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Nigeria

Executive Summary

Nigeria’s economy – Africa’s largest – experienced a recession in 2020, largely due to the COVID-19 pandemic and depressed global oil prices. The economy exited recession in the fourth quarter, but gross domestic product contracted 1.9% in 2020. The IMF forecasts a return to low-to-moderate growth rates in 2021 and 2022. President Muhammadu Buhari’s administration has prioritized diversification of Nigeria’s economy beyond oil and gas, with the stated goals of building a competitive manufacturing sector, expanding agricultural output, and capitalizing on Nigeria’s technological and innovative advantages. With the largest population in Africa, Nigeria is an attractive consumer market for investors and traders, offering abundant natural resources and a low-cost labor pool.

The government has undertaken reforms to help improve the business environment, including by facilitating faster business start-up by allowing electronic stamping of registration documents and making it easier to obtain construction permits, register property, obtain credit, and pay taxes. Reforms undertaken since 2017 have helped boost Nigeria’s ranking on the World Bank’s annual Doing Business rankings to 131 out of 190. Foreign direct investment (FDI) inflows have nevertheless remained stagnant, with new FDI totaling $1 billion in 2020 as a number of persistent challenges remain.

Corruption is a serious obstacle to Nigeria’s economic growth and is often cited by domestic and foreign investors as a significant barrier to doing business. Nigeria ranked 149 out of 175 countries in Transparency International’s 2020 Corruption Perception Index. Businesses report that corruption by customs and port officials often leads to extended delays in port clearance processes and to other issues importing goods.

Nigeria’s trade regime is protectionist in key areas. High tariffs, restricted forex availability for 44 categories of imports, and prohibitions on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth. The economic downturn in 2020 put pressure on Nigeria’s foreign reserves. Domestic and foreign businesses frequently cite lack of access to foreign currency as a significant impediment to doing business.

Nigeria’s underdeveloped power sector is a bottleneck to broad-based economic development and forced most businesses to generate a significant portion of their own electricity. The World Bank currently ranks Nigeria 169 out of 190 countries for ease of obtaining electricity for business. Reform of Nigeria’s power sector is ongoing, but investor confidence continues to be weakened by tariff and regulatory uncertainty.

Security remains a concern to investors in Nigeria due to violent crime, kidnappings for ransom, and terrorism in certain parts of the country. The ongoing Boko Haram and Islamic State in West Africa (ISIS-WA) insurgencies have included attacks against civilian and military targets in the northeast of the country. Nigeria has experienced a rise in kidnappings for ransom and attacks on villages by armed gangs in several parts of the country. Militant attacks on oil and gas infrastructure in the Niger Delta region restricted oil production and export in 2016, but a restored amnesty program and more federal government engagement in the Delta region have stabilized the frequency and number of attacks on pipelines and allowed restoration of oil and gas production.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 149 of 175 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 131 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 117 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 5,469 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 2,030 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Nigerian Investment Promotion Commission (NIPC) Act of 1995, amended in 2004, dismantled controls and limits on FDI, allowing for 100% foreign ownership in all sectors, except those prohibited by law for both local and foreign entities. These include arms and ammunitions, narcotics, and military apparel. In practice, however, some regulators include a domestic equity requirement before granting foreign firms an operational license. Nevertheless, foreign investors receive largely the same treatment as domestic investors in Nigeria, including tax incentives. The Act also created the NIPC with a mandate to encourage and assist investment in Nigeria. The NIPC features a One-Stop Investment Center (OSIC) that includes participation by 27 governmental and parastatal agencies to consolidate and streamline administrative procedures for new businesses and investments. The NIPC is empowered to negotiate special incentives for substantial and/or strategic investments. The Act also provides guarantees against nationalization and expropriation. The NIPC occasionally convenes meetings between investors and relevant government agencies with the objective of resolving specific investor complaints. The NIPC’s role and effectiveness is limited to that of convenor and moderator in these sessions as it has no authority over other Government agencies to enforce compliance. The NIPC’s ability to attract new investment has been limited because of the unresolved challenges to investment and business.

