Policies Towards Foreign Direct Investment

The Government of Ghana has no overall economic or industrial strategy that discriminates against foreign-owned businesses.  The government has made increasing FDI a priority and acknowledged the importance of having an enabling environment for the private sector to thrive.  Officials are implementing some regulatory and other reforms to improve the ease of doing business and make investing in Ghana more attractive.

The 2013 GIPC Act requires the Ghana Investment Promotion Center (GIPC) to register, monitor and keep records of all business enterprises in Ghana.  Sector-specific laws further regulate investments in minerals and mining, oil and gas, industries within Free Zones, banking, non-banking financial institutions, insurance, fishing, securities, telecommunications, energy, and real estate.  Some sector-specific laws, such as in the oil and gas sector and the power sector, include specific local content requirements that could discourage international investment. Foreign investors are required to satisfy the provisions of the GIPC Act as well as the provisions of sector-specific laws.  GIPC leadership has pledged to work in closer collaboration with the private sector to address investor concerns but there have been no significant changes to the laws. More information on investing in Ghana can be obtained from GIPC’s website, www.gipcghana.com  .

Limits on Foreign Control and Right to Private Ownership and Establishment

Ghana is one of the more open economies to foreign equity ownership in Sub-Saharan Africa.  Most of its major sectors are fully open to foreign capital participation.

U.S. investors in Ghana are treated the same as any other foreign investor.  All foreign investment projects must register with the GIPC. Foreign investments are subject to the following minimum capital requirements: USD 200,000 for joint ventures with a Ghanaian partner that should have at least 10 percent of the equity; USD 500,000 for enterprises wholly-owned by a non-Ghanaian; and USD 1 million for trading companies (firms that buy or sell imported goods or services) wholly owned by non-Ghanaian entities.  The minimum capital requirement may be in cash or capital goods relevant to the investment. Trading companies are also required to employ at least 20 skilled Ghanaian nationals.

Ghana’s investment code excludes foreign investors from participating in eight economic sectors: petty trading, the operation of taxi and car rental services with fleets of fewer than 25 vehicles, lotteries (excluding soccer pools), the operation of beauty salons and barber shops, printing of recharge scratch cards for subscribers to telecommunications services, production of exercise books and stationery, retail of finished pharmaceutical products, and the production, supply, and retail of drinking water in sealed pouches.  Sectors where foreign investors are allowed limited market access include: telecommunications, banking, fishing, mining, petroleum, and real estate.

Real Estate

The 1992 Constitution recognized existing private and traditional titles to land.  Freehold acquisition of land is no longer permitted. There is an exception, however, for transfer of freehold title between family members for land held under the traditional system.  Foreigners are allowed to enter into long-term leases of up to 50 years and the lease may be bought, sold, or renewed for consecutive terms. Nationals are allowed to enter into 99-year leases.

Oil and Gas

The oil and gas sector is subject to a variety of state ownership and local content requirements.  The Petroleum (Exploration and Production) Act (2016, Act 919) mandates local participation. All entities seeking petroleum exploration licenses in Ghana must create a consortium in which the state-owned Ghana National Petroleum Corporation (GNPC) holds a minimum 15 percent carried interest.  The Petroleum Commission issues all licenses, but exploration licenses must be approved by Parliament. Further, local content regulations specify in-country sourcing requirements with respect to the full range of goods, services, hiring, and training associated with petroleum operations. The regulations also require mandatory local equity participation for all suppliers and contractors.  The Minister of Energy must approve all contracts, sub-contracts, and purchase orders above USD 100,000. Non-compliance with these regulations may result in a criminal penalty, including imprisonment for up to five years.

The Petroleum Commission applies registration fees and annual renewal fees on foreign oil and gas service providers, which, depending on a company’s annual revenues, range from USD 70,000 to USD 150,000, compared to fees of between USD 5,000 and USD 30,000 for local companies.

Mining

Per the Minerals and Mining Act, 2006 (Act 703), foreign investors are restricted from obtaining a small-scale mining license for mining operations less than or equal to an area of 25 acres (10 hectares).  Non-Ghanaians may only apply for industrial mineral rights if the proposed investment is USD 10 million or above. The Act mandates compulsory local participation, whereby the government acquires 10 percent equity in ventures at no cost.  In order to qualify for a license, a non-Ghanaian company must be registered in Ghana, either as a branch office or a subsidiary that is incorporated under the Ghana Companies Act or Incorporated Private Partnership Act.

The Minerals and Mining Act provides for a stability agreement, which protects the holder of a mining lease for a period of 15 years from future changes in law that may impose a financial burden on the license holder.  When an investment exceeds USD 500 million, lease holders can negotiate a development agreement that contains elements of a stability agreement and more favorable fiscal terms. Parliament passed a new Minerals and Mining (Amendment) Act (Act 900) in December 2015.  One significant provision of the new act requires the mining lease-holder to, “…pay royalty to the Republic at the rate and in the manner that may be prescribed.” The previous Act 703 capped the royalty rate at six percent. The Minerals Commission implements the law.  

Power Sector

In December 2017, Ghana introduced regulations requiring local content and local participation in the power sector. The Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations, 2017 (L.I. 2354) specify minimum initial levels of local participation/ownership and ten year targets:

The regulations also specify minimum and target levels of local content in engineering and procurement, construction works, post construction works, services, management, operations and staff.  All persons engaged in or planning to engage in the supply of electricity are required to register with the ‘Electricity Supply Local Content and Local Participation Committee’ and satisfy the minimum local content and participation requirements within five years. Failure to comply with the requirements could result in a fine or imprisonment.

Insurance

The National Insurance Commission (NIC) imposes nationality requirements with respect to the board and senior management of locally-incorporated insurance and reinsurance companies.  At least two board members must be Ghanaians, and either the Chairman of the board or Chief Executive Officer (CEO) must be Ghanaian. In situations where the CEO is not Ghanaian, the NIC requires that the Chief Financial Officer be Ghanaian. Minimum initial capital investment in the insurance sector is 15 million Ghana cedis (approximately USD 3 million).

Telecommunications

Per the Electronic Communications Act of 2008, the National Communications Authority (NCA) regulates and manages the nation’s telecommunications and broadcast sectors.  For 800 MHz spectrum licenses for mobile telecommunications services, Ghana restricts foreign participation to a joint venture or consortium that includes a minimum of 25 percent Ghanaian ownership.  Applicants have two years to meet the requirement, and can list the 25 percent on the Ghana Stock Exchange. The first option to purchase stock is given to Ghanaians, but there are no restrictions on secondary trading.

There are no significant limits on foreign investment or differences in the treatment of foreign and national investors in other sectors of the economy.

Other Investment Policy Reviews

Ghana has not conducted an investment policy review (IPR) through the OECD recently. UNCTAD last conducted an IPR in 2003.

The WTO last conducted a Trade Policy Review (TPR) in May 2014.  The TPR concluded that the 2013 amendment to the investment law raised the minimum capital that foreigners must invest to levels above those specified in Ghana’s 1994 GATS horizontal commitments, and excluded new activities from foreign competition.  However, it was determined that overall this would have minimum impact on dissuading future foreign investment due to the size of the companies traditionally seeking to do business within the country. An executive summary of the findings can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp398_e.htm  

Business Facilitation

Although registering a business is a relatively easy procedure and can be done online through the Registrar General’s Department (RGD) at https://egovonline.gegov.gov.gh/RGDPortalWeb/portal/RGDHome/eghana.portal   , businesses have noted that the process involved in establishing a business is lengthy and complex, and requires compliance with regulations and procedures of at least four other government agencies, including GIPC, Ghana Revenue Authority (GRA), Ghana Immigration Service, and the Social Security and National Insurance Trust (SSNIT).

According to the World Bank’s Doing Business Report, it takes eight procedures and 14 days to establish a foreign-owned limited liability company (LLC) that wants to engage in international trade in Ghana.  This is longer than the regional average for Sub-Saharan Africa. Foreign investors must obtain a certificate of capital importation, which can take 14 days. The local authorized bank must confirm the import of capital with the Bank of Ghana, which will then confirm the transaction to GIPC for investment registration purposes.

Per the GIPC Act, all foreign companies are required to register with GIPC after incorporation with the RGD.  Registration can be completed online at http://www.gipcghana.com . While the registration process is designed to be completed within five business days, bureaucracy often delays this process.

The Ghanaian business environment is unique and guidance can be extremely helpful.  In some cases, a foreign investment may enjoy certain tax benefits under the law or additional incentives if the project is deemed critical to the country’s development.  Most companies or individuals considering investing in Ghana or trading with Ghanaian counterparts find it useful to consult with a local attorney or business facilitation company.  The Embassy maintains a list of local attorneys which is available through the U.S. Commercial Service in Ghana (www.export.gov/ghana). Specific information about setting up a business is available at the GIPC website: http://www.gipcghana.com/invest-in-ghana/doing-business-in-ghana.html .

Ghana Investment Promotion Centre
Post: P. O. Box M193, Accra-Ghana
Telephone: +233 (0) 302 665125, +233 (0)302 665126, +233 (0) 302 665127, +233 (0) 302 665128/ +233 (0) 302 665129
Telephone: +233 (0) 302 244318254/ 244318252
Email: info@gipcghana.com
Website: www.gipcghana.com  

Note that mining or oil/gas sector companies are required to obtain licensing/approval from the following relevant bodies:

Petroleum Commission Head Office
Plot No. 4A, George Bush Highway, Accra, Ghana
P.O. Box CT 228 Cantonments, Accra, Ghana
Telephone: +233 [0] 302 953392 | +233 [0] 302 953393
Website: http://www.petrocom.gov.gh/  

Minerals Commission
Minerals House, No. 12 Switchback Road, Cantonments, Accra
P.O. Box M 248
Telephone: +233 (0) 302 772 783 /+233 (0) 302 772 786 /+233 (0) 302 773 053
Website: http://www.mincom.gov.gh/  

Outward Investment

Ghana has no specific outward investment policy.  It has entered into bilateral treaties, however, with a number of countries to promote and protect foreign investment on a reciprocal basis.  A few Ghanaian companies have established operations in other West African countries.

Ghana has signed and ratified Bilateral Investment Treaties (BITs) with the following countries: China; Denmark; Germany; Malaysia; the Netherlands; Switzerland; and the United Kingdom. Ghana has concluded the BIT negotiation process with 26 countries in total, 19 of which are awaiting Parliament ratification.  The countries with concluded BITs that have not yet been internally ratified are: Barbados, Benin, Botswana, Bulgaria, Burkina Faso, Cote d’Ivoire, Cuba, Egypt, France, Guinea, Italy, Mauritania, Mauritius, Romania, Spain, Yugoslavia, Zambia, and Zimbabwe. Agreements with Pakistan, South Korea, North Korea, and Belgium are being discussed.

Ghana has signed and ratified tax treaties, commonly referred to as double taxation agreements, with the following countries:  Belgium, Denmark, France, Germany, Italy, South Africa, Switzerland, the Netherlands, Mauritius, and the United Kingdom. Signed double taxation agreements with the Czech Republic, Morocco, Singapore, Qatar, Malta, Seychelles, Barbados, and Ireland are yet to be ratified by Parliament.

Ghana has not yet signed the Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement (IGA), but it has allowed banks or foreign financial institutions (FFIs) in Ghana to report information directly to the United States Internal Revenue Service.

The United States has signed several investment-related agreements with Ghana: the Trade and Investment Framework Agreement (TIFA), OPIC Investment Incentive Agreement, and the Open Skies Agreement.  In 2012, the United States and Ghana initiated exploratory BIT discussions but those stalled.

Ghana has continued to meet eligibility requirements to participate in the benefits afforded by the African Growth and Opportunity Act (AGOA) and also separately qualifies for the apparel benefits under AGOA.

Transparency of the Regulatory System

The Government of Ghana’s policies on trade liberalization and investment promotion are guiding its efforts to create a clear and transparent regulatory system.

