1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Nigerian Investment Promotion Commission (NIPC) Act of 1995 dismantled controls and limits on FDI, allowing for 100 percent foreign ownership in all sectors, except the petroleum sector where FDI is limited to joint ventures or production-sharing contracts. It also created the NIPC with a mandate to encourage and assist investment in Nigeria. The NIPC features a One-Stop Investment Center (OSIC) that nominally includes participation of 27 governmental and parastatal agencies (not all of which are physically present at the OSIC) to consolidate and streamline administrative procedures for new businesses and investments. Foreign investors receive largely the same treatment as domestic investors in Nigeria, including tax incentives. 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 would develop domestic production capacity and services that would otherwise be imported. The import bans and high tariffs used to advance Nigeria’s import substitution goals have been undermined by smuggling of targeted products (most notably rice and poultry) through the country’s porous borders, and by corruption in the import quota systems developed by the government to incentivize domestic investment. The government began closing land borders to commercial trade in August 2019 to try and curb smuggling. Investors generally find Nigeria a difficult place to do business despite the government’s stated goal to attract investment.
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 liberalized the ownership structure of business in Nigeria allowing foreign investors to own and control 100 percent of the shares in any company except the petroleum industry. Ownership prior to the NIPC Act was limited to a 60/40 percentage in favor of majority Nigeria control. The foreign control of investments applies to all industries minus a few exceptions. Investment in the oil and gas sector is limited to joint ventures or production-sharing agreements. Laws also control investment in the production of items critical to national security (i.e. firearms, ammunition, and military and paramilitary apparel) to domestic investors. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990. The NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in case of national interest.
Other Investment Policy Reviews
The OECD completed an investment policy review of Nigeria in 2015. (http://www.oecd.org/countries/nigeria/oecd-investment-policy-reviews-nigeria-2015-9789264208407-en.htm ). 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 .
The United Nations Council on Trade and Development (UNCTAD) published an investment policy review of Nigeria and a Blue Book on Best Practice in Investment Promotion and Facilitation in 2009 (available at unctad.org ). The recommendations from its reports continue to be valid: Nigeria needs to diversify FDI away from the oil and gas sector by improving the regulatory framework, investing in physical and human capital, taking advantage of regional integration and reviewing external tariffs, fostering linkages and local industrial capacity, and strengthening institutions dealing with investment and related issues. NIPC and the Federal Inland Revenue Service published a compendium of investment incentives which is available online at https://nipc.gov.ng/compendium .
Although the NIPC offers the OSIC, Nigeria does not have an online single window business registration website, as noted by Global Enterprise Registration (www.GER.co ). The Nigerian Corporate Affairs Commission (CAC) maintains an information portal and in 2018 the Trade Ministry launched an online portal for investors called “iGuide Nigeria” (https://theiguides.org/public-docs/guides/nigeria ). Many steps for business registration can be completed online, but the final step requires submitting original documents to a CAC office to complete registration. On average, a foreign-owned limited liability company (LLC) in Nigeria (Lagos) can be established in 10 days through eight steps. This average is significantly faster than the 23-day average for Sub-Saharan Africa. Timing may vary in different parts of the country. Only a local legal practitioner accredited by the CAC can incorporate companies in Nigeria. According to the Nigerian Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, foreign capital invested in an LLC must be imported through an authorized dealer, which will issue a Certificate of Capital Importation. This certificate entitles the foreign investor to open a bank account in foreign currency. Finally, a company engaging in international trade must get an import-export license from the Nigerian Customs Service (NCS).
Although not online, the OSIC co-locates relevant government agencies to provide more efficient and transparent services to investors. 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. The Nigerian government has not established uniform definitions for micro, small, and medium enterprises (MSMEs) with different agencies using different definitions, so the process may vary from one company to another.
The Nigerian Export Promotion Council (NEPC) administered an Export Expansion Grant (EEG) scheme to improve non-oil export performance, but the government suspended the program in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export. The program was revised and re-launched in 2018 when the federal government set aside 5.12 billion naira (roughly USD 14.2 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.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical source||USG or international statistical source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) ($M USD)||N/A||N/A||2019||$448 billion||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical source||USG or international statistical source||USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country ($M USD, stock positions)||N/A||N/A||2018||$5,630||BEA data available at
|Host country’s FDI in the United States ($M USD, stock positions)||N/A||N/A||2018||$75||BEA data available at
|Total inbound stock of FDI as % host GDP||N/A||N/A||2018||25.1%||UNCTAD data available at
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||Amount||100%||Total Outward||Amount||100%|
|Bermuda||15,684||17%||Data Not Available|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
Data not available.