The Nigerian government continues to promote import substitution policies such as trade restrictions, foreign exchange restrictions, and local content requirements in a bid to attract investment that develops domestic production capacity. The import bans and high tariffs used to advance Nigeria’s import substitution goals have been undermined by smuggling of targeted products through the country’s porous borders, and by corruption in the import quota systems developed by the government to incentivize domestic investment. The government opened land borders in December 2020, which were progressively closed to commercial trade starting in August 2019 with the aim of curbing smuggling and bolstering domestic production.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign control of investments; however, Nigerian regulatory bodies may insist on domestic equity as a prerequisite to doing business. The NIPC Act of 1995, amended in 2004, liberalized the ownership structure of business in Nigeria, allowing foreign investors to own and control 100% of the shares in any company. One hundred percent ownership is allowed in the oil and gas sector. However, the dominant models for oil extraction are joint venture and production sharing agreements between oil companies (both foreign and local) and the federal government. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Act reviewed in 2020. A foreign company may apply for exemption from incorporating a subsidiary if it meets certain conditions including working on a specialized project specifically for the government, and/or funded by a multilateral or bilateral donor or a foreign state-owned enterprise. The NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in cases of national interest and stipulates modalities for “fair and adequate” compensation should that occur.

Other Investment Policy Reviews

The World Bank published an Investment Policy and Regulatory Review of Nigeria in 2019. It provides an overview of Nigeria’s legal and regulatory framework as it affects FDI, foreign investors, and businesses at large and is available at https://openknowledge.worldbank.org/handle/10986/33596 . The WTO published a trade policy review of Nigeria in 2017, which also includes a brief overview and assessment of Nigeria’s investment climate. That review is available at https://www.wto.org/english/tratop_e/tpr_e/tp456_e.htm .

Business Facilitation

The government established the Presidential Enabling Business Environment Council (PEBEC) in 2016 with the objective of removing constraints to starting and running a business in Nigeria. Nigeria’s ranking has since jumped from 169 to 131 on the World Bank’s 2020 Doing Business Report and has ranked in the top ten most improved economies in two out of the last three years. Nigeria recorded improvements in eight of the 10 categories with “obtaining construction permits” witnessing the highest increase. The other two categories, “getting credit” and “protecting minority investments” remained static. Despite these improvements, Nigeria remains a difficult place to do business, ranking 179 out of 190 countries in the “trading across borders” category and scoring below its sub-Saharan counterparts in all trading subcategories. Particularly egregious were time to import (border compliance) and cost to import (documentary compliance) which, at 242 hours and $564, respectively, are double the sub-Saharan African average. PEBEC’s focal areas are improving trade, starting a business, registering property, obtaining building permits and electricity, and obtaining credit.

The OSIC co-locates relevant government agencies to provide more efficient and transparent services to investors, although much of its functions have yet to be moved online. The OSIC assists with visas for investors, company incorporation, business permits and registration, tax registration, immigration, and customs issues. Investors may pick up documents and approvals that are statutorily required to establish an investment project in Nigeria.

All businesses, both foreign and local, are required to register with the Corporate Affairs Commission (CAC) before commencing operations. CAC began online registration as part of PEBEC reforms. Online registration is straightforward and consists of three major steps: name search, reservation of business name, and registration. A registration guideline is available on the website as is a post-registration portal for enacting changes to company details. The CAC online registration website is https://pre.cac.gov.ng/home . The registration requires the signature of a Legal Practitioner and attestation by a Notary Public or Commissioner for Oaths. Business registration can be completed online but the certificate of incorporation is usually collected at a CAC office upon presentation of the original application and supporting documents. Online registration can be completed in as little as three days if there are no issues with the application. On average, a limited liability company (LLC) in Nigeria can be established in seven days. This average is significantly faster than the 22-day average for Sub-Saharan Africa. It is also faster than the OECD average of nine days. Timing may vary in different parts of the country.

Businesses must also register with the Federal Inland Revenue Service (FIRS) for tax payments purposes. If the business operates in a state other than the Federal Capital Territory, it must also register with the relevant state tax authority. CAC issues a Tax Identification Number (TIN) to all businesses on completion of registration which must be validated on the FIRS website https://apps.firs.gov.ng/tinverification/  and subsequently used to register to pay taxes. The FIRS will then assign the nearest tax office with which the business will engage for tax payments purposes. Some taxes may also be filed and paid online on the FIRS website. Foreign companies are also required to register with NIPC which maintains a database of all foreign companies operating in Nigeria. Companies which import capital must do so through an authorized dealer, typically a bank, after which they are issued a Certificate of Capital Importation. This certificate entitles the foreign investor to open a bank account in foreign currency and provides access to foreign exchange for repatriation, imports, and other purposes. A company engaging in international trade must get an import-export license from the Nigerian Customs Service (NCS). Businesses may also be required to register with other regulatory agencies which supervise the sector within which they operate.