Ghana does not have a standardized consultation process but ministries and Parliament generally share the text or summary of proposed regulations and solicit comments directly from stakeholders or via public meetings and hearings.  All laws that are currently in effect are printed in the Ghana Gazette (equivalent of the U.S. Federal Register).

The Government of Ghana has established regulatory bodies such as the National Communications Authority, the National Petroleum Authority, the Petroleum Commission, the Energy Commission, and the Public Utilities Regulatory Commission to oversee activities in the telecommunications, downstream and upstream petroleum, electricity and natural gas, and water sectors.  The creation of these bodies was a positive step but the lack of resources and their subjectiveness to political influence challenge their ability to deliver the intended level of oversight.

The government launched a Business Regulatory Reform program in 2017, but implementation has been slow.  The program aims to improve the ease of doing business, review all rules and regulations to identify and reduce unnecessary costs and requirements, establish an e-registry of all laws, establish a centralized public consultation web portal, provide regulatory relief for entrepreneurs, and eventually implement a regulatory impact analysis system.

Ghana continues to improve on making information on debt obligations, including contingent and state-owned enterprise debt, publicly available.  Information on the overall debt stock (including domestic and external) is presented in the Annual Debt Management Report which is available on the Ministry of Finance website at https://www.mofep.gov.gh/sites/default/files/reports/economic/2018-Annual-Public-Debt-Report.pdf .  However, information on contingent liabilities from state-owned enterprises is not explicit and is scattered in various reports.

International Regulatory Considerations

Ghana has been a World Trade Organization (WTO) member since January 1995.  Ghana issues its own standards for many products under the auspices of the Ghana Standards Authority (GSA).  The GSA has promulgated more than 500 Ghanaian standards and adopted more than 2,000 international standards for certification purposes.  The Ghanaian Food and Drugs Authority is responsible for enforcing standards for food, drugs, cosmetics, and health items. Ghana notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Ghana’s legal system is based on British common law and local customary law. Investors should note that the acquisition of real property is governed by both statutory and customary law.  The judiciary comprises both the lower courts and the superior courts. The superior courts are the Supreme Court, the Court of Appeal, and the High Court and Regional Tribunals. Lawsuits are permitted and usually begin in the High Court. The High Court has jurisdiction in all matters, civil and criminal, other than those involving treason.  There is a history of government intervention in the court system, although somewhat less so in commercial matters. The courts have, when the circumstances require, entered judgments against the government. However, the courts have been slow in disposing of cases and at times face challenges in enforcing decisions, largely due to resource constraints and institutional inefficiencies.

Laws and Regulations on Foreign Direct Investment

The GIPC Act codified the government’s desire to present foreign investors with a transparent foreign investment regulatory regime.  GIPC regulates foreign investment in acquisitions, mergers, takeovers and new investments, as well as portfolio investment in stocks, bonds, and other securities traded on the Ghana Stock Exchange.  The GIPC Act also specifies areas of investment reserved for locals, and further delineates incentives and guarantees that relate to taxation, transfer of capital, profits and dividends, and guarantees against expropriation.

While Ghana does not currently have a “one-stop shop” for business registration, GIPC helps to facilitate the process and provides economic, commercial and investment information for companies and business people interested in starting a business or investing in Ghana.  GIPC provides assistance to enable investors to take advantage of relevant incentives. Registration can be completed online at www.gipcghana.com  .  

As detailed in the previous section on “Limits on Foreign Control and Right to Private Ownership and Establishment,” sector-specific laws regulate foreign participation/investment in telecommunications, banking, fishing, mining, petroleum, and real estate.  

Ghana regulates the transfer of technologies not freely available in Ghana.  According to the 1992 Technology Transfer Regulations, total management and technical fee levels higher than eight percent of net sales must be approved by GIPC.  The regulations do not allow agreements that impose obligations to procure personnel, inputs, and equipment from the transferor or specific source. The duration of related contracts cannot exceed ten years and cannot be renewed for more than five years.  Any provisions in the agreement inconsistent with Ghanaian regulations are unenforceable in Ghana.

Competition and Anti-Trust Laws

Ghana’s competition law, Protection Against Unfair Competition Act, 2,000 (Act 589), is still under review.

Expropriation and Compensation

The Constitution sets out some exceptions and a clear procedure for the payment of compensation in allowable cases of expropriation or nationalization.  Additionally, Ghana’s investment laws generally protect investors against expropriation and nationalization. The Government of Ghana may, however, expropriate property if it is required to protect national defense, public safety, public order, public morality, public health, town and country planning, or to ensure the development or utilization of property in a manner to promote public benefit.  In such cases, the GOG must provide prompt payment of fair and adequate compensation to the property owner. The Government of Ghana guarantees due process by allowing access to the high court by any person who has an interest or right over the property.

U.S. investors are generally not subject to differential or discriminatory treatment in Ghana, and there have been no government expropriations involving U.S. investments in recent times.  There have been no reported instances of indirect expropriation or any government action equivalent to expropriation during the past year.

Dispute Settlement

ICSID Convention and New York Convention

Ghana is a member state to the International Centre for the Settlement of Investment Disputes (ICSID Convention).  Ghana is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

There is a caveat for investment disputes arising from within the energy sector: the Government of Ghana has expressed a preference for handling disputes under the ad hoc arbitration rules of the UN Commission on International Trade Law (UNCITRAL Model Law).

Investor-State Dispute Settlement

Ghana’s track record for sound governance and a relatively reliable legal system result in a dispute resolution process that benefits foreign investors, in comparison to other countries in the region.

Over the past ten years, there have been four disputes involving U.S. investors.  One of the cases was resolved through international arbitration. The other three are still pending resolution.

International Commercial Arbitration and Foreign Courts

The United States has signed three bilateral agreements on trade and investment with Ghana: a Trade and Investment Framework Agreement (TIFA), OPIC Investment Incentive Agreement, and the Open Skies Agreement.  These agreements contain provisions for investment as well as trade dispute mechanisms.

The Commercial Conciliation Center of the American Chamber of Commerce (Ghana) provides arbitration services on trade and investment issues for disputes regarding contracts with arbitration clauses.

There is interest in alternative dispute resolution, especially as it applies to commercial cases. Several lawyers provide arbitration and/or conciliation services.  Arbitration decisions are enforceable provided they are registered in the courts.

The Government of Ghana established fast track courts to expedite action in certain cases.  These fast track courts, which are automated divisions of the High Court, were intended to oversee cases which can be concluded within six months.  However, they have not succeeded in consistently disposing of cases within six months. In March 2005, the government established a commercial court with exclusive jurisdiction over all commercial matters.  This Court also handles disputes involving commercial arbitration and the enforcement of awards; intellectual property rights, including patents, copyrights and trademarks; commercial fraud; applications under the Companies Act; tax matters; and insurance and re-insurance cases.  A distinctive feature of the commercial court is the use of mediation or other alternative dispute resolution mechanisms, which are mandatory in the pre-trial settlement conference stage. Ghana also has a Financial and Economic Crimes Court. It is a specialized division of the High Court that handles high profile corruption and economic crime cases.

Enforcement of foreign judgments in Ghana is based on the doctrine of reciprocity.  On this basis, judgments from Brazil, France, Israel, Italy, Japan, Lebanon, Senegal, Spain, the United Arab Emirates, and the United Kingdom are enforceable. Judgments from American courts are not currently enforceable in Ghana.

The GIPC, Free Zones, Labor, and Minerals and Mining Laws outline dispute settlement procedures and provide for arbitration when disputes cannot be settled by other means.  They also provide for referral of disputes to arbitration in accordance with the rules of procedure of the United Nations Commission on International Trade Law (UNCITRAL), or within the framework of a bilateral agreement between Ghana and the investor’s country.  The 2010 Alternative Dispute Resolution Act (Act 798 of 2010) provides for the settlement of disputes by mediation and customary arbitration, in addition to regular arbitration processes.

Bankruptcy Regulations

Ghana does not have a bankruptcy statute.  The Companies Act of 1963, however, provides for official closure of a company when it is unable to pay its debts.  A new insolvency law is under debate in Parliament.

Investment Incentives

Investment incentives differ slightly depending upon the law under which an investor operates.  For example, while all investors operating under the Free Zone Act are entitled to a ten-year corporate tax holiday, investors operating under the GIPC law are not automatically entitled to a tax holiday.  Tax incentives vary depending upon the sector in which the investor is operating.

All investment-specific laws contain some incentives.  The GIPC law allows for import and tax exemptions for plant inputs, machinery and parts that are imported for the purpose of the investment. Chapters 82, 84, 85, and 89 of the Customs Harmonized Commodity and Tariff Code zero-rate these production items.  The Government of Ghana imposed a five percent import duty on some items that were previously zero-rated, to conform to the ECOWAS common external tariff.

The Ghanaian tax system is replete with tax concessions that considerably reduce the effective tax rate. The minimum incentives are specified in the GIPC law and are not applied in an ad hoc or arbitrary manner.  Once an investor has been registered under the GIPC law, the investor is entitled to the incentives provided by law. The government has discretion to grant an investor additional customs duty exemptions and tax incentives beyond the minimum stated in the law.  The GIPC website (http://www.gipcghana.com) provides a thorough description of available incentive programs. The law also guarantees an investor all the tax incentives provided for under Ghanaian law. For example, rental income from commercial and residential property is exempt from tax for the first five years after construction. Similarly, income from a company selling or leasing out premises is income tax exempt for the first five years of operation.  Rural banks and cattle ranching are exempt from income tax for ten years and pay 8 percent thereafter.

The corporate tax rate is 25 percent and this applies to all sectors except income from non-traditional exports (8 percent tax rate) and oil and gas exploration companies (35 percent tax rate). For some sectors there are temporary tax holidays.  These sectors include Free Zone enterprises and developers (0 percent for the first ten years and 15 percent thereafter); real estate development and rental (0 percent for the first five years and 25 percent thereafter); agro-processing companies (0 percent for the first five years, after which the tax rate ranges from 0 percent to 25 percent depending on the location of the company in Ghana), and waste processing companies (0 percent for seven years and 25 percent thereafter).  Tax rebates are also offered in the form of incentives based on location. A capital allowance in the form of accelerated depreciation is applicable in all sectors except banking, finance, commerce, insurance, mining, and petroleum. Under the new Income Tax law of 2015, all businesses can carry forward tax losses for at least three years.

Ghana has no discriminatory or excessively burdensome visa requirements.  A foreign investor who invests under the GIPC law is automatically entitled to a specific number of visas/work permits based on the size of the investment.  When an investment of USD 50,000, but not more than USD 250,000 or its equivalent is made in convertible currency or machinery and equipment, the enterprise can obtain a visa/work permit for one expatriate employee.  An investment of USD 250,000, but not more than USD 500,000, entitles the enterprise to two automatic visas/work permits. An investment of USD 500,000, but not more than USD 700,000, allows the enterprise to bring in three expatriate employees.  An investment of more than USD 700,000 allows an enterprise to bring in four expatriate employees. An enterprise may apply for extra visas or work permits, but the investor must justify why a foreigner must be employed rather than a Ghanaian. There are no restrictions on the issuance of work and residence permits to Free Zone investors and employees.  Overall, the process of issuing work permits is not very transparent.

Ghana has no import price controls.  It is pursuing a liberalized import regime policy within the framework of the World Trade Organization to accelerate industrial growth.  The Government of Ghana joined other ECOWAS countries by fully implementing the ECOWAS Common External Tariff (CET) in February 2016.

In some instances, Ghana has issued guarantees for foreign direct investment projects that it deems critical to the country’s development.  To make the operation of public-private partnerships (PPPs) effective, the government may support such projects with viability gap funding and guarantees.  A new PPP law is under debate in Parliament.

Foreign Trade Zones/Free Ports/Trade Facilitation

Free Trade Zones (called Free Zones in Ghana) were established in May 1996, with one near Tema Steelworks, Ltd., in the Greater Accra Region, and two other sites located at Mpintsin and Ashiem near Takoradi in the Western Region.  The seaports of Tema and Takoradi, as well as the Kotoka International Airport and all the lands related to these areas, are part of the Free Zone. The law also permits the establishment of single factory zones outside or within the areas mentioned above.  Under the law, a company qualifies to be a Free Zone company if it exports more than 70 percent of its products. Among the incentives for Free Zone companies are a ten-year corporate tax holiday and zero import duty.

