procedures, and average of 67.9 days, and a cost of 9.6 percent of property value.

Fee simple property rights are rare. Most property consists of long-term leases with certificates of occupancy acting as title deeds. Transfers are complex and must usually go through state governor's offices. In Abuja, the Federal Capital Territory (FCT) government cancelled and began a process of re-registering all property allotments, refusing to renew those it deemed not in accordance with the city's master plan. Authorities have frequently demolished buildings on these property allotments, including government and commercial buildings, residences, and churches, , even in the face of court injunctions. Therefore, acquiring and maintaining rights to real property remains a major challenge.

Nigeria is a member of WIPO and a signatory to the Universal Copyright Convention, the Berne Convention, and the Paris Convention (Lisbon text). The Patents and Design Decree of 1970 governs the registration of patents, and the Registry of Trademarks, Patents and Designs in the Ministry of Commerce and Industry is responsible for registering patents, trademarks, and designs. Once conferred, a patent conveys exclusive rights to make, import, sell, or use a product or apply a process. The Trademarks Act of 1965 gives trademark holders exclusive rights to use registered trademarks for a specific product or class of products. The Copyright Act of 2004 is based on WIPO standards and U.S. copyright law, and makes it a crime to export, import, reproduce, exhibit, perform, or sell any work without the permission of the copyright owner. However, copyright owners do not register their works under the Copyright Act. Rather, they notify the Nigerian Copyright Commission (NCC). Nigeria's copyright statutes also include the National Film and Video Censors Board Act and the Nigerian Film Policy Law of 1993.

The Copyright Act incorporates trade-related aspects of intellectual property rights (TRIPS) protection for copyrights, except provisions to protect geographical indications and undisclosed business information. Confusion exists among the various GON agencies regarding proposed legislation expected to put all intellectual property agencies under a single and uniform authority. Concomitantly, the National Assembly has under consideration a private bill that would establish an Industrial Property Commission (IPC) and amend the Patents and Design Decree to make comprehensive provisions for the registration and proprietorship of patents and designs, amend the Trademarks Act to improve existing legislation relating to the recording, publishing, and enforcement of trademarks, and provide protection for plant varieties (including biotechnology) and animal breeds. However, the Ministry of Commerce and Industry and the Ministry of Justice have competing plans to send similar bills to the National Assembly for consideration. This ongoing division has lasted since at least 2006. The GON has signed the WIPO Internet Treaties but has yet to ratify them. However, the Nigerian Copyright Commission (NCC) claims that it already implements the terms of the treaties.

Patent and trademark enforcement remains weak, and judicial procedures as well as application of enforcement measures are slow and subject to corruption. Relevant Nigerian institutions suffer from poor training and limited resources. A key deficiency involves inadequate appreciation of the benefits of IPR protection among regulatory officials, distributor networks, and consumers. The over-stretched and under-trained Nigerian police have little understanding of intellectual property rights. The tariff policy released in September 2008 empowers the NCS to seize pirated works and prosecute offenders. The NCS has received some WIPO-sponsored and USG-sponsored training, but admits that the technical capacity of its officers needs to be enhanced for it to be able to combat piracy effectively.

Companies do not often seek trademark or patent protection, because they view the enforcement mechanisms as ineffective. Nonetheless, recent efforts to curtail abuse have yielded some results. The Nigerian Police and the NCC raided the notorious Alaba International Market in Lagos in early 2010 and arrested suspected, high-profile pirate Tony Onwujekwe. Onwujekwe is currently undergoing trial on a three-count charge bordering on large-scale piracy of several musical and audio-visual works belonging to different local and international right owners. Various businesses have also filed high-profile charges against IPR violators. Most raids involving copyright, patent, or trademark infringement appear to target small, rather than large and well-connected, pirates. The GON has successfully prosecuted very few cases, with most cases settled out of court, if at all. Those adjudicated in court are handled primarily by the Federal High Court, whose judges are generally familiar with intellectual property rights law. A U.S. hotel management company filed a suit against a local company using its trademark in January 1999. After many adjournments, the court granted judgment in the U.S. company’s favor in August 2001. Since then, the infringing hotel has filed several rounds of appeal, all of which the court has dismissed. The most recent appeal of March 2008 was dismissed, but without a deadline for the defendants to file a proper motion, so the appeal is still alive, with no end in sight. After over a decade of litigation, the U.S. company does not believe it has an effective remedy for its case. A U.S. company worked with Nigerian authorities to conduct several raids and seize counterfeit products in 2009. Police arrested and interrogated the counterfeiters but eventually released both the counterfeiters and the seized products. The police also tried to arrest the U.S. company’s investigator for wrongfully raiding the counterfeiters and seizing the counterfeit products. The U.S. company has identified two additional counterfeiters and would like to take enforcement actions, but cannot do so, due to as the danger posed to its investigators and/or legal representation. This company has requested USG assistance in preventing the illegal action against its representatives and regaining the ability to enforce its trademark in Nigeria.