Outward Investment

Nigeria does not promote outward direct investments. Instead, it focuses on promoting exports especially as a means of reducing its reliance on oil exports and diversifying its foreign exchange earnings. The Nigerian Export Promotion Council (NEPC) administered a revised Export Expansion Grant (EEG) in 2018 when the federal government set aside 5.1 billion naira ($13 million) in the 2019 budget for the EEG scheme. The Nigerian Export-Import (NEXIM) Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are 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 created to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption. Nigeria’s inadequate power supply and lack of infrastructure, coupled with the associated high production costs, leave Nigerian exporters at a significant disadvantage. Many Nigerian businesses fail to export because they find meeting international packaging and safety standards is too difficult or expensive. Similarly, firms often are unable to meet consumer demand for a consistent supply of high-quality goods in sufficient quantities to support exports and meet domestic demand. Most Nigerian manufacturers remain unable to or uninterested in competing in the international market, given the size of Nigeria’s domestic market.

Domestic firms are not restricted from investing abroad. However, the Central Bank of Nigeria (CBN) mandates that export earnings be repatriated to Nigeria, and controls access to the foreign exchange required for such investments. Noncompliance with the directive carries sanctions including expulsion from accessing financial services and the foreign exchange market.

Nigeria’s Securities and Exchange Commission (SEC) in April 2020 prohibited investment and trading platforms from facilitating Nigerians’ purchase of foreign securities listed on other stock exchanges. SEC cites Nigeria’s Investment and Securities Act of 2007, which mandates that only foreign securities listed on a Nigerian exchange should be sold to the Nigerian investing public.

6. Financial Sector

Capital Markets and Portfolio Investment

The NIPC Act of 1995, amended in 2004, 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. The NSE was the world’s best performing stock market in 2020, as assessed by Bloomberg. It closed the year at 40,270 points, a 50% increase from the end of 2019. The NSE equity market capitalization increased by 62% to 21 trillion naira ($55.4 billion) from 2019 to 2020 while market turnover increased by 7% to 1 trillion ($2.6 billion). Domestic investors dominated the NSE for the second consecutive year with a 65% share of market turnover by value. Foreign investors had accounted for over 50% of the market in 2018. The NSE’s bond market capitalization increased by 36% to 18 trillion naira ($47.5 billion) from 2019 to 2020. At 92%, the Nigeria government accounted for the majority of issuances raising 2.4 trillion naira ($6.3 billion) in 2020. Much of the growth in the NSE may be attributable to declining rates in Nigeria’s debt market. Treasury bill rates fell below 1% in 2020 with 91-day bills briefly dipping below 0% before settling at a record low of 0.34%. As of March 2021, the NSE had 168 listed companies, 132 listed bonds, and 12 exchange-traded funds. The Nigerian government has considered requiring companies in certain sectors such as telecoms, oil and gas, or over a certain size to list on the NSE as a means to encourage greater corporate participation and sectoral balance in the Nigerian Stock Exchange, but those proposals have not been enacted.

The government employs debt instruments, issuing treasury bills of one year or less, and bonds of various maturities ranging from two to 30 years. Nigeria is increasingly relying on the bond market to finance a widening deficit especially as domestic bond rates fell well below Nigeria’s Eurobond rates in 2020, and Nigeria continues to shirk the conditionalities attached to multilateral borrowing. Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital. Nigeria’s SEC has issued stringent guidelines for states wishing to raise funds on capital markets, such as requiring credit assessments conducted by recognized credit rating agencies.

The CBN plans to stop offering its lucrative Open Market Operations (OMO) bills to non-residents, a departure from its strategy of attracting hard currency investments to shore up foreign exchange supply. OMO bills have recently provided foreign investors with returns of up to 30% in dollar terms, which has led to issuances being oversubscribed. CBN officials say OMO offerings to foreigners will be phased out once current obligations have been redeemed due to the large debt burden placed on the CBN. The CBN has also placed limits on transactions that can be made in foreign currency due to this foreign currency shortage. The OMO bills’ market was estimated at about $40 billion at the end of 2020, with foreigners holding about a third.

Money and Banking System

The CBN is the apex monetary authority of Nigeria; it was established by the CBN Act of 1958 and commenced operations on July 1, 1959. It has oversight of all banks and other financial institutions and is designed to be operationally independent of political interference although the CBN governor is appointed by the president and confirmed by the Senate. The amended CBN Act of 2007  mandates the CBN to have the overall control and administration of the monetary and financial sector policies of the government. The new Banking and Other Financial Institutions Act (BOFIA) of 2020 broadens CBN’s regulatory oversight function to include financial technology companies as it prohibits the operations of unlicensed financial institutions.