To make it easier for Free Zone developers to acquire the various licenses and permits to operate, the Ghana Free Zones Authority (www.gfzb.com.gh) provides a “one-stop approval service” to assist in the completion of all formalities.  A lack of resources has limited the effectiveness of the Authority. Foreign employees of Free Zone businesses require work and residence permits.

Performance and Data Localization Requirements

In most sectors, Ghana does not have performance requirements for establishing, maintaining, and expanding a business.  Investors are not currently required to purchase from local sources or employ prescribed levels of local content, except in the upstream petroleum sector and the power sector, which are subject to substantial local content requirements.  Similar legislation is being drafted for the downstream petroleum sector and a National Local Content Policy is being debated by Cabinet that may extend to a broad array of sectors of the economy, but there is no clear timeline for its approval.

Generally, investors are not required to export a specified percentage of their output, except for Free Zone enterprises which, in accordance with the Free Zone Act, must export 70 percent of their products.  Government officials have intimated that local content requirements should be applied to sectors other than petroleum, but currently no local content regulations have been promulgated for other sectors.

As detailed earlier in this report, there are a few areas where the GOG does impose performance requirements including the mining, oil and gas, insurance, and telecommunications sectors.

Data Storage

The Government of Ghana does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology.  In addition, there are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption).

Real Property

The legal system recognizes and enforces secured interest in property.  The process to get clear title over land is difficult, complicated, and lengthy.  It is important to conduct a thorough search at the Lands Commission to ascertain the identity of the true owner of any land being offered for sale.  Investors should be aware that land records can be incomplete or non-existent and, therefore, clear title may be impossible to establish.

Mortgages exist, although there are only a few thousand in existence due to a variety of factors including land ownership issues and scarcity of long-term finance.  Mortgages are regulated by the Home Mortgages Finance Act 770 (2008) which has enhanced the process of foreclosure. A mortgage must be registered under the Land Title Registration Law, a requirement that is mandatory for it to take effect.  Registration with the Land Title Registry is a reliable system of recording the transaction.

Intellectual Property Rights

The protection of intellectual property rights (IPR) is an evolving area of law in Ghana.  Progress has been made in recent years to afford protection under both local and international law.  Ghana is a party to the Universal Copyright Convention, the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty (PTC), the Singapore Trademark Law Treaty (STLT), and the Madrid Protocol Concerning the International Registration of Marks.  Ghana is also a member of the World Intellectual Property Organization (WIPO), the English-speaking African Regional Intellectual Property Organization (ARIPO), and the World Trade Organization (WTO). In 2004, Ghana’s Parliament ratified the WIPO internet treaties, namely the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty. Ghana also amended six IPR laws to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), including: copyrights, trademarks, patents, layout-designs (topographies) of integrated circuits, geographical indications, and industrial designs.  Except for the copyright law, implementing regulations necessary for fully effective promulgation have not been passed.

The Government of Ghana launched a National Intellectual Property Policy and Strategy in January 2016, which aimed to strengthen the legal framework for protection, administration, and enforcement of IPR and promote innovation and awareness, although progress on implementation stalled.  Enforcement remains weak and piracy of intellectual property continues to take place. Although precise statistics are not available for many sectors, counterfeit computer software is regularly available at street markets and counterfeit pharmaceuticals have found their way into public hospitals.  Counterfeit products have also been discovered in such disparate sectors as industrial epoxy, cosmetics, drinking spirits, and household cleaning products. Based on cases where it has been possible to trace the origin of counterfeit goods, most have been found to have been produced outside the region, usually in Asia.  Holders of IPR have access to local courts for redress of grievances, although the few trademark, patent, and copyright infringement cases that have been filed in Ghana by American companies have reportedly moved through the legal system slowly.

Ghana is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

Resources for Rights Holders

Please contact the following at Mission Accra if you have further questions regarding IP issues:

Margo Siemer
Economic Section
No. 24 Fourth Circular Road, Cantonments, Accra, Ghana
233-030-274-1000
SiemerME@state.gov

A list of local lawyers can be found at: https://gh.usembassy.gov/u-s-citizen-services/attorneys/

American Chamber of Commerce Ghana
5TH Crescent Street, Asylum Down
P.O. Box CT2869, Cantonments-Accra, Ghana
Tel: 233 030 2247562/233 030 7011862
Fax: 233 030 2247562
Website: http://www.amchamghana.org/ 

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ 

Capital Markets and Portfolio Investment

Private sector growth in Ghana is constrained by financing challenges.  Businesses continue to face difficulty raising capital on the local market.  While credit to the private sector has increased, levels have remained stagnant over the last decade and high government borrowing has driven up interest rates beyond 25 percent and crowded out private investment.

Capital markets and portfolio investment are gradually evolving.  The longest-term domestic bonds are 15 years, with Eurobonds ranging up to 31-year maturities.  Foreign investors are only permitted to participate in bond auctions with maturities of two years or longer.  In 2018, foreign investors held about 30 percent (valued at USD 5.7 billion) of the total outstanding domestic securities.  Authorities are working to expand the secondary market to improve liquidity.

The rapid accumulation of debt over the last decade has raised debt sustainability concerns.  Ghana received debt relief under the Heavily Indebted Poor Country (HIPC) initiative in 2004, and began issuing Eurobonds in 2007.  Following a rebasing of GDP in 2018, total public debt, roughly evenly split between external and domestic, stands at approximately 58 percent of GDP.  Following the government’s strategy of increasing demand for longer-dated bonds, short-term debt declined from a share of 22.4 percent in 2017 to 17.3 percent in 2018.

The Ghana Stock Exchange (GSE) has 42 listed companies, four government bonds and one corporate bond. Both foreign and local companies are allowed to list on the GSE.  The Securities and Exchange Commission regulates activities on the Exchange. There is an 8 percent tax on dividend income. Foreigners are permitted to trade stocks listed on the GSE without restriction.  There are no capital controls on the flow of retained earnings, capital gains, dividends or interest payments. The GSE composite index (GGSECI) has exhibited mixed performance.

Money and Banking System

Banks in Ghana are relatively small with the largest in the country, Ecobank Ghana Ltd., holding assets totaling about USD 1.3 billion.  The Central Bank increased the minimum capital requirement for commercial banks from 120 million Ghana cedis (USD 24 million) to 400 million (USD 80 million) effective December 2018, as part of a broader effort to strengthen the banking industry.  As a result of the reforms and subsequent closures and mergers of some banks, the number of commercial banks dropped from 36 to 23. Eight are domestically controlled and the remaining 15 are foreign-controlled. In total, there are nearly 1,500 branches distributed across the sixteen regions of the country.

Overall, the banking industry in Ghana is well-capitalized with a capital adequacy ratio of 21.7 percent as of February 2019, which is above the 10 percent prudential and statutory requirement.  As of February 2019, the non-performing loans ratio had decreased to 18.2 percent from 21.6 percent in February 2018. Lending in foreign currencies to unhedged borrowers poses a risk, and widely varying standards in loan classification and provisioning may be masking weaknesses in bank balance sheets.  The BoG is taking steps to address weaknesses in the non-bank deposit-taking institutions sector (e.g., microfinance, savings and loan, and rural banks) and has also issued new guidelines to strengthen corporate governance regulations in the banks.

Recent developments in the non-banking financial sector indicate increased diversification, including new rules and regulations governing the trading of Exchange Traded Funds.  Non-banking financial institutions such as leasing companies, building societies, and savings and loan associations have increased access to finance for underserved populations, as have rural and mobile banking.  Currently, Ghana has no “cross-shareholding” or “stable shareholder” arrangements used by private firms to restrict foreign investment through mergers and acquisitions.

Foreign Exchange and Remittances

Foreign Exchange

Ghana operates a free-floating exchange rate regime.  The Ghana cedi can be exchanged for dollars and major European currencies.  Investors may convert and transfer funds associated with investments provided there is documentation of how the funds were acquired.  Ghana’s investment laws guarantee that investors can transfer the following transactions in convertible currency out of Ghana: dividends or net profits attributable to an investment; loan service payments where a foreign loan has been obtained; fees and charges with respect to technology transfer agreements registered under the GIPC Act; and the remittance of proceeds from the sale or liquidation of an enterprise or any interest attributable to the investment.  Companies have not reported challenges or delays in remitting investment returns. For details, please consult the GIPC Act (http://www.gipcghana.com) and the Foreign Exchange Act guidelines (http://www.sec.org). Persons arriving in or departing from Ghana are permitted to carry up to USD 10,000.00 without declaration; any greater amount must be declared.

Ghana’s foreign exchange reserve needs are largely met through cocoa, gold and oil exports, government securities, foreign assistance, and private remittances.  

Remittance Policies

There is a single formal system for transferring currency out of the country through the banking system.  The Parliament passed the Foreign Exchange Act in November 2006. The Act provided the legal framework for the management of foreign exchange transactions in Ghana.  It fully liberalized capital account transactions, including allowing foreigners to buy certain securities in Ghana. It also removed the requirement for the Bank of Ghana (the central bank) to approve offshore loans.  Payments or transfer of foreign currency can only be made through banks or institutions licensed to do money transfers. There is no limit on capital transfers as long as the transferee can identify the source of capital.

Sovereign Wealth Funds

Ghana’s only sovereign wealth fund is the Ghana Petroleum Fund (GPF), which is funded by oil profits and flows to the Ghana Heritage Fund and Stabilization Fund.  The Petroleum Revenue Management Act (PRMA) (Act 815), passed in 2011, spells out how revenues from oil and gas should be spent and includes transparency provisions for reporting by government agencies, as well as an independent oversight group, the Public Interest and Accountability Committee (PIAC).  Section 48 of the PRMA requires the Fund to publish an audited annual report by the Ghana Audit Service. The Fund’s management meets the legal obligations. Management of the Ghana Petroleum Fund is a joint responsibility between the Ministry of Finance and the Bank of Ghana. The Minister develops the investment policy for the GPF, and is responsible for the overall management of GPF funds, consults regularly with the Investment Advisory Committee and Bank of Ghana Governor before making any decisions related to investment strategy or management of GPF funds.  The Minister is also in charge of establishing a management agreement with the Bank of Ghana for the oversight of the funds. The Bank of Ghana is responsible for the day-to-day operational management of the Petroleum Reserve Accounts (PRAs) under the terms of Operation Management Agreement.

For additional information regarding Ghana petroleum funds, please visit the 2018 Petroleum Annual Report at: https://www.mofep.gov.gh/sites/default/files/reports/petroleum/2018-Petroleum-Annual-Report.pdf 

By the end of 2017, Ghana had 86 State-Owned Enterprises (SOEs), 45 of which are wholly-owned while 41 are partially owned.  Thirty-six (36) of the wholly-owned SOEs are commercial and operate more independently from government while nine are public corporations or institutions, some providing regulatory functions.  While the President appoints the CEO and full boards of most of the wholly-owned SOEs, they are under the supervision of line ministries. Most of the partially owned investments are in the financial, mining, and oil and gas sectors.  To improve the efficiency of SOEs and reduce fiscal risks they pose to the budget, in 2017 the government embarked on an exercise to tackle weak corporate governance in the SOEs as well as create a single entity institution to monitor all SOEs.  Legislation creating a single authority for managing state-owned assets in pending before Parliament.

Today only a handful of large SOEs remain, mainly in the transportation, power, and extractive sectors.  The largest SOEs are Ghana Ports and Harbor Authority (GPHA), Electricity Company of Ghana (ECG), Volta River Authority (VRA), Ghana Water Company Limited (GWCL), Tema Oil Refinery (TOR), Ghana Airport Company Limited (GACL), Ghana Cocoa Board (COCOBOD), Ghana National Gas Company Limited, and Ghana National Petroleum Corporation (GNPC). Many of these receive subsidies and assistance from the government.  In March 2019, a private sector concessionaire, Power Distribution Services (PDS) Limited, took over management of ECG, through a process of increasing private sector participation in ECG under Ghana’s second Millennium Challenge Corporation (MCC) compact, which entered into force in September 2016. The USD 498.2 million compact is designed to increase the commercial viability of the utility. PDS will manage and operate ECG on a concession agreement for a period of 20 years.