Transparency of the Regulatory System

Nigeria's legal, accounting, and regulatory systems are consistent with international norms, but enforcement is uneven. Opportunities occasionally exist for public comment and input into proposed regulations. Professional organizations set standards for the provision of professional services, e.g., accounting, law, medicine, engineering, and advertising. These standards are usually consistent with international norms. No legal barriers prevent entry into this sector.

Taxation: Nigeria’s tax laws generally do not impede investment, but the imposition and administration of taxes is uneven and lacks transparency. Tax evasion is common, and individuals and businesses often collude with relevant officials to avoid paying taxes. Nigeria has signed double taxation agreements with several countries, including the United Kingdom, France, the Philippines, and Japan. The GON imposes a 7.5-percent tax rate on dividends, interest, rent, and royalties when such benefits are paid to a bona-fide beneficiary under a tax treaty. Multiple taxes are a problem for businesses at state and local levels. Companies within concurrent state and local jurisdictions may be expected to pay several taxes and levies.

Efficient Capital Markets and Portfolio Investment

The NIPC Decree of 1995 liberalized Nigeria's foreign investment regime, which has facilitated access to credit from domestic financial institutions. Foreign investors who have incorporated their companies in Nigeria have equal access to all financial instruments. Some investors consider the capital market, specifically the Nigerian Stock Exchange (NSE), a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments.

Trading on the NSE has witnessed significant declines in value since March 2008 due to a combination of factors, including the freeze on margin loans by local banks, the sale of large quantities of shares by bank debtors to pay back margin loans, and the exit of foreign portfolio investors and hedge funds due to the global economic and financial crisis. Market capitalization was 4.98 trillion naira (about $33.2 billion) at the end of 2009, but closed at 7.91 trillion naira (about $52.7 billion) at the end of 2010. The NSE All Shares Index was at 20,827 points at the end of 2009 but rose to 24,770 points at the end of 2010. The exchange operates nine branches nationwide, and the volume of shares listed continues to rise due to new companies listing their shares on the NSE. The listing of Dangote Cement Company, a company arising from a $13 billion merger between Dangote Cement and Benue Cement Company, the introduction of the contributory pension system in late 2005, the GON's divestment of equity in parastatal companies, and the initial public offerings (IPOs) and issuances of additional shares by listed companies have contributed to the NSE's growth in 2010. The NSE continues to expand its membership and investor pool. Currently, the exchange lists 215 equities.

Government debt instruments are traded. The GON has issued bonds of various maturities ranging from two to 20 years since the return of civilian rule in 1999. The issuance of bonds is aimed at restructuring the GON’s domestic debt portfolio from short-term to medium and long-term instruments. There has been renewed interest in bonds since the decline in the equities market in March 2008. Some state governments have issued bonds to finance development projects, and some domestic banks have raised additional capital from the bond market. Some companies are considering the issuance of bonds. The Nigerian Securities and Exchange Commission (SEC) has issued stringent guidelines for states that wish to raise funds on capital markets, such as a credit assessment conducted by a recognized credit rating agency. The credit rating agencies recognized by the SEC are Agusto and Company and Global Credit Rating (GCR) of South Africa.

