The Democratic Republic of the Congo (DRC) is the second largest country in Africa and one of the richest in the world in terms of natural resources. With 80 million hectares (197 million acres) of arable land and 1,100 minerals and precious metals, the DRC has the resources to achieve prosperity for its people. Despite its potential, the DRC often cannot provide adequate security, infrastructure and health care to its estimated 84 million inhabitants, of which 75 percent live on less than two dollars a day.
The accession of Felix Tshisekedi to the presidency in 2019 and his government’s commitment to attracting international and particularly U.S. investment have raised the hopes of the business community for greater openness and transparency. The DRC government is currently working with USTR to regain preferential trade preferences under the Africa Growth and Opportunity Act (AGOA). Tshisekedi created a presidential unit to lead business reform and improve DRC’s standing of 183rd out of 190 countries in the World Bank’s Doing Business 2019 report.
The natural resource and telecommunications sectors have attracted the most foreign investment in the past. The primary minerals sector is the country’s main source of revenue, as exports of copper, cobalt, gold, coltan, diamond, tin and tungsten provide over 95 percent of the DRC’s export revenue. Several breweries and bottlers, a number of large construction firms, and limited textiles production are active. The highly competitive telecommunications industry is expanding into electronic banking. Given the vast needs, there are significant commercial opportunities in aviation, road, rail, water transport, and ports. The agricultural and forestry sectors present opportunities for economic diversification in the DRC.
In 2019 economic growth remained sluggish, with only the extractives sector exhibiting significant growth. After reaching 5.8 percent in 2018, economic growth slowed to 4.4 percent in 2019 owing to the drop in commodity prices. The outbreak of the COVID-19 pandemic sent growth negative as global demand for DRC’s exports dropped.
Overall, businesses in the DRC face numerous challenges, including poor infrastructure and a weak and corrupt bureaucracy. Armed groups remain active in the eastern part of the country, making for a fragile security situation that negatively affects the business environment. Reform of a non-transparent and often corrupt legal system is underway. While laws protecting investors are in effect, the court system is often very slow to make decisions or follow the law, allowing numerous investment disputes to last for years.
Nigeria’s economy – Africa’s largest – exited recession in 2017, assisted by the Central Bank of Nigeria’s more rationalized foreign exchange regime. No growth is expected in the near term and although 2019 ended with a real growth rate of 2.3 percent this is still below Nigeria’s population growth rate of 2.6 percent. With the largest population in Africa (estimated at nearly 200 million), Nigeria continues to represent a large consumer market for investors and traders. Nigeria has a very young population with nearly two-thirds under the age of 25. It offers abundant natural resources and a low-cost labor pool and enjoys mostly duty-free trade with other member countries of the Economic Community of West African States (ECOWAS). Nigeria’s full market potential remains unrealized because of pervasive corruption, inadequate power and transportation infrastructure, high energy costs, an inconsistent regulatory and legal environment, insecurity, a slow and ineffective bureaucracy and judicial system, and inadequate intellectual property rights protections and enforcement. The Nigerian government has undertaken reforms to help improve the business environment, including making starting a business faster by allowing electronic stamping of registration documents, and making it easier to obtain construction permits, register property, get 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.
Nigeria’s underdeveloped power sector remains a bottleneck to broad-based economic development. Power on the national grid currently averages 4,000 megawatts, forcing most businesses to generate much 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 shaken by tariff and regulatory uncertainty. The Nigerian Government, in partnership with the World Bank, published a Power Sector Recovery Plan (PSRP) in 2017. However, three years after its launch, differing perspectives on various PSRP interventions have delayed implementation. The Ministry of Finance is driving the implementation effort and has convened three Federal Government of Nigeria committees charged with moving the process forward in the areas of regulation, policy, and finances. Discussions between the government and the World Bank are continuing, but some sector players report skepticism that the World Bank’s USD 1 billion loan will be enacted, though FGN may proceed without it. The plan is ambitious and will require political will from the administration, external investment to address the accumulated deficit, and discipline in implementing plans to mitigate future shortfalls. It is, nevertheless, a step in the right direction, and recognizes explicitly that the Nigerian economy is losing on average approximately USD 29 billion annually due to lack of adequate power.
Nigeria’s trade regime remains 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. Nigeria’s imports rose in 2019, largely as a result of the country’s continued recovery from the 2016 economic recession. U.S. goods exports to Nigeria in 2018 were valued at USD 2.7 billion, up nearly 23 percent from the previous year, while U.S. imports from Nigeria totaled USD 5.6 billion, a decrease of 20.3 percent. U.S. exports to Nigeria are primarily refined petroleum products, used vehicles, cereals, and machinery. Crude oil and petroleum products continued to account for over 95 percent of Nigerian exports to the United States in 2018 (latest data available). The stock of U.S. foreign direct investment (FDI) in Nigeria was USD 5.6 billion in 2018, a substantial increase from USD 3.8 billion in 2016, but only a modest increase from 2015’s USD 5.5 billion in FDI. U.S. FDI in Nigeria continues to be led by the oil and gas sector.
Given the corruption risk associated with the Nigerian business environment, potential investors often develop anti-bribery compliance programs. The United States and other parties to the Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention aggressively enforce anti-bribery laws, including the U.S. Foreign Corrupt Practices Act (FCPA). A high-profile FCPA case in Nigeria’s oil and gas sector resulted in U.S. Securities Exchange Commission (SEC) and U.S. Department of Justice rulings in 2010 that included record fines for a U.S. multinational and its subsidiaries that had paid bribes to Nigerian officials. Since then, the SEC has charged an additional four international companies with bribing Nigerian government officials to obtain contracts, permits, and resolve customs disputes. See SEC enforcement actions at https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml.
Security remains a concern to investors in Nigeria due to high rates of violent crime, kidnappings for ransom, and terrorism. 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, causing general insecurity and a major humanitarian crisis there. 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 brought a reprieve in violence and allowed restoration of oil and gas production. The longer-term impact of the government’s Delta peace efforts, however, remains unclear and criminal activity in the Delta – in particular, rampant oil theft – remains a serious concern. Maritime criminality in Nigerian waters, including incidents of piracy and crew kidnapping for ransom, has increased in recent years, and law enforcement efforts have been ineffectual. International inspectors have voiced concerns over the adequacy of security measures at some Nigerian port facilities onshore. Businesses report that bribery of customs and port officials remains common to avoid delays, and smuggled goods routinely enter Nigeria’s seaports.
Although the constitution and laws provide for freedom of speech and press, the government frequently restricts these rights. A large and vibrant private, domestic press frequently criticizes the government, but critics report being subjected to threats, intimidation, and sometimes violence as a result. Security services increasingly detain and harass journalists, including for reporting on sensitive topics such as corruption and security. As a result, some journalists practice self-censorship on sensitive issues. Journalists and local NGOs claim security services intimidate journalists, including editors and owners, into censoring reports perceived to be critical of the government.