While the Government of Ghana does not actively promote adherence to the OECD Guidelines, corporate governance of SOEs is overseen by the State Enterprise Commission (SEC).  The SEC encourages SOEs to be managed like Limited Liability Companies so as to be profit-making. In addition, beginning in 2014, most state-owned enterprises were required to contract and service direct and government-guaranteed loans on their own balance sheet.  The government’s goal is stop adding these loans to “pure public” debt, paid by taxpayers directly through the budget.

Privatization Program

Ghana currently has no formal privatization program; however, the current government is prioritizing the creation of public-private partnerships (PPPs) to restructure and privatize non-performing state-owned enterprises.  Procuring PPPs is allowed under the National Policy on Public Private Partnerships in Ghana, which was adopted in June 2011. A PPP law is being drafted.

There is no specific responsible business conduct (RBC) law in Ghana and the government has no action plan regarding OECD RBC guidelines.

Ghana has been a member of the Extractive Industries Transparency Initiative since 2010.  The government also enrolled in the Voluntary Principles on Security and Human Rights in 2014, making Ghana the only African country in the initiative to this day.

Corporate social responsibility (CSR) is a growing concern among Ghanaian companies.  The Ghana Club 100 is a ranking of the top performing companies, as determined by GIPC.  It is based on several criteria, including a 10 percent weight assigned to corporate social responsibility, including philanthropy.  Companies have noted that Ghanaian consumers are not generally interested in the CSR activities of private companies, with the exception of the extractive industries (whose CSR efforts seem to attract consumer, government and media attention).  In particular, there is a widespread expectation that extractive sector companies will involve themselves in substantial philanthropic activities in the communities in which they have operations.

Corruption in Ghana is comparatively less prevalent than in other countries in the region, but remains a serious problem.  The government has a relatively strong anti-corruption legal framework in place, but enforcement of existing laws is rare and haphazard.  Corruption in government institutions is pervasive. The Government of Ghana has vowed to combat corruption and has taken some steps to promote better transparency and accountability.  These include establishing an Office of the Special Prosecutor to investigate and prosecute corruption cases, and passing a Right to Information Act (similar to the U.S. Freedom of Information Act) to increase transparency.

The most common commercial fraud scams are procurement offers tied to alleged Ghanaian government or, more frequently, ECOWAS programs. U.S. companies frequently report being contacted by an unknown Ghanaian firm claiming to be an authorized agent of an official government procurement agency.  Foreign firms that express an interest in being included in potential procurements are lured into paying a series of fees to have their companies registered or products qualified for sale in Ghana or the West Africa region. U.S. companies receiving offers from West Africa from unknown sources should use extreme caution and conduct significant due-diligence prior to pursuing these offers.  American firms can request background checks on companies with whom they wish to do business by using the United States Commercial Service’s International Company Profile (ICP). Requests for ICPs should be made through the nearest United States Export Assistance Center. For more information about the United States Commercial Service, visit www.export.gov/ghana .

Businesses have noted that bribery is most pervasive in the judicial system and across public services.  Companies report that bribes are often exchanged in return for favorable judicial decisions. Large corruption cases are prosecuted, but proceedings are lengthy and convictions are slow.  A 2015 exposé captured video of judges and other judicial officials extorting bribes from litigants to manipulate the justice system. Thirty-four judges were implicated, and 25 were dismissed following the revelations, though none have been criminally prosecuted.  

In 2016, the public procurement law was amended to address the shortcomings identified over a decade of implementation of the original law aimed at harmonizing the many public procurement guidelines used in the country and to bring public procurement into conformity with WTO standards.  Notwithstanding the procurement law, companies cannot expect complete transparency in locally funded contracts. There continue to be allegations of corruption in the tender process and the government has in the past set aside international tender awards in the name of national interest. Though the law on public financial management was overhauled in August 2016, with stiffer sanctions and penalties on breaches, its impact on corruption is yet to be recorded.  The Companies Act was also amended in 2016 to establish a register to collect and maintain a national database on beneficial owners in Ghana, but the register has yet to be established. 

The 1992 Constitution established the Commission for Human Rights and Administrative Justice (CHRAJ).  Among other things, the Commission is charged with investigating alleged and suspected corruption and the misappropriation of public funds by officials.  The Commission is also authorized to take appropriate steps, including providing reports to the Attorney General and the Auditor-General in response to such investigations.  The effectiveness of the Commission, however, is affected by a lack of resources, as it conducts few investigations leading to prosecutions. CHRAJ issued guidelines on conflict of interest to public sector workers in 2006, and issued a new Code of Conduct for Public Officers in Ghana with guidelines on conflicts of interest in 2009.  CHRAJ also developed a National Anti-Corruption Action Plan that was approved by the Parliament in July 2014, but many of its provisions have not been implemented due to lack of resources. In November 2015, then-President Mahama fired the CHRAJ Commissioner after she was investigated for misappropriating public funds.

In 1998, the Government of Ghana also established an anti-corruption institution, called the Serious Fraud Office (SFO), to investigate corrupt practices involving both private and public institutions.  SFO’s name was changed to Economic and Organized Crime Office (EOCO) in 2010 and its functions were expanded to include crimes such as money laundering and other organized crimes. EOCO is empowered to initiate prosecutions and to recover proceeds from criminal activities.  The government passed a “Whistle Blower” law in July 2006, intended to encourage Ghanaian citizens to volunteer information on corrupt practices to appropriate government agencies.

Like most other African countries, Ghana is not a signatory to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Commission on Human Rights and Administrative Justice (CHRAJ)
Old Parliament House, High Street, Accra
Postal Address: Box AC 489, Accra
Phone: 0302- 662150/ 664267/ 664561/ 668839
Fax: 0302- 660020/ 668840/ 680396/ 673677
Email: info@chrajghana.com
Website: http://www.chrajghana.com/  

Economic and Organized Crime Office (EOCO)
Tel +233 30 266 9995
Tel +233 30 266 7485
Tel +233 30 266 4786
Website: http://mail.eoco.org.gh/aboutus.html  

Ghana offers a relatively stable and predictable political environment for American investors. Ghana has a solid democratic tradition.  In December 2016, Ghana completed its seventh consecutive peaceful presidential and parliamentary elections. Opposition New Patriotic Party (NPP) candidate Nana Akufo-Addo defeated incumbent President and National Democratic Congress (NDC) candidate John Mahama by a margin of over one million votes.  Mahama conceded the election and power was transferred to the NPP peacefully. There were isolated cases of politically-motivated violence but no widespread civil disturbances.

Ghana has a large pool of unskilled labor.  English is widely spoken, especially in urban areas. However, according to the United Nations, illiteracy remains high at 33 percent. Labor regulations and policies are generally favorable to business.  Although labor-management relationships are generally positive, there are occasional labor disagreements stemming from wage policies in Ghana’s inflationary environment. Many employers find it advantageous to maintain open lines of communication on wage calculations and incentive packages.  A revised Labor Act of 2003 (Act 651) unified and modified the old labor laws to bring them into conformity with the core principles of the International Labor Convention, to which Ghana is a signatory.

Under the Labor Act, the Chief Labor Officer both registers trade unions and approves applications by unions for a collective bargaining certificate.  A collective bargaining certificate entitles the union to negotiate on behalf of a class of workers. The Labor Act also created a National Labor Commission to resolve labor and industrial disputes, and a National Tripartite Committee to set the national daily minimum wage and provide policy guidance on employment and labor market issues.  The National Tripartite Committee includes representatives from government, employers’ organizations, and organized labor. The Labor Act sets the maximum hours of work at eight hours per day or 40 hours per week, but makes provision for overtime and rest periods. Task workers and domestic workers are excluded from the eight hours per day or 40 hours per week maximum.

The Labor Act prohibits the “unfair termination” of workers for specific reasons outlined in the law, including participation in union activities, pregnancy, or based on a protected class, such as by gender, race, color, ethnicity, origin, religion, creed, social, political or economic status, or disability.  The Labor Act also provides procedures companies are required to follow when laying off staff, including under certain situations providing severance pay, known locally as “redundancy pay.” Disputes over redundancy pay can be referred to the National Labor Commission. The Act’s provisions regarding fair and unfair termination of employment do not apply to some classes of contract, probationary, and casual workers.

There is no legal requirement for labor participation in management.  However, many businesses utilize joint consultative committees in which management and employees meet to discuss issues affecting business productivity and labor issues.

There are no statutory requirements for profit sharing, but fringe benefits in the form of year-end bonuses and retirement benefits are generally included in collective bargaining agreements. Child labor remains a problem.  Child labor is particularly severe in agriculture, including in cocoa, and in fishing. Fish (including tilapia) is included on the U.S. government’s Executive Order 13126 List of Goods Produced by Forced and Indentured Child Labor.  Additionally, cocoa, fish, gold, and tilapia are included on the U.S. government’s List of Goods Produced by Child Labor or Forced Labor. In general, worker protection provisions in the Labor Act, including health and safety provisions, are weakly enforced.  Post recommends consulting a local attorney for detailed advice regarding labor issues. The United States Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service (www.export.gov/ghana ).

Ghana has signed an agreement with the Overseas Private Investment Cooperation (OPIC). OPIC is active in Ghana, providing financing and insurance for a number of projects – particularly in the energy, housing, and health sectors.  The African Project Development Facility (APDF) and the African investment program of the International Finance Corporation are other sources of information.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Margo Siemer
Economic Section
No. 24 Fourth Circular Road, Cantonments, Accra, Ghana
233-030-274-1000
SiemerME@state.gov

Policies Towards Foreign Direct Investment

Mauritania is increasingly open to foreign direct investment (FDI).  In 2019, the government created a ministerial-level committee charged with overseeing improvements in the business climate.  Government officials regularly highlight the need to improve the business climate in order to attract more FDI, particularly from the United States.  Local, reputable businesses in the private sector frequently express interest in representing U.S. companies, and the number doing so is growing. There is no law prohibiting or limiting foreign investment, which can target any sector of the economy.  There are no laws or regulations specifically authorizing private firms to adopt articles of incorporation or association, which limit or prohibit foreign investment, participation, or control. There are no other practices by private firms to restrict foreign investment.  The government continues to prioritize foreign investment in all sectors of the economy. It is working closely with the International Monetary Fund (IMF), the World Bank, and the international donor community to improve basic infrastructure and to update laws and regulations.

The IMF 2018 review on the Extended Credit Facility (ECF) in Mauritania shows improvement in balance of payments and reserves recovery following the 2014 shock to the Mauritanian economy caused by the drop in price of iron ore.

In 2012, the government adopted a revised Investment Code and created the Office of Promotion of the Private Sector (OPPS) to promote and monitor investment.  Currently, prospective investors are required to obtain an Investment Certificate by presenting their proposal and all required documents to the OPPS. The government tends to maintain on ongoing dialogue with investors through formal business conferences and meetings.

Limits on Foreign Control and Right to Private Ownership and Establishment

All domestic or foreign entities are allowed to engage in all forms of remunerative activities, except activities involving selling pork or alcohol.  There are no limits of transfer of profit or repatriation of capital, royalties, or service fees, provided the investments were authorized and made through approved banks.  The Government of Mauritania practices mandatory screening of foreign investments. These screening mechanisms are routine and non-discriminatory. The OPPS “Guichet Unique” (a single location to take care of all administrative needs related to registering a company) provides the review for all sectors, except the petroleum and mining sectors, which require approval from a cabinet meeting led by the president.

Other Investment Policy Reviews

The latest investment policy review occurred in February 2008.  The United Nations Conference on Trade and Development (UNCTAD) review is available online, in French, at: http://unctad.org/en/Docs/iteipc20085_fr.pdf.  The report recommended that the Government of Mauritania diversify the economy, improve its investment potential through increasing revenue generated by the exploitation of natural resources, accelerate required reforms, and enhance the business and investment climate.