Banking System: Twenty-four commercial banks operated in Nigeria, as of December 31, 2009. The Central Bank of Nigeria (CBN) concluded a special audit of the 24 banks in 2009 to ascertain whether they had classified their loans in line with mandated prudential guidelines and were well-capitalized. The outcome of the special audit led to the replacement of the executive management of eight banks, while two other banks have been ordered to raise additional capital. The CBN also provided 620 billion naira (about $4.1 billion) in long-term loans to the eight banks to boost their liquidity. CBN officials gave the remaining 14 banks a clean bill of health, though they asked them to make further provisions for non-performing loans granted to petroleum product importers and capital market operators. Some banks published their 2009 financial results in line with the CBN’s new directive of making full provision for bad loans, showing a loss position. Most of the same banks returned to profitability in 2010. The positive results of some banks may have resulted partially from loan loss recoveries.

Competition from State-Owned Enterprises (SOEs)

The GON privatized most State-Owned Enterprises (SOEs) to make them more efficient. The remaining SOEs represent a major drain on government finances. The state-owned telecommunications company, NITEL, and its mobile subsidiary, MTEL, have lost considerable market share due to lack of investment and the market entry of privately-owned competitors. Both NITEL and MTEL are undergoing a privatization process. The successful bidder, New Generation Telecoms, failed to make the 30 percent down payment of $750 million of its $2.5 billion bid at expiration on November 4, but gained a 20-day extension until November 24. The down payment had still not been made as of the end of 2010. The four state-owned petroleum refineries in Port-Harcourt, Warri, and Kaduna operate far below their original installed capacity. The GON sold the Port-Harcourt and Kaduna refineries to a private consortium during the Obasanjo administration, but then-President Umaru Musa Yar'Adua later reversed the transaction. The GON’s subsequent management of the refineries has been poor. There is an ongoing drive to encourage private investment in refineries and, in a bid to attract such investment, the GON says it plans to fully deregulate the downstream sector and allow market forces to determine prices of petroleum products. The deregulation of gasoline prices would be politically sensitive and is unlikely to occur in the run-up to the national elections in April 2011. In another effort to attract such investment, the GON abolished the $1 million non-refundable deposit requirement for investors applying to build refineries. Plans also exist to attract private investment to the railway sector through public-private partnerships (PPPs).

Sovereign Wealth Fund: The GON has plans to establish a Sovereign Wealth Fund (SWF) but discussions are still ongoing within the GON on the SWF’s objectives and how it would be operated. In November, the National Council of State approved the draft legislation that will be forwarded to the National Assembly for consideration.

Corporate Social Responsibility

Both local and foreign enterprises generally follow Corporate Social Responsibility (CSR) principles as a way of identifying with the communities in which they operate and sometimes to display support for GON initiatives. Generally, firms that pursue CSR have favorable reputations.

Political Violence

Social unrest, ethnic and religious strife, violent crime, kidnapping, and terrorism affect many parts of Nigeria. Decades of neglect, persistent poverty, and environmental damage caused by energy projects have aggravated unrest in the oil-rich Niger Delta region. Sabotage and vandalism of pipelines and other installations and kidnapping of Nigerian and expatriate oil workers regularly occur. Unknown assailants raided an off shore oil platform in November, 2010, taking two U.S. and five other expatriates hostage, along with seven Nigerians. Attackers shot a third U.S. citizen in the leg and left him on the platform. Abductors released all the hostages, following negotiations between the GON and the kidnappers. Authorities later arrested the kidnappers. President Yar'Adua’s unconditional amnesty for Niger Delta militants in 2009 induced all major militant leaders to put down their arms and join a political reconciliation process. However, the subsequent rehabilitation and reintegration process for former militants has shown slow progress, and the promised massive investment in infrastructure and development in the region has been slow to materialize. Many observers fear that, absent major progress on these fronts, militancy could return in 2011. Compounding this fear is the 2011 elections. Political violence has occurred in previous elections in Delta states, where candidates recruit young people to intimidate opponents or engage in electoral malfeasance. Complicating the current election cycle is the contest within the ruling People’s Democratic Party (PDP) over its 2011 standard bearer, with incumbent President Goodluck Jonathan, from Bayelsa State, among the leading candidates for nomination.

The Niger Delta Development Commission (NDDC) has a mandate to implement social and economic development projects in the Delta region, but the NDDC has been largely ineffective. State and local governments offer few social services and Niger Delta residents continue to seek direct payments and other assistance from oil companies, who cannot meet demand. Some oil companies have implemented their own socio-economic development programs to assist local communities, but many communities consider the company programs inadequate. In 2009, the GON established the Ministry for the Niger Delta to oversee Niger Delta development projects. The proposed PIB also provides for allocation of 10 percent of the annual revenues from the new Incorporated Joint Ventures (IJVs) to local communities where oil and gas fields and installations exist. Such a development could help provide the resources needed for local social and economic development.