Foreign banks and investors are allowed to establish banking business in Nigeria provided they meet the current minimum capital requirement of N25 billion ($65 million) and other applicable regulatory requirements for banking license as prescribed by the CBN. The CBN regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country stipulate that the foreign institutions’ aggregate investment must not be more than 10% of the latter’s total capital.

In addition, any foreign-owned bank in Nigeria desirous of acquiring or merging with a local bank must have operated in Nigeria for a minimum of five years. To qualify for merger or acquisition of any of Nigeria’s local banks, the foreign bank must have achieved a penetration of two-thirds of the states of the federation. This provision mandates that the foreign-owned bank have branches in at least 24 out of the 36 states in Nigeria. The CBN also stipulates that the foreign bank or investors’ shareholding arising from the merger or acquisition should not exceed 40% of the total capital of the resultant entity.

The CBN currently licenses 22 deposit-taking commercial banks in Nigeria. Following a 2009 banking crisis, CBN officials intervened in eight of 24 commercial banks and worked to stabilize the sector through reforms, including the adoption of uniform year-end International Financial Reporting Standards to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks. As of 2019, there were 5,000 bank branches operating in Nigeria and, according to the Nigeria interbank settlement scheme, 40 million Nigerians had a Bank Verification Number (BVN), which every bank account holder is mandated to have.

Before October 2018, only banks and licensed financial institutions were allowed to provide financial services in Nigeria, and about 37% of 100 million adult Nigerians were financially excluded. The CBN reiterated its commitment to enhance the level of financial inclusion in the country and defined a target of 80% financial inclusion rate by 2020 and 95% by 2024. Its revised National Financial Inclusion Strategy was planned to focus on women; rural areas; youth; Northern Nigeria; and micro, small, and medium enterprises. The CBN plans to massively leverage technology with the licensing of mobile money operators and approved some telecom companies to operate as payment service banks because of their huge subscriber base.

The CBN supports non-interest banking. Several banks have established Islamic banking operations in Nigeria including Jaiz Bank International Plc, Nigeria’s first full-fledged non-interest bank, which commenced operations in 2012. A second non-interest bank, Taj Bank, started operations in December 2019. There are six licensed merchant banks: (1) Coronation Merchant Bank Limited, (2) FBN Merchant Bank, (3) FSDH Merchant Bank Ltd, (4) NOVA Merchant Bank, (5) Greenwich Merchant Bank, and (6) Rand Merchant Bank Nigeria Limited.

Many bank branches’ operations were disrupted by the COVID-19 pandemic, and profitability was expected to be impacted. The CBN announced monetary interventions to cushion the impact of the pandemic including the reduction of interest rates on CBN intervention loans from 9% to 5%, a one-year moratorium on CBN loans, and regulatory forbearance to restructure loans in impacted sectors like aviation and hospitality. The banking sector remained resilient despite the operational disruptions, currency devaluation, and monetary policy tweaks. Banking stocks remained top picks for investors and the banking index of the Nigeria Stock Exchange grew by 10% in 2020. Many banks were able to leverage technology to deliver services to customers and therefore earned income on digital channels usage which had grown during the lockdown.

The CBN has continued its system of liquidity management using unorthodox monetary policies. The measures included an increase in cash reserve ratio (CRR) to 27.5% – among the highest globally – to absorb the excess liquidity within the system which was a direct consequence of the lack of investment opportunities. The CBN arbitrarily debited banks for carrying excess loanable deposits on their books resulting in the effective CRR for some banks rising as high as 50%, which limited banks’ capacity to lend. The CBN also enforced a 65% minimum loan to deposit ratio in order to increase private sector credit and boost productivity. In December 2020, the CBN released some of the excess CRR back to banks by selling them special bills in an attempt to improve liquidity and support economic recovery.

CBN reported that non-performing loans (NPLs) declined marginally to 5.5% in September 2020 from 6.1% in December 2019. Full year NPLs are projected to have remained relatively stable despite the challenges presented by the pandemic in 2020. It is expected that the effect of the pandemic, currency devaluation, and subsidy removal could become more evident in some sectors of the economy which may result in defaults on loans and increasing banks’ NPLs.

The top ten banks in Nigeria control nearly 70% of the banking sector. Twelve out of the commercial banks listed on the NSE (Access Bank, GT Bank, Fidelity Bank, FCMB, Sterling Bank, FBNH, Union Bank, Zenith Bank, UBA, Ecobank, Stanbic IBTC, and Wema Bank) reported a combined total asset of N42.9 trillion ($112.9 billion) as of September 2020. This represents an 12% rise from total assets of N38.4 trillion ($101 billion) in December 2019. The size of their total assets also indicates how much support they can give to the Nigerian economy as their collective total assets represent roughly one-third of Nigeria’s GDP. FBNH and Access Bank lead the pack with N6.9 trillion ($18.1 billion) each in assets, closely followed by Zenith Bank with N6.8 trillion ($17.9 billion) and UBA with N4.8 trillion ($12.6 billion). The CBN reported that total deposits increased by N8.4 trillion or 32% and aggregate credit grew by N3.45 trillion or 13% by December 2020.