In 2011, Mauritania underwent a World Trade Organization (WTO) trade policy review.  The report is available online at http://www.wto.org/english/tratop_e/tpr_e/tp350_e.htm.  The report states that, since 2002, the government had undertaken few reforms in the areas of customs, trade, or investment regulations.  The report also highlighted a lack of transparency as a deficiency. These policy reviews led to the release of the revised Investment Code in June 2012 to improve transparency in the government procurement process.

Business Facilitation

The government continues to amend its laws and regulations to facilitate business registration.  The “Guichet Unique” facilitates business registration and encourages FDI. In 2016, Mauritania made starting a business easier by eliminating the minimum capital requirement.  In 2017, trading across borders was made easier by upgrading the SYDONIA World electronic system, which reduced the time for preparation and submission of customs declarations for both exports and imports.  It can take up to seven days to register a business in Mauritania.

In 2018, Mauritania ranked 148 among 190 economies in the ease of doing business, according to the World Bank annual ratings.  Mauritania had been ranked 150 in 2017. The 2018 ranking is the highest ever for Mauritania, and marks a significant improvement from Mauritania’s worst ranking at 176 in 2014.

Outward Investment

Government incentives toward promoting outward investment remain limited.  Mauritania’s major exports are iron ore (46 percent), non-fillet frozen fish (16 percent), and gold (11 percent). China, France, Spain, Japan, and the United Arab Emirates are the main trade partners.  There are no investment restrictions on domestic investors from investing abroad.

Mauritania has bilateral investment agreements with the Arab Maghreb Union (Algeria, Libya, Morocco, and Tunisia) as well as with Saudi Arabia, France, Belgium, and Romania.  Agreements also exist with Burkina Faso, Cameroon, The Gambia, Ghana, Mauritius, Italy, Lebanon, Qatar, Yemen, Korea, and Egypt.

Mauritania is a signatory to the Cotonou Agreement between the European Union (EU) and the group of African, Caribbean and Pacific (ACP) countries, and thus enjoys free access to the EU market.  Due to its least-developed country status, Mauritania also benefits from duty-free access to the European market under the Everything-But-Arms initiative.

Mauritania does not have a bilateral investment agreement or bilateral taxation treaty with the United States.

Effective January 1, 2019, Mauritania is not eligible for benefits under the U.S. African Growth and Opportunity Act (AGOA) due to insufficient progress toward combating forced labor.  However, Mauritania remains eligible to the Generalized System of Preferences (GSP), which allows marketable goods produced in Mauritania to enter the U.S. market duty-free.

Mauritania is a member of the Arab Maghreb Union (Algeria, Libya, Morocco, and Tunisia) economic trade block.  In 2017, Mauritania and Economic Community of West African States (ECOWAS) countries signed an Association Agreement aimed at allowing the free flow of goods between Mauritania and ECOWAS countries; that agreement is provisionally in effect.  Mauritania has been a member of the World Trade Organization (WTO) since May 31, 1995. The country, however, is in a transitional stage regarding its commitments, and it is currently engaging the WTO to ensure it makes progress towards complete compliance with required commitments.

Transparency of the Regulatory System

The government has adopted laws that have furthered transparency during recent years.  In 2016, the government approved a new anti-corruption bill, which aims to introduce the provisions of the UN Convention against Corruption in the Mauritanian judicial system so that it is consistent with international standards.  In 2017, the government approved the new anti-discrimination law aimed at tackling discrimination. In 1999, the government created a regulatory authority in charge of overseeing the privatization process and ensuring that transparent policies and laws are used to foster competition through the bidding process.  There is no law or policy impeding foreign investment in Mauritania. In practice, ownership in many sectors of the economy is concentrated among a few families and tribes who exercise significant oligopolistic power, which is reinforced by formal and informal regulatory barriers.

While the government is moving to streamline bureaucratic procedures for investment, difficulties remain.  There is a complex and often-overlapping system of permits and licenses required to do business. There continues to be a lack of transparency in the legal, regulatory, and accounting systems, which do not meet international norms.  Proposed laws and regulations are supposed to be published in draft form for public comment before being sent to the National Assembly, but this does not always occur. To the best of our knowledge, there are no informal regulatory processes managed by nongovernmental organizations or private sector associations, and laws and regulations do not discriminate against foreign investment.

In 2011, the government promulgated two orders to regulate accounting practices of nongovernmental and private entities, which must now have reputable financial management and submit periodic reports of financial transactions.  All such entities must also have a local bank account with an identifiable account number and address. As of 2018, these orders are inconsistently followed and were not enforced by the government.

In 2018, the Mauritanian government continued to make meaningful progress in implementing the EITI standard.

International Regulatory Considerations

See section 2 – Bilateral Investment and Taxation Treaties.

Legal System and Judicial Independence

The Mauritanian judicial system combines French and Islamic (Malikite rite) judicial systems. The constitution guarantees the independence of the judiciary (Article 89), and an organic law  also protects judges from undue influence. Civil and Commercial Codes exist and are designed to protect contracts, although court enforcement and dispute settlement can be difficult. The judicial system remains weak and unpredictable in its application of the law, due in part to the training judges receive in two separate and distinct legal systems: Shari’a law and laws modeled after the French legal system. Judges remain undercompensated and susceptible to tribal pressures and bribery. Specialized commercial law courts exist, but sometimes judges lack training and experience in commercial and financial law. Some judges may only have formal training in the Shari’a legal system, while others are only familiar with the French civil law system. A lack of standardization of applicable legal knowledge in the judiciary leads to inefficiency in the execution of judgments in a timely and efficient manner.

Laws and decrees related to commercial and financial sectors exit. However, they are not always publicly available.

Most judgments are not issued within prescribed time limits and records are not always well kept. Judgments of foreign courts are recognized by local courts, but enforcement is limited. During the last few years, the government has taken steps to provide training to judges and lawyers as an attempt to professionalize the system to reduce the backlog and work through cases in a more efficient manner. In 2017, the Government passed a new small claims law that covers cases valued at less than USD 11,000 USD.

Laws and Regulations on Foreign Direct Investment

There are no new major investment laws or judicial decisions ratified last year.  The investment Code, last updated in June 2012, was designed to encourage direct investment by enhancing the security of investments and facilitating administrative procedures.  The code provides for free repatriation of foreign capital and wages for foreign employees. The code also created free points of importation and export incentives. Small and medium enterprises (SME), which register through OPPS (“Guichet Uniquie” one-stop-shop), do not pay corporate taxes or customs duties.  The Code also created Special Economic Zones to encourage regional development. Separately, the Nouadhibou Free Zone was created with its own regulatory scheme more favorable to foreign investment (see further in section 4).

Competition and Anti-Trust Laws

The Ministry of Economy’s office of “Commission de Passation des Marches des Secteurs de l’Economie et Finance” (Procurement Commission of the Economic and Finance Sectors, www.cmsef.mr) is the government agency that reviews tender bids in accordance with the law and regulations.  Suppliers for large government contracts are selected through a tender process initiated at the ministry level. Invitations for tenders are publicly announced in local newspapers and on government websites. After issuing an invitation for tenders, the Ministry of Economy’s commission in charge of reviewing tenders selects the offer that best fulfills government requirements.  If two offers, i.e., one from a foreign company and one from a Mauritanian company, are otherwise considered equal, statutes require that the government award the tender to the Mauritanian company. In practice, this has resulted in tenders awarded to companies that have strong ties to government officials and tribal leaders, regardless of the merits of an individual offer. Preferential treatment remains common in government procurement, despite the government’s recent efforts to promote transparency in the public sector.

Expropriation and Compensation

The revised Investment Code provides more property guarantees and protection to business owners.  The Code protects private companies against nationalization, expropriation, and requisition. However, if a foreign enterprise is facing difficulties, the government can propose an expropriation plan to avoid bankruptcy and to protect jobs of local employees, with fair and equitable compensation.

The only known case of expropriation since Mauritania’s independence was the nationalization of the French mining company MIFERMA in November 1974, the largest employer and hard currency earner in the country.  In that case, the two parties agreed on a compensation plan.

The Mauritanian government guarantees companies that the tax, customs, and legal regulations in force at the time of issuance of an Investment Certificate will remain applicable to them for a period of 20 years.  Likewise, any favorable changes to the corporate tax or customs laws during that guaranteed period will be applicable to the investor.

Dispute Settlement

ICSID Convention and New York Convention

In 1966, Mauritania ratified the Convention on the settlement of investment disputes between States and nationals of other States.  In 1997, Mauritania became a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). However, there is no specific legislation to ensure enforcement.

Investor-State Dispute Settlement

The most recent investment dispute between the Mauritanian government and a foreign investor occurred in 2006 over production-sharing contracts (PSC) signed in 2003 with former President Taya’s government.  A successor government lodged a dispute over four amendments to the original PSC involving oil revenues and environmental issues. An international arbiter was brought in and ruled in the government’s favor.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are not consistently applied.  The government accepts international arbitration of investment disputes between foreign investors and government authorities.  Judgments of foreign courts are accepted by the local courts, but enforcement is limited. In the past, issues were referred to the International Center for Settlement of Investment Disputes (ICSID), of which Mauritania became a member in 1965.

Settling disputes through the courts remains a long and complicated process.  Inadequate laws and poor administration remain the key source of legal disputes encountered in the country. The duration of investment disputes are subject to numerous appeals before reaching a final verdict.  Though the government is looking for ways to streamline the system by providing training to judges and lawyers, the court procedures are currently long and complicated.

Though there are no recent reports on disputes involving State-Owned Enterprises (SOE), it is likely that domestic courts would favor SOEs during a dispute.

Bankruptcy Regulations

The country has bankruptcy laws which carry the potential for criminal penalties.  Mauritania’s bankruptcy laws were last updated in 2001. The bankruptcy law allows for the reorganization or restructuring of a business.  There are very few reported cases of these laws being applied.

Investment Incentives

Investment incentives such as free land, deferred and reduced taxes, and tax-free importation of materials and equipment are available to encourage foreign investors.  The Ministry of

Economy and Finance offers tax benefits, including exemptions in some instances, to enterprises in Special Economic Zones and some companies in priority sectors throughout the country.  The Investment Code outlines standard investment incentives, but foreign investors may negotiate other incentives directly with the government.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Investment Code creates Special Economic Zones (Free Export Zone or Cluster of Development in the Interior) by decree.  SEZ are subject to continuous monitoring by the Customs Service in a manner specified in the decree. Nouadhibou, the commercial capital of Mauritania, is designated as a Free Trade Zone by the government.  The Nouadhibou Free Trade Zone has its own regulatory structure. As of January 2018, the Nouadhibou Free Trade Zone has granted 450 authorizations for companies, primarily in the tourism, services, and fisheries sectors.

The Investment Code provides three main preferential tax regimes: Small and Medium Enterprises Regimes, which apply to any investment between USD 167,000 and USD 667,000; Free Export Zones/Clusters of Development; and Targeted Industries, which includes agriculture, artisanal fishing, tourism, renewable energy, and raw material processing.  Land concessions allocated to companies located in Free Economic Zones will follow a rental rate determined by joint decision of the relevant Minister and the Minister of Economy, which sets land allocation prices. As for tax advantages, companies will be exempt from taxes, excluding personnel taxes such as for retirement and social security, if they have invested at least USD 1.6 million and generated at least 50 permanent jobs, and show a potential to export at least 80 percent of their goods or services.

Additionally, under the provisions in the revised Investment Code, companies will not be taxed on patents, licenses, property, or land, but rather assessed a single municipal tax that cannot exceed an annual amount of USD 16,000.  Companies established in free zones are exempt from taxes on profits for the first five years. Additionally, companies established in free zones benefit from a total exemption of customs duties and taxes on the importation and export.