Violent clashes between police and militant members of an Islamic sect, Boko Haram (Hausa for “Western Education Is Prohibited”), in four Northern states between July 26 and 29, 2009, resulted in over 700 reported deaths and 4,000 people displaced. The violence began when followers of an extremist Boko Haram group attacked a police station in retaliation for the arrest of several of the group’s leaders. Violence quickly spread, and the police and military allegedly used excessive force, including the extrajudicial execution by police of the Boko Haram leader. Boko Haram members raided a prison in Bauchi in September 2010, killing five members of the security forces and freeing over 750 inmates, including many of their imprisoned comrades. Alleged Boko Haram members have engaged since mid-2010 in a campaign of targeted violence in Northern and Middle-belt states, with the assassinations of political leaders, their family members, and members of the police.

Political violence has become common during Nigerian elections. Candidates hire young people to engage in violent acts, including intimidation of their opponents’ supporters or of voters believed to support opponents. Violence can also occur during the polling process, with stolen ballot boxes and clashes at or near polling stations. The murder of political opponents and the kidnapping of family members of political opponents have also taken place.

Corruption

Domestic and foreign observers recognize corruption as a serious obstacle to economic growth and poverty reduction. Nigeria ranked 134 out of 178 countries in Transparency International’s 2010 Corruption Perception Index (CPI), dropping four places from its 130 ranking in the 2009 CPI. Nigeria’s corruption levels remain high and its main anti-corruption institution, the Economic and Financial Crimes Commission (EFCC), has underperformed on the issue. On one occasion in 2009, the EFCC arrested a U.S. executive, and an EFCC official pressured the U.S. executive to reach an out-of-court settlement that led to the U.S. executive’s release.

The Corrupt Practices and Other Related Offences Act of 2001 established an Independent Corrupt Practices and Other Related Offences Commission (ICPC) to prosecute individuals, government officials, and businesses accused of corruption. The Act identifies over 19 offenses, including accepting or giving bribes, fraudulent acquisition of property, and concealment of fraud. Nigerian law stipulates that giving and receiving bribes are criminal offences and, as such, are not tax deductible. ICPC investigations have resulted in less than fifteen convictions since 2001.

The GON established the EFCC to prosecute individuals involved in financial crimes and other acts of economic “sabotage.” It has been most successful in prosecuting low-level Internet scam operators. Some high-profile convictions have taken place, such as a former governor of Bayelsa State, a former Inspector General of Police, and a former Chairman of the Board of the Nigerian Port Authority. However, many other cases have languished in the courts without resolution. Concerns about the EFCC’s commitment grew after a change in leadership in December 2007 and the redeployment of some personnel in July 2008. Nigeria gained entry into the Egmont Group of Financial Intelligence Units (FIUs) in May 2007. The Paris-based Financial Action Task Force (FATF) removed Nigeria from its list of Non-Cooperative Countries and Territories in June 2006. The Nigeria Extractive Industries Transparency Initiative (NEITI) Act of 2007 established the NEITI organization, which seeks to develop a framework for transparency and accountability in the reporting and disclosure by all extractive industry companies of revenue due to or paid to the GON. NEITI is a member of the international Extractive Industries Transparency Initiative (EITI), which provides a global standard for revenue transparency for extractive industries like oil and gas and mining.

Bilateral Investment Agreements

Investment Agreements: The GON signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2000. A bilateral investment treaty (BIT) with the U.S. is not in place, but the GON has expressed interest in negotiating one. Nigeria has bilateral investment agreements with Algeria, Bulgaria, China, Egypt, France, Finland, Germany, Italy, Jamaica, Montenegro, Netherlands, North Korea, Romania, Serbia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Turkey, Uganda, and the United Kingdom. Only four of the treaties (France, Netherlands, South Korea, and the United Kingdom) have been ratified by both parties. GON officials blame treaty partners for the lack of ratification, but the ratification process within the GON is not proactive or well-organized.

OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation offers all its products to U.S. investors in Nigeria.