In 2013, the CBN introduced a stricter supervision framework for the country’s top banks, identified as “Systemically Important Banks” (SIBs) as they account for a majority of the industry’s total assets, loans and deposits, and their failure or collapse could disrupt the entire financial system and the country’s real economy. The current list, released in 2019, includes seven banks which were selected based on their size, interconnectedness, substitutability, and complexity. These banks accounted for 64% of the industry’s total assets of N35.1 trillion and 65% of the industry’s total deposits of N21.7 trillion. Under the supervision framework, the operations of SIBs are closely monitored with regulatory authorities conducting stress tests on the SIBs’ capital and liquidity adequacy. Moreover, SIBs are required to maintain a higher minimum capital adequacy ratio of 15%.

Under Nigerian laws and banking regulations, one of the conditions any foreigner seeking to open a bank account in Nigeria must fulfill is to be a legal resident in Nigeria. The foreigner must have obtained the Nigerian resident permit, known as the Combined Expatriate Residence Permit and Aliens Card which can only be processed by a foreigner that has been employed by a Nigerian company through an expatriate quota. Another requirement is the biometric BVN, which every account holder in Nigeria must have according CBN regulations.

Only a company duly registered in Nigeria can open a bank account in the country. Therefore, a foreign company is not entitled to open a bank account in Nigeria unless its subsidiary has been registered in Nigeria.

Foreign Exchange and Remittances

Foreign Exchange

Foreign currency for most transactions is procured through local banks in the inter-bank market, irrespective of investment type. Low value foreign exchange, typically in U.S. dollars, British pounds or the Euro, may also be procured at a premium from foreign exchange bureaus, called Bureaus de Change. In 2020, the COVID-19 pandemic affected foreign currency inflows to Nigeria. In response, the CBN placed some capital restrictions to manage investment outflows. Domestic and foreign businesses frequently express strong concern about the CBN’s foreign exchange restrictions, which they report prevent them from importing needed equipment and goods and from repatriating naira earnings. Foreign exchange demand remains high due to the dependence on foreign inputs for manufacturing and refined petroleum products.

In 2015, the CBN published a list of 41 product categories which could no longer be imported using official foreign exchange channels ( https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf ). The list has since been increased to include fertilizer, dairy products, and maize bringing the total number of product categories to 44.

The CBN maintains a managed-float exchange rate regime where the exchange rate is fixed with little room to maneuver. It also maintains several “windows” through which foreign exchange is sold to different clients at different rates. While the CBN had been able to maintain convergence between its various rates in 2019, the forex shortages experienced in 2020 caused a divergence of exchange rates starting March 2020. The CBN devalued the official exchange rate through 2020 from 305 naira to the dollar to 379 naira to the dollar. The Investors and Exporters (I&E) rate, used by businesses to repatriate and trade, has since depreciated to around 408 naira to the dollar while the retail market rate depreciated to 480 naira to the dollar as of December 2020.

Remittance Policies

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10% withholding tax). Companies must provide evidence of income earned and taxes paid before repatriating dividends from Nigeria. Money transfers usually take no more than 48 hours. In 2015, the CBN mandated that all foreign exchange remittances be transferred through banks. Such remittances may take several weeks depending on the size of the transfer and the availability of foreign exchange at the remitting bank. Due to the forex shortages currently being experienced in Nigeria, remittances take longer than usual. The CBN claims to have plans to clear the backlog of demand with targeted forex injections into the market. Transfers of currency are protected by Article VII of the International Monetary Fund Articles of Agreement ( http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) manages Nigeria’s sovereign wealth fund. It was created by the NSIA Act in 2011 and began operations in October 2012 with $1 billion seed capital and received an additional $250 million each in 2015 and 2017 bringing total capital to $1.5 billion. It was created to harness Nigeria’s excess oil revenues toward economic stability, wealth creation, and infrastructure development.

The NSIA is a public agency that subscribes to the Santiago Principles, which are a set of 24 guidelines that assign “best practices” for the operations of Sovereign Wealth Funds globally. The NSIA invests through three ring-fenced funds: the Future Generations Fund for diversified portfolio of long term growth, the Nigeria Infrastructure Fund for domestic infrastructure development, and the Stabilization Fund to act as a buffer against short-term economic instability. The NSIA does not take an active role in management of companies. The Embassy has not received any report or indication that NSIA activities limit private competition.