Performance and Data Localization Requirements

The government mandates that companies may employ expatriate staff in no more than 10 percent of key managerial staff positions, in accordance with the Labor Code and are required to have a plan in place to “Mauritanize” expatriate staff positions.  Expatriate staff may be hired in excess of 10 percent with authorization from the appropriate industry authority by establishing that no competent Mauritanian national is available for the vacancy. Foreign companies are required to transfer skills to local employees by providing training for lower-skilled jobs.  However, this does not apply to companies operating within the Nouadhibou Free Trade Zone Authority.

Current immigration laws do not discriminate nor are they considered to apply excessively onerous visa, residence, or work permit requirements inhibiting foreign investors’ mobility.  However, some U.S. companies have expressed frustration with the difficulty in obtaining or renewing work and residency permits for their employees that are not Mauritanians.

The government imposes performance requirements as a condition for establishing, maintaining, or expanding an investment, or for access to tax and investment incentives.  Foreign investors consistently report that government-sponsored requests for tenders lack coherence and transparency. The revised Investment Code requires investors to purchase from local sources if the good or service is available locally and is of the same quality and price as could be purchased abroad.  There is no requirement for investors to export a certain percentage of output or have access to foreign exchange only in relation to their exports. If imported “dumped” goods are deemed to be competing unfairly with a priority enterprise, the government will respond to industry requests for tariff surcharges, thus providing some potential protection from competition.

Expatriate staff members working for companies in accordance with the Labor Code are eligible to import, free of customs duties and taxes, their personal belongings and one passenger vehicle per household, under the regime of exceptional temporary admission (Admission Temporaire Exceptionelle, or ATE).  All sales, transfers, or withdrawals are subject to permission of customs officials.

The Mauritanian government does not have any requirements or a mechanism that impedes companies from transmitting data freely outside the country.  There are no laws in place enforced on local data storage.

Real Property

Property rights are protected under the Mauritanian Civil Code, which is modeled on the French code.  In practice, however, it can be difficult to gain redress for grievances through the courts. Mortgages exist and are extended by commercial banks.  There is a well-developed property registration system for land and real estate in most areas of the country, but land tenure issues in southern Mauritania, particularly the area along the Senegal River, are the subject of much controversy.  For example, in January 2014, rural communities around Boghe (300 kilometers southeast of Nouakchott) denounced as expropriation the signing of an agreement with the Saudi Arabian Al Rajhi Bank that granted permission for the Bank to cultivate 31,000 hectares in Brakna and Trarza provinces.  Investors should be fully aware of the history of the lands they are purchasing or renting, and should verify that the local partner has the proper authority to sell/rent large tracts of land—particularly in this region—before agreeing to any deals. In 2015, the Ministry of Economy and Finance established a computerized system to provide more transparent land allocation.  All information regarding the property titles is available at the Land Registry Agency housed at the Ministry of Habitat, including information related to mortgages and other tax related matters. The Land Registry Agency performs due diligence prior to making the final title transfer. To register a property, owners only need to have their notarized sale agreement along with the title certificate.

Intellectual Property Rights

The legal protection of intellectual property rights (IPR) is still a relatively new concept in Mauritania, and those seeking legal redress for IPR infringements will find very little historical record of cases or legal structures in place to support such claims.  There is no separate judicial circuit that specializes in IPR.

Mauritania is a member of the Multilateral Investment Guarantee Agency (MIGA) and the African Organization of Intellectual Property (OAPI).  In joining the latter, member states agree to honor IPR principles and to establish uniform procedures of implementation for the following international agreements: the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Hague Convention for the Registration of Designs and Industrial Models, the Lisbon Convention for the Protection and International Registration of Original Trade Names, the Washington Treaty on Patents, and the Vienna Treaty on the Registration of Trade Names.  Mauritania signed and ratified the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994 but has yet to implement it. The government also signed and ratified the World Intellectual Property Organization (WIPO) Convention in 1976, but it has not signed or ratified the WIPO Internet treaties. The government is in the process of launching reforms related to property, product certification, and accreditation bodies to protect IPR. The Agency for Consumer Protection, housed at the Ministry of Commerce, is in charge of quality control and the prevention of sales of counterfeit goods in local markets, but its capabilities to track and enforce its regulations are very constrained.

Mauritania is not included in the United States Trade Representative (USTR) Notorious Markets List or the Special 301 Report.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/

Capital Markets and Portfolio Investment

In accordance with Article 3.1 of the Investment Code, the Government of Mauritania guarantees any individual or legal entity wishing to undertake business activities in the country the freedom of establishment in accordance with laws and regulations.  Private entities, whether foreign or national, have the right to freely establish, acquire, own, and/or dispose of interests in business enterprises and receive legal remuneration. Privatization and liberalization programs have also helped put private enterprises on an equal footing with respect to access to markets and credit.  In principle, government policies encourage the free flow of financial resources and do not place restrictions on access by foreign investors. Most foreign investors, however, prefer external financing due to the high interest rates and procedural complexities that prevail locally. Credit is often difficult to obtain due to a lax legal system to enforce regulations that build trust and guarantee credit return.  There are no legal or policy restrictions on converting or transferring funds associated with investments. Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries.

Commercial bank loans are virtually the only type of credit instrument.  There is no stock market or other public trading of shares in Mauritanian companies.  Currently, individual proprietors, family groups, and partnerships generally hold companies, and portfolio investments.

Money and Banking System

The IMF has in the past assisted Mauritania with the stabilization of the banking sector and access to domestic credit has become easier and cheaper.  A proliferation of banks has fostered competition that has contributed to the decline in interest rates from 30 percent in 2000 to 10 percent in 2009, not including origination costs and other fees.  Interest rates have remained stable since 2009, ranging between 10 to 17 percent as of April 2019.

The banking system is stable but fragile.  In 2018, GDP growth is estimated at 3.5 percent, up from 3.0 percent in 2017 and 1.4 percent in 2015.  Nevertheless, this rebound remains fragile as liquidity constraints in the financial market, arising from fiscal consolidation and an ineffective monetary policy, continue to dampen liquidity in the banking sector.  The country’s five largest banks are estimated to have USD 100 million in combined reserves; however, these figures cannot be independently verified, making an evaluation of the banking system’s strength impossible. As of April 2019, 25 banks, national and foreign, currently operate in Mauritania, despite the fact that only some 15 percent of the population holds bank accounts.  The Central Bank of Mauritania is in charge of regulating the Mauritanian banking industry, and the Central Bank has made reforms to streamline the financial sector’s compliance with international standards. The Ministry of Economy and Finance mandates that the Central Bank perform yearly audits of Mauritanian banks. There are no restrictions enforced on foreigners who wish to obtain an individual or business banking account.

In 2017, the Central Bank significantly reduced direct foreign currency sales to the private sector to better enforce foreign exchange regulations as part of its drive to allow for a more flexible determination of the exchange rate.  In 2018, the Central Bank of Mauritania lost all correspondence banking relationships with banks in the United States. This occurred because of de-risking policies enforced by U.S. banks.

Foreign Exchange and Remittances

Foreign exchange

There are no legal or policy restrictions on converting or transferring funds associated with investments.  Due to the global de-risking phenomenon, there are currently no correspondent banking relationships between U.S. and Mauritanian banks.  Local branches of international banks (such as Societe Generale or Attijari) do maintain correspondent banking relationships with U.S. banks and are able to clear transactions in USD.

Investors are guaranteed the free transfer of convertible currencies at the legal market rate, subject to the availability of such currencies. Similarly, foreigners working in Mauritania are guaranteed the prompt transfer of their professional salaries.  To transfer funds, investors are required to open a foreign exchange bank account in Mauritania. There are no maximum legal transaction limits for investors transferring money into or out of Mauritania, although regulations to withdraw money may be complicated in practice.

The local currency, the ouguiya, is freely convertible within Mauritania, but its exportation is not legally authorized.  Hard currencies can be obtained from the central bank and local commercial banks. The Central Bank holds regular foreign exchange auctions, allowing market forces to fix the value of the ouguiya.  Individuals and companies may obtain hard currency through the informal market and commercial banks for the payment of purchases or the repatriation of dividends. If the bank has hard currency available, there is no delay in effect for remitting investment returns.  However, if the bank does not have sufficient reserves, the hard currency must be obtained from the Central Bank in order to conduct the transfer. The Central Bank is required to prioritize government transfers, which could present further delays. Delays of one to three weeks, although relatively uncommon, can occur.

In January 2018, the government of Mauritania introduced a new currency.  The new currency drops a zero from the country’s previous currency; however, the value and the name of the currency remain unaffected by the change.  Local banks had to adapt their software, change their checkbooks, and reconfigured their ATMs to bring them into compliance with the new currency.

Remittance Policies

There are no legal parallel markets in Mauritania that would allow investors to remit investments through other means.  There is no limit on the inflow or outflow of funds for remittances of profits, debt service, capital or capital gains.

Businesses transfer money through the traditional Hawala system—they deposit their money in a Hawala store and designate a beneficiary for pick up.  The Hawala system has become a reliable substitute to the high interest rate, long wait period and transaction fees imposed by local banks. However, in March 2019, the Central Bank closed 700 illegal money transfer points to restructure the financial sector.  Currently, only nine agencies have a provisional authorization for transfer of funds.

Sovereign Wealth Funds

The Central Bank administers the National Fund for Hydrocarbon Reserves, a sovereign wealth fund (SWF), which was established in 2006.  The SWF is funded from the revenues received from the extraction of oil, any royalties and corporate taxes from oil companies, and from the profits made through the fund’s investment activities.  The fund’s mandate is to create macroeconomic stability by setting aside oil revenues for developmental projects. However, the fund’s management is considered to lack transparency and the projected revenue streams remain unrealized.

SOEs and the parastatal sector in Mauritania represent an important portion of the economy.  They have an impact on employment, service delivery, and most importantly fiscal reserves given their size in the economy and state budget.  However, they are constrained by weak institutional capacity. In recent years, parastatal companies and SOEs have experienced significant business and financial problems in terms of increasing levels of debt, operational losses, and payment delays.  This increase in fiscal reserve risk has led the government to provide subsidies to SOEs.

In 2017, the government announced its plan to privatize SONIMEX (La Societe Nationale d’Importation et d’Exportation).  SONIMEX is an import/export company involved in food distribution commodities (wheat, rice, tea, sugar, milk, vegetable oil) in Mauritania.  This project has not yet been finalized.

Hard budget constraints for SOEs are written into the Public Procurement Code, but are not enforced.  SOMELEC, the state-owned electricity company, has been operating in a precarious financial situation for many years.  The company relies on government financial support to remain operational.

Most state-owned enterprises in Mauritania have independent boards of directors.  The directors are usually appointed based on political affiliations.

There are about 120 SOEs and parastatal companies operating in the commercial sector with engagements in a wide range of sectors including energy, network utilities, mining, petroleum, telecommunications, transportation, commerce, and fisheries.  Parastatal and wholly owned SOEs remain the major employer in the country. This includes the National Mining Company, SNIM, which is by far the largest Mauritanian enterprise and the second largest employer in the country after public administration.

The publically available financial information on parastatal and wholly owned SOEs is incomplete and outdated, with the exception of budget transfers.  There is no publication of the expenditures SOEs allocate to research and development. In addition, they execute the largest portion of government contracts, receiving preference over the private sector.  According to the Public Procurement Code, there are no formal barriers to competition with SOEs. However, informal barriers such as denial of access to credit and/or land exist.

Privatization Program

We not aware of any privatization programs during the reporting period.

Historically, there has been little local awareness of corporate social responsibility in Mauritania, either on the part of producers or consumers.  However, awareness is growing, particularly as more foreign-owned companies enter the Mauritanian market. Certain state-run industries have been active in providing basic educational and training opportunities for the children of their employees and scholarships for their employees to study abroad, but this is usually the extent of social responsibility initiatives.  Companies in the mining and hydrocarbon industries send young Mauritanians overseas to complete their studies on scholarship programs; many of the scholarship recipients have family ties to powerful individuals in the companies. The larger fishing companies have recently started to provide more opportunities for qualified youth to study at the fishing and naval training school in Nouadhibou to prepare them for careers in the fishing industry.  Current projects by foreign-owned companies include providing free water to local communities; building vocational training centers, health clinics, and roadways; and providing healthcare equipment and medicines to towns near company operations.