Labor

Nigeria's skilled labor pool has declined over the past decade as vocational and university educational standards have fallen, mainly because of poor funding, as employment opportunities in the formal sector have stagnated, and as educated Nigerians have left for employment in other countries, such as the United Kingdom, the United States, and South Africa. The low employment capacity of Nigeria's formal sector means that almost three-quarters of all Nigerians work in the informal and agricultural sectors or remain unemployed. Companies involved in formal sector businesses such as banking and insurance possess an adequately skilled workforce (often trained abroad in private institutions or at the better-funded universities). Manufacturing sector workers often require additional training and supervision, but there are too few supervisory personnel to ensure that this is done well. Labor-management relations are strained in some sectors, especially in the profitable oil and gas and public education sectors.

The Right of Association: Nigeria's Constitution guarantees the rights of free assembly and association and protects workers' rights to form or belong to trade unions. Several statutory laws nonetheless restrict the rights of workers to associate or disassociate with labor organizations. The Trade Union Amendment Act of 2005 allows non-management senior staff to join unions. The Act also gives the Trade Union Congress and the Nigeria Labor Congress, Nigeria’s most influential organized labor federations, representation on Nigeria’s National Labor Advisory Council (NLAC), which advises the Minister of Labor and Productivity on labor matters.

Nigeria's largest labor federation, the Nigeria Labor Congress (NLC), contains 37 industrial unions, while the second largest, Trade Union Congress (TUC), includes 18. According to figures from the Ministry of Labor and Productivity, total union membership at the end of 2010 was about seven million. About 30 percent of the total work force is unionized in both the private and public formal sectors. Workers in the agricultural sector, which employs over half of the work force, are not organized.

Collective Bargaining: Collective bargaining occurred throughout the public sector and the organized private sector in 2010. However, public sector employees have become increasingly concerned about GON failure to honor its agreements from the collective bargaining process. According to the NLC and TUC, GON failure to honor its agreements threatens to "devalue the enviable record of dialogue, consultation, and mutual trust that has characterized the relationship between the GON and labor unions since 1999." In November 2010, the GON agreed to send legislation to the National Assembly to raise the national minimum wage for workers to 18,000 naira (about $120) per month.

Collective bargaining in the petroleum industry is relatively efficient compared to other sectors. Issues pertaining to salaries, benefits, health and safety, and working conditions tend generally to be resolved quickly through negotiations. One exception is a longstanding unresolved dispute over the industry's use of contract labor. Organized labor's efforts in the oil and gas, construction, telecommunications, and banking sectors to address broad political issues have resulted in industrial actions, such as general strikes over the minimum wage and fuel price increases intended to reduce costly fuel subsidies. These strikes continue to affect industry productivity. In 2010, petroleum tanker transport workers threatened strikes over contract labor, the shooting of union member by a soldier, and a bank’s threatened foreclosure of a tanker transport company as a result of an unpaid loan. In November, the NLC called for a warning strike to protest inaction by the GON on the national minimum wage bill. Public servants, banking, and aviation workers observed a one-day strike.

Workers under collective bargaining agreements cannot participate in strikes unless their unions comply with the requirements of the law, which includes provisions for mandatory mediation and referral of disputes to the GON. The law provides the GON the option of referring matters to a labor conciliator, an arbitration panel, a board of inquiry, or the National Industrial Court (NIC). The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced. Strikes occur frequently in both the private and public sectors. More than a dozen threatened or actual strikes occurred among unions in the media, education, health, government, entertainment, and transportation sectors in 2010. University professors engaged in strikes for months in some states, and doctors in Lagos state successfully struck for higher wages in late 2010.

The Nigerian Minister of Labor and Productivity may refer unresolved disputes to the Industrial Arbitration Panel (IAP) and the NIC. Union officials question the effectiveness and independence of the NIC in view of its refusal to resolve disputes stemming from GON failure to fulfill contract provisions for public sector employees. Union leaders criticize the arbitration system's dependence on the Minister of Labor and Productivity’s referrals to the IAP.