9. Corruption

Domestic and foreign observers identify corruption as a serious obstacle to economic growth and poverty reduction. Nigeria ranked 149 out of 175 countries in Transparency International’s 2020 Corruption Perception Index. The Economic and Financial Crimes Commission (EFCC) Establishment Act of 2004 established the EFCC to prosecute individuals involved in financial crimes and other acts of economic “sabotage.” Traditionally, the EFCC has achieved the most success in prosecuting low-level Internet scam operators. A relatively few high-profile convictions have taken place, such as a former governor of Adamawa State, a former governor of Bayelsa State, a former Inspector General of Police, and a former Chair of the Board of the Nigerian Ports Authority.

Businesses report that bribery of customs and port officials remains common and often necessary to avoid extended delays in the port clearance process, and that smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Since taking office in 2015, President Buhari has focused on implementing a campaign pledge to address corruption, though his critics contend his anti-corruption efforts often target political rivals. Since then, the EFCC arrested a former National Security Advisor (NSA), a former Minister of State for Finance, a former NSA Director of Finance and Administration, and others on charges related to diversion of funds intended for government arms procurement.

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 for corruption. The Corrupt Practices Act punishes over 19 offenses, including accepting or giving bribes, fraudulent acquisition of property, and concealment of fraud. Nigerian law stipulates that giving and receiving bribes constitute criminal offences and, as such, are not tax deductible. Since its inauguration, the ICPC has secured convictions in 71 cases (through 2015, latest data available) with nearly 300 cases still open and pending as of July 2018. In 2014, a presidential committee set up to review Nigeria’s ministries, departments, and agencies recommended that the EFCC, the ICPC, and the Code of Conduct Bureau (CCB) be merged into one organization. The federal government, however, rejected this proposal to consolidate the work of these three anti-graft agencies.

In 2016, Nigeria announced its participation in the Open Government Partnership, a significant step forward on public financial management and fiscal transparency.  The Ministry of Justice presented Nigeria’s National Action Plan for the Open Government Partnership. Implementation of its 14 commitments has made some progress, particularly on the issues such as tax transparency, ease of doing business, and asset recovery. The National Action Plan, which ran through 2019, covered five major themes: ensuring citizens’ participation in the budget cycle, implementing open contracting and adoption of open contracting data standards, increasing transparency in the extractive sectors, adopting common reporting standards like the Addis Tax initiative, and improving the ease of doing business.  Full implementation of the National Action Plan would be a significant step forward for Nigeria’s fiscal transparency, although Nigeria has not fully completed any commitment to date.

The Nigeria Extractive Industries Transparency Initiative (NEITI) Act of 2007 provided for the establishment of the NEITI organization, charged with developing a framework for transparency and accountability in the reporting and disclosure by all extractive industry companies of revenue due to or paid to the Nigerian government. NEITI serves as a member of the international Extractive Industries Transparency Initiative, which provides a global standard for revenue transparency for extractive industries like oil and gas and mining. Nigeria is party to the United Nations Convention Against Corruption. Nigeria is not a member of the OECD and not party to the OECD Convention on Combating Bribery.

Foreign companies, whether incorporated in Nigeria or not, may bid on government projects and generally receive national treatment in government procurement, but may also be subject to a local content vehicle (e.g., partnership with a local partner firm or the inclusion of one in a consortium) or other prerequisites which are likely to vary from tender to tender. Corruption and lack of transparency in tender processes have been a far greater concern to U.S. companies than discriminatory policies based on foreign status. Government tenders are published in local newspapers, a “tenders” journal sold at local newspaper outlets, and occasionally in foreign journals and magazines. The Nigerian government has made modest progress on its pledge to conduct open and competitive bidding processes for government procurement with the introduction of the Nigeria Open Contracting Portal in 2017 under the Bureau of Public Procurement.

The Public Procurement Law of 2007 established the Bureau of Public Procurement as the successor agency to the Budget Monitoring and Price Intelligence Unit. It 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 100 million naira (approximately $264,000) reportedly undergo full “due process,” but government agencies routinely flout public procurement requirements. Some of the 36 states of the federation have also passed public procurement legislation.

The reforms have also improved transparency in procurement by the state-owned NNPC. Although U.S. companies have won contracts in numerous sectors, difficulties in receiving payment are not uncommon and can deter firms from bidding. Supplier or foreign government subsidized financing arrangements appear in some cases to be a crucial factor in the award of government procurements. Nigeria is not a signatory to the WTO Agreement on Government Procurement.