Since 2011, three of Mauritania’s largest mining companies—Kinross, Mauritanian Copper Mines (MCM), and SNIM—funded a School of Mining with the goal of increasing the number of qualified Mauritanians to serve in the mining industry.  The school has a partnership with the Ecole Polytechnique in Montreal and with the mining companies. The school is considered a public entity under the Ministry of Oil, Energy, and Mines. In 2017, Kosmos Energy provided financial support to the national Diawling Park in the southern part of country, and in 2018 Kosmos launched the Kosmos Innovation Center in Mauritania.  ExxonMobil, BP and the other international oil companies now operating in Mauritania are likewise increasing corporate social responsibility programs.

Despite the ongoing push to fight corruption, wealthy business groups and government officials reportedly receive frequent favors from authorities, such as exemption from taxes, special grants of land, and favorable treatment during bidding on government projects.  Mauritanian and non-Mauritanian employees at every level and in every organization are believed to flout Mauritanian tax laws and filing requirements. The only exceptions are civil servants, whose income taxes are automatically deducted from their pay. Such widespread tax evasion and corruption has deprived the government of a significant source of revenue, weakening its capacity to provide necessary services.  In 2009, the government passed a law requiring all high-ranking government employees to publicly declare their assets, although this law is not enforced.

In the July 2009 presidential election, President Aziz ran on an anti-corruption and populist platform.  Donor partners applauded the release of the first-ever Mauritanian anti-corruption strategy in November 2009, and a number of high-profile anticorruption cases have demonstrated at least nascent efforts to fight corruption.  Although progress has been made, laws and regulations are still not evenly and effectively enforced, largely because corruption is endemic in a society that is still largely based on familial and tribal relationships rather than strict adherence to the rule of law.

Corruption is an obstacle to foreign direct investment in Mauritania, but firms generally rate access to credit, an underdeveloped infrastructure, and a lack of skilled labor as even greater impediments.  Corruption is most pervasive in government procurement, bank loans, fishing license attribution, land distribution, access to port facilities and tax payments. Giving or accepting a bribe is a criminal act punishable by two to 10 years imprisonment and fines up to USD 700, but there is little application of this law.  Firms commonly pay bribes to obtain telephone, electricity, and water connections, and construction permits more quickly.

There are several organizations that track corruption within Mauritania.  Transparency International has a representative who reports on local corruption policies and events.

In practice annual auditing of government, accounts are not enforced and therefore rarely conducted.  However, the government rectified previously misreported financial data in an effort to be more transparent, such as publishing quarterly financial statements on a government treasury website:  www.tresor.mr.

In April 2016, a new anti-corruption bill was introduced to address the provisions of the UN Convention against Corruption and to provide protection to NGOs involved in investigating corruptions cases.  Corruption is most pervasive in government procurement, bank loans, fishing license attribution, land distribution, tax payments, and mining licenses.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Cour Des Comptes Mauritanie
Email ccomptes@cc.gov.mr
Telephone: +222 4525 34 04
Fax: +222 4525 49 64

Contact at “watchdog” organization:

“Publiez ce que vous payez” (Publish What You Pay)
Executive Office
+222 4525-0455
+222 4641-7702

Mauritania’s constitution is grounded in French civil law and sharia (Islamic law).  The National Assembly exercises legislative functions but was weak relative to the executive.

In August 2017, the government organized a referendum on constitutional amendments, which passed with 85 percent of the vote.  One of the amendments led to the dissolution of the Senate and the transformation of the legislative system into a unicameral one.  The number of seats at the new National Assembly increased from 147 to 157. In September 2018 the Union for the Republic (UPR), the president’s party, won 95 of 157 seats in the National Assembly in legislative elections.

The National Police is responsible for enforcing the law and maintaining order in urban areas.  The National Guard, under the Ministry of Interior and Decentralization, performs limited police functions in keeping with its peacetime role as the guarantor of physical security at government facilities, including prisons.  Mauritanian security forces have demonstrated notable progress in restore civil order during riots and other large-scale disturbances throughout the country.

The Ministry of Interior and Decentralization’s newest police force, the General Group for Road Safety, maintains security on roads and operates checkpoints throughout the country.

The Mauritanian economy is highly informal (mainly in agriculture, artisanal fisheries/ mining and animal husbandry) and unemployment rate is pegged at 12 percent.  While labor is abundant, there is a shortage of skilled workers and well-trained technical and managerial personnel in most sectors of the economy. As a result, there are few sectors of the economy that use advanced technologies because the skilled labor required to operate them is not readily available.  The mining sector is led by the national company SNIM; the subsidiary of a Canadian gold mining company, Kinross-Tasiast; and the subsidiary of a Canadian company, MCM. These companies provide advanced training for their employees.

The “Mauritanization law” requires that employers give priority to nationals over foreign workers, unless the skills required for the position cannot be filled by the national labor force.  In this case the employer should create a plan of “Mauritanization” to transfer skillsets to local workers within a period of two years. There is no restriction on employers resorting to reducing their workforce in periods of unfavorable market conditions.  However, the law requires that compensations be granted to laid-off employees.

The ILO reported in 2018 that a significant pay gap between staff in the labor inspectorate and staff in other government inspection departments who receive better remuneration (such as tax inspectors or education inspectors) led to attrition.  The ILO also reported that the labor inspectorate was subject to undue influence by employers and the government, thereby reducing the effectiveness of inspection activity.

The law provides that men and women should receive equal pay for equal work.  The two largest employers, the civil service and the state mining company, observed this law; most employers in the private sector reportedly did not.  In the modern wage sector, women also received family benefits, including three months of paid maternity leave. Women faced employment discrimination, because employers usually preferred to hire men, and women were overrepresented in low-paying positions.

Mauritania signed an agreement with Overseas Private Investment Corporation (OPIC), but its program is limited.  Potential investors should contact OPIC directly for guidance. Mauritania is a member of the Multilateral Investment Guarantee Agency (MIGA), which protects foreign direct investment against political risk.  A British-Mauritanian insurance company, Atlantic Londongate, offers broad commercial coverage.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

Andrew Byrley or Samba Diallo
Economic Officer & Economic Specialist
+222 4525-2660
NouakchottEconComm@state.gov

Policies Towards Foreign Direct Investment

In 1995 the Nigerian Investment Promotion Commission Act dismantled years of controls and limits on foreign direct investment (FDI), opening nearly all sectors to foreign investment, allowing for 100 percent foreign ownership in all sectors (with the exception of the petroleum sector, where FDI is limited to joint ventures or production sharing contracts), and creating the Nigerian Investment Promotion Commission (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, however) in order 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. However, without strong political and policy support, and because of the unresolved challenges to investment and business in Nigeria, the ability of the NIPC to attract new investment has been limited.

The Nigerian government has continued to promote import substitution policies such as trade restrictions and local content requirements in a bid to attract investment that would develop domestic capacity to produce products 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.  Despite the government’s stated goal to attract investment, investors generally find Nigeria a difficult place to do business.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign control of investments in Nigeria.  However, in some instances regulatory bodies may insist on Nigerian equity as a prerequisite to doing business.  The NIPC Act of 1995 liberalized the ownership structure of business in Nigeria, so that foreign investors can now own and control 100 percent of the shares in any company (as opposed to the earlier arrangement of 60 percent – 40 percent in favor of Nigerians).

The lack of restrictions applies to all industries, except in the oil and gas sector where investment is limited to joint ventures or production-sharing agreements.  Additional laws restrict industries to domestic investors if they are considered crucial to national security, such as firearms, ammunition, and military and paramilitary apparel.  Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990. The Act prohibits the nationalization or expropriation of foreign enterprises except in cases of national interest.

Other Investment Policy Reviews

The OECD completed an investment policy review of Nigeria in May 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 (FIRS) developed a compendium of investment incentives which is available online at: https://nipc.gov.ng/compendium 

Business Facilitation

Although the NIPC offers the One-Stop Investment Centre, 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).  While many steps for business registration can be completed online, the final step requires submitting original documents to a CAC office in exchange for final registration.  On average, it takes eight procedures and 10 days to establish a foreign-owned limited liability company (LLC) in Nigeria (Lagos), significantly faster than the regional average for Sub-Saharan Africa at 23 days.  Time required is likely to vary in different parts of the country. Only a local legal practitioner accredited by the Corporate Affairs Commission 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.

Although not online, the One-Stop Investment Center co-locates relevant government agencies in one place in order to provide more efficient and transparent services to investors.  Investors may pick up documents and approvals that are statutorily required to establish an investment project in Nigeria. The Center assists with visas for investors, company incorporation, business permits and registration, tax registration, immigration, and customs issues.  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.

Outward Investment

The Nigerian Export Promotion Council 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 who collected the grants but did not actually export.  After a period of re-evaluation and revision, the program was relaunched in 2018. 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 quantities sufficient to support exports as well as the domestic market.  Therefore, the vast majority of Nigeria’s manufacturers remain unable or uninterested in competing in the international market, especially given the size of Nigeria’s domestic market.

The Nigerian government signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2000.  U.S. and Nigerian officials held their latest round of TIFA talks in April 2016. In 2017, Nigeria and the United States signed a Memorandum of Understanding to formally establish the U.S. – Nigeria Commercial and Investment Dialogue (CID), a new bilateral policy instrument focused on improving trade and investment between the two nations.  The aim of the CID is to promote increased, diverse, and sustained trade and investment with an initial focus on infrastructure, agriculture, digital economy, investment, and regulatory reform.

Nigeria has bilateral investment agreements with Algeria, Austria, Bulgaria, Canada, China, Egypt, Ethiopia, France, Finland, Germany, Italy, Jamaica, the Republic of Korea, Kuwait, Morocco, the Netherlands, Romania, Russia, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, Uganda, and the United Kingdom.  Fifteen of these treaties (those with China, France, Finland, Germany, Italy, the Republic of Korea, The Netherlands, Romania, Serbia, South Africa, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom) have been ratified by both parties. Nigerian government officials blame treaty partners for the lack of ratification, but the ratification process within Nigeria has not proven proactive or well-organized.

Nigeria is a party to double taxation agreements with the following 23 countries: Belgium, Canada, China, Czech Republic, France, Ghana, Italy, Kenya, the Republic of Korea, Mauritius, the Netherlands, Pakistan, the Philippines, Poland, Qatar, Romania, Singapore, Slovakia, South Africa, Spain, Sweden, United Arab Emirates, and the United Kingdom.  The most recent agreement was signed with Ghana in July 2018; however, it and a number of the other agreements remain to be ratified. Nigeria does not have such an agreement with the United States.

Transparency of the Regulatory System

Nigeria’s legal, accounting, and regulatory systems comply with international norms, but enforcement remains uneven.  Opportunities for public comment and input into proposed regulations sometimes occur. Professional organizations set standards for the provision of professional services, such as accounting, law, medicine, engineering, and advertising.  These standards usually comply with international norms. No legal barriers prevent entry into these sectors.

Ministries and regulatory agencies develop and make public anticipated regulatory changes or proposals and publish proposed regulations before their application.  The general public has the opportunity to comment through targeted outreach, including business groups and stakeholders, and during the public hearing process before a bill becomes law.  There is no specialized agency tasked with publicizing proposed changes and the time period for comment may vary. Ministries and agencies do conduct impact assessments, including environmental assessments, but impact assessment methodology may vary.  The National Bureau of Statistics reviews regulatory impact assessments conducted by other agencies. Laws and regulations are publicly available.

Fiscal management occurs at all three tiers of government: national, 36 state governments and Federal Capital Territory (FCT), and 774 local governments.  Revenues from oil and non-oil sources are collected into the federation account and then shared among the different tiers of government by the Federal Account Allocation Committee (FAAC) in line with a statutory sharing formula.  All state governments are allowed to collect internally generated revenues, which vary from state to state. However, the fiscal federalism structure does not compel states to be accountable to the federal government or transparent about revenues generated or received from the federation account.  The national government’s finances are more transparent as budgets are made public and the financial data are published by agencies such as the CBN, Debt Management Office, and the National Bureau of Statistics. However, the financial dealings of the state-owned oil company, the Nigerian National Petroleum Corporation, are very opaque.