Child Labor: Nigeria has ratified the International Labor Organization (ILO) Convention on the elimination of the worst forms of child labor. The 1974 Labor Act and the 1999 Constitution prohibit forced or compulsory labor of children and restrict the employment of children under the age of 15 to home-based agricultural or domestic work for no more than eight hours per day. The 1974 Labor Act allows the apprenticeship of youth as of the age of 13 under specific conditions. However, Nigeria's poor distribution of income has forced many children into commercial activities to enhance family income. The 1974 Labor Act, which sets a general minimum age of above 12 years of age for employment, does not protect children from exploitation in the workplace and is not effectively enforced by the government. Child labor was widespread, and the Ministry of Labor and Productivity and the National Agency for the Prohibition of Traffic in Persons (NAPTIP) estimated that more than 15 million children engaged in child labor. The federal government passed the Child Rights Act of 2003, but implementation was required by each state government. Only 23 of the 36 states passed a version of the Child Rights Act establishing laws providing the protection of children's rights as of the end of 2010. The 2005 UNICEF State of the World’s Children report estimated that 39 percent of children aged five to 14 were involved in child labor (not necessarily exploitative) in Nigeria. Similarly, a 2003 study conducted by the Nigerian National Bureau of Statistics in conjunction with the ILO estimated as many as 15 million children were working in Nigeria, with as many as 40 percent of them at risk of being trafficked for forced labor. The situation does not appear to have improved since production of those estimates.

The Ministry of Labor and Productivity deals specifically with child labor problems and operates an inspections department to enforce legal provisions on conditions of work and protection of workers. The Ministry of Labor and Productivity conducted over 150 child labor inspections and 50 full investigations with 408 officers in 2009. (2010 figures are pending.) The Inspections Department employed nearly 400 inspectors for all business sectors, but fewer than 50 factory inspectors for the entire country. Labor inspections were mostly random, but occasionally took place when there was suspicion of, rather than actual complaints of, illegal activity.

Acceptable Conditions of Work: Nigeria's 1974 Labor Act provides for a 40-hour work week, two to four weeks of annual leave, and overtime and holiday pay for all workers except agricultural and domestic workers. No law prohibits compulsory overtime. The Decree establishes general health and safety provisions, some of which apply specifically to young or female workers, and requires the Factory Division of the Ministry of Labor and Productivity to inspect factories for compliance with health and safety standards. Under-funding and limited resources undermine the Factory Division’s oversight capacity, and construction sites and other non-factory work sites are often ignored. Nigeria's labor law requires employers to compensate injured workers and dependent survivors of workers killed in industrial accidents, but the Ministry of Labor and Productivity has been ineffective in identifying violators and has failed to implement ILO recommendations to update its inspection program and accident reporting.

Foreign Trade Zones/Free Trade Zones

The GON established the Nigerian Export Processing Zone Authority (NEPZA) in 1992 to attract export-oriented investment. NEPZA allows duty-free import of all equipment and raw materials into its export processing zones. Up to 25 percent of production in an export processing zone may be sold domestically upon payment of applicable duties. Investors in the zones are exempt from foreign exchange regulations and taxes and may freely repatriate capital. Only two of the five export processing zones established under NEPZA, those in Calabar and Onne, function properly. In 2001, both were converted into free trade zones (FTZ), thereby freeing them from the export requirement. The Tinapa Free Trade Zone owned by the Cross River state government was commissioned during the first quarter of 2007, and several shops and bank branches are operating there. Oil and gas companies use the Onne FTZ as a bonded warehouse for supplies and equipment and for the export of liquefied natural gas. The GON also encourages private sector participation and partnership with the federal government and state and local governments under the FTZ scheme. This has resulted in the establishment of the Lekki FTZ in Lagos state and the Olokola FTZ, straddling Ogun and Ondo states, which are under construction. Workers in FTZs may legally unionize, but may not strike for an initial ten-year period.

Foreign Direct Investment

The United Nations World Investment Report of 2010 estimates that the stock of foreign direct investment (FDI) in Nigeria in 2009 was $69.089 billion. Total FDI inflow was $5.851 in 2009 This FDI inflow is mostly concentrated in the oil industry. The $5.851 billion figure represents 58 percent of total FDI in West Africa and 10 percent of total FDI in Africa (including North Africa) and places Nigeria as the third largest recipient of FDI in Africa after Angola and Egypt. Some FDI is channeled into telecommunications and manufacturing, but total investment in the non-oil and gas sector remains small relative to investment in the oil and gas sector. Only two U.S. companies operate in the manufacturing sector, both of which are in the southwest region, where they have better access to the ports.



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