Resources to Report Corruption

Economic and Financial Crimes Commission
Headquarters: No. 5, Fomella Street, Off Adetokunbo Ademola Crescent, Wuse II, Abuja, Nigeria. Branch offices in Ikoyi, Lagos State; Port Harcourt, Rivers State; Independence Layout, Enugu State; Kano, Kano State; Gombe, Gombe State.
Hotline: +234 9 9044752 or +234 9 9044753

Independent Corrupt Practices and Other Related Offences Commission:
Abuja Office – Headquarters
Plot 802 Constitution Avenue, Central District, PMB 535, Garki Abuja
Phone/Fax: 234 9 523 8810
Email: info@icpc.gov.ng 

10. Political and Security Environment

Political, religious, and ethnic violence continue to affect Nigeria. The Islamist group Jama’atu Ahl as-Sunnah li-Da’awati wal-Jihad, popularly known as Boko Haram, and Islamic State – West Africa (ISIS-WA) have waged a violent terrorist campaign to destabilize the Nigerian government, killing tens of thousands of people, forcing over two million to flee to other areas of Nigeria or into neighboring countries, and leaving more than seven million people in need of humanitarian assistance in the country’s northeast. Boko Haram has targeted markets, churches, mosques, government installations, educational institutions, and leisure sites with improvised explosive devices (IEDs) and suicide vehicle-borne IEDs across nine northern states and in Abuja. In 2017, Boko Haram employed hundreds of suicide bombings against the local population. Women and children were forced to carry out many of the attacks. There were multiple reports of Boko Haram killing entire villages suspected of cooperating with the government. ISIS-WA targeted civilians with attacks or kidnappings less frequently than Boko Haram. ISIS-WA employed acts of violence and intimidation to expand its area of influence and gain control over critical economic resources. As part of a violent and deliberate campaign, ISIS-WA also targeted government figures, traditional leaders, humanitarian workers, transportation workers, and contractors.

President Buhari has focused on matters of insecurity in Nigeria and in neighboring countries. While the two insurgencies maintain the ability to stage forces in rural areas and launch attacks against civilian and military targets across the northeast, Nigeria is also facing rural violence in the Nigeria’s north central and northwest states caused by bandits and criminals and by conflicts between migratory pastoralist and farming communities, often over scarce resources. Another major trend is the nationwide rise in kidnappings for ransom and attacks on villages by armed gangs.

Due to challenging security dynamics throughout the country, the U.S. Mission to Nigeria has significantly limited official travel in the northeast, and travel to other parts of Nigeria requires security precautions.

Decades of neglect, persistent poverty, and environmental damage caused by oil spills have left Nigeria’s oil rich Niger Delta region vulnerable to renewed violence. Though each oil-producing state receives a 13% derivation of the oil revenue produced within its borders, and several government agencies, including the Niger Delta Development Corporation (NDDC) and the Ministry of Niger Delta Affairs, are tasked with implementing development projects, bureaucratic mismanagement and corruption have prevented these investments from yielding meaningful economic and social development in the region. Niger Delta militants have demonstrated their ability to attack and severely damage oil instillations at will as seen when they cut Nigeria’s production by more than half in 2016. While attacks on oil installations have since decreased due to a revamped amnesty program and continuous high-level engagement with the region, the underlying issues and historical grievances of the local communities have not been addressed. As a result, insecurity in various forms continues to plague the region.

11. Labor Policies and Practices

Nigeria’s skilled labor pool has declined over the past decade due to inadequate educational systems, limited employment opportunities, and the migration of educated Nigerians to other countries, including the United Kingdom, the United States, Canada, 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 are unemployed. Companies involved in formal sector businesses, such as banking and insurance, possess an adequately skilled workforce. Manufacturing and construction sector workers often require on-the-job training. The result is that while individual wages are low, individual productivity is also low, which means overall labor costs can be high. The Buhari Administration is pushing reforms in the education sector to improve the supply of skilled workers but this and other efforts run by state governments are in their initial stages.

Labor organizations in Nigeria remain politically active and are prone to call for strikes on a regular basis against the national and state governments. While most labor actions are peaceful, difficult economic conditions fuel the risk that these actions could become violent.

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. Nigerian unions belong to one of three trade union federations: the Nigeria Labor Congress (NLC), which tends to represent junior (i.e., blue collar) workers; the United Labor Congress of Nigeria (ULC), which represents a group of unions that separated from the NLC in 2015; and the Trade Union Congress of Nigeria (TUC), which represents the “senior” (i.e., white collar) workers. According to figures provided by the Ministry of Labor and Employment, total union membership stands at roughly 7 million. A majority of these union members work in the public sector, although unions exist across the private sector. The Trade Union Amendment Act of 2005 allowed non-management senior staff to join unions.

Collective bargaining in the oil and gas industry is relatively efficient compared to other sectors. Issues pertaining to salaries, benefits, health and safety, and working conditions tend to be resolved quickly through negotiations. 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 Nigerian government. Despite these restrictions on staging strikes, unions occasionally conduct strikes in the private and public sectors without warning. Localized strikes occurred in the education, government, energy, power, and healthcare sectors in 2020. The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced.

In April 2019, President Buhari signed into law a new minimum wage, increasing it from 18,000 naira ($50) to 30,000 naira ($83) per month. Nigeria’s 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 Act establishes general health and safety provisions, some of which specifically apply to young or female workers and requires the Ministry of Labor and Employment to inspect factories for compliance with health and safety standards. Under-funding and limited resources undermine the Ministry’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.

The Nigerian Minister of Labor and Employment may refer unresolved disputes to the Industrial Arbitration Panel (IAP) and the National Industrial Court (NIC). In 2015, the NIC launched an Alternative Dispute Resolution Center. Union officials question the effectiveness and independence of the NIC, believing it unable to resolve disputes stemming from Nigerian government failure to fulfill contract provisions for public sector employees. Union leaders criticize the arbitration system’s dependence on the Minister of Labor and Employment’s referrals to the IAP.

Nigeria’s laws regarding minimum age for child labor and hazardous work are inconsistent. Article 59 of the Labor Act of 1974 sets the minimum age of employment at 12, and it is in force throughout Nigeria. The Act also permits children of any age to do light work alongside a family member in agriculture, horticulture, or domestic service.

The Federal 2003 Child Rights Act (CRA) codifies the rights of children in Nigeria and must be ratified by each State to become law in its territory. To date, 25 states and the FCT have ratified the CRA, with all 11 of the remaining states located in northern Nigeria.

The CRA states that the provisions related to young people in the Labor Act apply to children under the CRA, but also that the CRA supersedes any other legislation related to children. The CRA restricts children under the age of 18 from any work aside from light work for family members; however, Article 59 of the Labor Act applies these restrictions only to children under the age of 12. This language makes it unclear what minimum ages apply for certain types of work in the country.

While the Labor Act forbids the employment of youth under age 18 in work that is dangerous to their health, safety, or morals, it allows children to participate in certain types of work that may be dangerous by setting different age thresholds for various activities. For example, the Labor Act allows children age 16 and older to work at night in gold mining and the manufacturing of iron, steel, paper, raw sugar, and glass. Furthermore, the Labor Act does not extend to children employed in domestic service. Thus, children are vulnerable to dangerous work in industrial undertakings, underground, with machines, and in domestic service. In addition, the prohibitions established by the Labor Act and CRA are not comprehensive or specific enough to facilitate enforcement. In 2013, the National Steering Committee (NSC) for the Elimination of the Worst Forms of Child Labor in Nigeria validated the Report on the Identification of Hazardous Child Labor in Nigeria. The report has languished with the Ministry of Labor and Employment and still awaits the promulgation of guidelines for operationalizing the report.

The Nigerian government adopted the Trafficking in Persons (Prohibition), Enforcement, and Administration Act of 2015.  While not specifically directed against child labor, many sections of the law support anti-child labor efforts. The Violence against Persons Prohibition Act was signed into law in 2015 and, while not specifically focused on child labor, it covers related elements such as “depriving a person of his/her liberty,” “forced financial dependence/economic abuse,” and “forced isolation/separation from family and friends” and is applicable to minors.

Draft legislation, such as a new Labor Standards Act which includes provisions on child labor, and an Occupational Safety and Health Act that would regulate hazardous work, have remained under consideration in the National Assembly since 2006.

Admission of foreign workers is overseen by the Ministry of the Interior. Employers must seek the consent of the Ministry in order to employ foreign workers by applying for an “expatriate quota.” The quota allows a company to employ foreign nationals in specifically approved job designations as well as specifying the validity period of the designations provided on the quota.

There are two types of visas which may be granted, depending on the length of stay. For short-term assignments, an employer must apply for and receive a temporary work permit, allowing the employee to carry out some specific tasks. The temporary work permit is a single-entry visa and expires after three months. There are no numerical limitations on short-term visas, and foreign nationals who meet the conditions for grant of a visa may apply for as many short-term visas as required.

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