The Debt Management Office (DMO) puts Nigeria’s total debt stock at USD 79.4 billion as of December 2018 – USD 25.2 billion or nearly 32 percent of which is external.  Debts owed by state governments rose 110 percent from USD 5.92 billion between 2014 and 2017, during which the national government had allocated USD 4.8 billion to bail out several states that could not pay salaries.  The total debt figures presented by the DMO usually do not include off-balance-sheet financing such as sovereign guarantees.

International Regulatory Considerations

Foreign companies operate successfully in Nigeria’s service sectors, including telecommunications, accounting, insurance, banking, and advertising.  The Investment and Securities Act of 2007 forbids monopolies, insider trading, and unfair practices in securities dealings. Nigeria is not a party to the WTO’s Government Procurement Agreement (GPA).  Nigeria generally regulates investment in line with the WTO’s Trade-Related Investment Measures (TRIMS) Agreement, but the government’s local content requirements in the oil and gas sector and the ICT sector may conflict with Nigeria’s commitments under TRIMS.

In December 2013, the National Information Technology Development Agency (NITDA), under the auspices of the Ministry of Communication, issued the Guidelines for Nigerian Content Development in the ICT sector.  These guidelines require original ICT equipment manufacturers, within three years from the effective date of the guidelines, to use 50 percent local manufactured content and to use Nigerian companies in providing 80 percent of value added on networks.  The guidelines also require multinational companies operating in Nigeria to source all hardware products locally; all government agencies to procure all computer hardware only from NITDA-approved original equipment manufacturers; and ICT companies to host all consumer and subscriber data locally, use only locally manufactured SIM cards for telephone services and data, and to use indigenous companies to build cell towers and base stations.  Enforcement of the guidelines is largely inconsistent.  The Nigerian government generally lacks the capacity and resources to monitor labor practices, technology compliancy, and digital data flows.  There are reports that individual Nigerian companies periodically lobby the National Assembly and/or NITDA to address allegations (warranted or not) against foreign firms that they are in non-compliance with the guidelines.

The goal is to promote development of domestic production of ICT products and services for the Nigerian and global markets, but the guidelines pose impediments and risks to foreign investment and U.S. companies by interrupting their global supply chain, increasing costs, disrupting global flow of data, and stifling innovative products and services.  Industry representatives remain concerned about whether the guidelines would be implemented in a fair and transparent way towards all Nigerian and foreign companies. All ICT companies, including Nigerian companies, use foreign manufactured products as Nigeria does not have the capacity to supply ICT hardware that meets international standards.

Nigeria is a member of the Economic Community of West African States (ECOWAS), which implemented a Common External Tariff (CET) beginning in 2015 with a five-year phase in period.  An internal CET implementation committee headed by the Fiscal Policy/Budget Monitoring and Evaluation Department of the Nigeria Customs Service was set up to develop the implementation work plans that were consistent with national and ECOWAS regulations by the year 2020.  The country has also put in place a CET monitoring committee, domiciled at the Ministry of Finance consisting of a number of Ministries, Departments and Agencies (MDAs) that have issues related to the CET. Under the CET, Nigeria applies five tariff bands: zero duty on capital goods, machinery, and essential drugs not produced locally; 5 percent duty on imported raw materials; 10 percent duty on intermediate goods; 20 percent duty on finished goods; and 35 percent duty on goods in certain sectors such as palm oil, meat products, dairy and poultry that the Nigerian government seeks to protect.  Under the CET, ECOWAS member governments are permitted to assess import duties higher than the maximum allowed in the tariff bands (but not to exceed a total effective duty of 70 percent) for up to 3 percent of the 5,899 tariff lines included in the ECOWAS CET.

Legal System and Judicial Independence

Nigeria has a complex, three-tiered legal system comprised of English common law, Islamic law, and Nigerian customary law.  Common law governs most business transactions, 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 is slow and inefficient, lacks adequate court facilities and computerized document-processing systems, and poorly remunerates judges and other court officials, all of which encourages corruption and undermines enforcement.  Judges have frequently failed to appear for trials.  In addition, the pay for court officials is low, and they often lack proper equipment and training.

Although the constitution and law provide for an independent judiciary, the judicial branch remains susceptible to pressure from the executive and legislative branches.  Political leaders have influenced the judiciary, particularly at the state and local levels.

The World Bank’s publication, Doing Business 2019, ranked Nigeria 92 out of 190 on enforcement of contracts, a significant improvement from previous years.  The Doing Business report credited business reforms for improving contract enforcement by issuing new rules of civil procedure for small claims courts which limit adjournments to unforeseen and exceptional circumstances but noted that there can be variation in performance indicators between cities in Nigeria (as in other developing countries).  For example, resolving a commercial dispute takes 476 days in Kano but 447 days in Lagos. In the case of Lagos, the 447 days includes 40 days for filing and service, 265 days for trial and judgment and 142 days for enforcement of the judgment with total costs averaging 42 percent of the claim. In Kano, however, filing and service only takes 21 days with enforcement of judgement only taking 90 days, but trial and judgment accounts for 365 days with total costs averaging lower at 28.4 percent of the claim.  In comparison, in OECD countries the corresponding figures are an average of 582 days and averaging 21.2 percent of the claim and in sub-Saharan countries an average of 655 days and averaging 42.3 percent of the claim.

Laws and Regulations on Foreign Direct Investment

The NIPC Act of 1995 allows 100 percent foreign ownership of firms, except in the oil and gas sector where investment remains limited to joint ventures or production-sharing agreements.  Laws restrict industries to domestic investors if they are considered crucial to national security, such as firearms, ammunition, and military and paramilitary apparel. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990.  The Act prohibits the nationalization or expropriation of foreign enterprises except in cases of national interest, but the Embassy is unaware of specific instances of such interference by the government.

Competition and Anti-Trust Laws

After years of debate, the Nigerian government enacted the Federal Competition and Consumer Protection Act in February 2019.  The bill repealed the Consumer Protection Act of 2004 and replaced the previous Consumer Protection Council with a Federal Competition and Consumer Protection Commission while also creating a Competition and Consumer Protection Tribunal to handle issues and disputes arising from the operations of the Act.  Under the terms of the Act, businesses will be able to lodge anti-competitive practices complaints against other firms in the Tribunal.  The bill prohibits agreements made to restrain competition, such as agreements on price fixing, price rigging, collusive tendering, etc. (with specific exemptions for collective bargaining agreements and employment, among other items). The bill empowers the President of Nigeria to regulate prices of certain goods and services on the recommendation of the Commission.

The law prescribes stringent fines for non-compliance.  A general fine imposed by this law for offences committed by companies is an amount up to 10 percent of the company’s annual turnover in the preceding business year.  The law will supersede previous systems whereby particular regulatory agencies had consumer protection oversight and the Investment and Securities Act had provisions on competition.

Expropriation and Compensation

The Nigerian government has not expropriated or nationalized foreign assets since the late 1970s, and the NIPC Act of 1995 forbids nationalization of a business or assets unless the acquisition is in the national interest or for a public purpose.  In such cases, investors are entitled to fair compensation and legal redress. A U.S.-owned waste management investment expropriated by Abia State in 2008 is the only known U.S. expropriation case in Nigeria.

Dispute Settlement

ICSID Convention and New York Convention

Nigeria is a member of the International Center for Settlement of Investment Disputes and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (also called the “New York Convention”).  The Arbitration and Conciliation Act of 1988 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 United Nations Commission on International Trade Law (UNCITRAL) arbitration rules or any other international arbitration rule acceptable to the parties, and made the 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 receive equal treatment, and ensures that each party has full opportunity to present its case. Some U.S. firms have written provisions mandating International Chamber of Commerce (ICC) arbitration into their contracts with Nigerian partners. Several other arbitration organizations also operate in Nigeria.

Investor-State Dispute Settlement

Nigeria’s civil courts have jurisdiction over disputes between foreign investors and the Nigerian government as well as between foreign investors and Nigerian businesses.  The courts occasionally rule against the government. 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.

Section 26 of the NIPC Act of 1995 provides for the resolution of investment disputes through arbitration as follows:

1. Where a dispute arises between an investor and any Government of the Federation in respect of an enterprise, all efforts shall be made through mutual discussion to reach an amicable settlement.
2. Any dispute between an investor and any Government of the Federation in respect of an enterprise to which this Act applies which is not amicably settled through mutual discussions, may be submitted at the option of the aggrieved party to arbitration as follows:
   1. in the case of a Nigerian investor, in accordance with the rules of procedure for arbitration as specified in the Arbitration and Conciliation Act; or
   2. in the case of a foreign investor, within the framework of any bilateral or multilateral agreement on investment protection to which the Federal Government and the country of which the investor is a national are parties; or
   3. in accordance with any other national or international machinery for the settlement of investment disputes agreed on by the parties.
3. Where in respect of any dispute, there is disagreement between the investor and the Federal Government as to the method of dispute settlement to be adopted, the International Centre for Settlement of Investment Dispute Rules shall apply.

Nigeria is a signatory to the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards.  Nigerian courts have generally recognized contractual provisions that call for international arbitration. Nigeria does not have a bilateral investment treaty or free trade agreement with the United States.

International Commercial Arbitration and Foreign Courts

Bankruptcy Regulations

Reflecting Nigeria’s business culture, entrepreneurs generally do not seek bankruptcy protection.  Claims often go unpaid, even in cases where creditors obtain judgments against defendants. Under Nigerian law, the term bankruptcy generally refers to individuals whereas corporate bankruptcy is referred to as insolvency.  The former is regulated by the Bankruptcy Act of 1990, as amended by the Bankruptcy Decree 109 of 1992. The latter is regulated by Part XV of the Companies and Allied Matters Act Cap 59 1990 which replaced the Companies Act, 1968.  The Embassy is not aware of U.S. companies that have had to avail themselves of the insolvency provisions under Nigerian law.

Investment Incentives

The Nigerian government maintains different and overlapping incentive programs.  The Industrial Development/Income Tax Relief Act, Cap 17, Laws of the Federation of Nigeria, 2004 provides incentives to pioneer industries deemed beneficial to Nigeria’s economic development and to labor-intensive industries, such as apparel.  There are currently 99 industries and products that qualify for the pioneer status incentive through the NIPC, following the addition of 27 industries and products which were added to the list in late 2017. The government has added a stipulation calling for a review of the qualifying industries and products to occur every two years.  Companies that receive pioneer status may benefit from a tax holiday from payment of companies income tax for an initial period of three years, extendable for one or two additional years. A pioneer industry sited in an economically disadvantaged area is entitled to a 100 percent tax holiday for seven years and an additional 5 percent depreciation allowance over and above the initial capital depreciation allowance.  Additional tax incentives are available for investments in domestic research and development, for companies that invest in local government areas (LGAs) deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for a number of other investment scenarios. For a full list of incentives, refer to the Nigerian Investment Promotion Commission website at: https://www.nipc.gov.ng/investment-incentives/.

The Nigerian Export Promotion Council administers an Export Expansion Grant (EEG) scheme to improve non-oil export performance.  The program was suspended in 2014 due to concerns about corruption on the part of companies who collected the grants but did not actually export, but was revised and relaunched in 2018.  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 for the importation of machinery and raw materials used for generating exports. Repayment terms are typically up to seven years, including a moratorium period of up to two years depending on the loan amount and the project being finance.  Agencies created to promote industrial exports remain burdened by uneven management, vaguely-defined policy guidelines, and corruption.

The NIPC states that up to 120 percent of expenses on (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and are connected with the business from which income or profits are derived. Also, for the purpose of R&D on local raw materials, 140 percent of expenses are allowed.  For cases in which the research is long-term, it will be regarded as a capital expenditure and will be written off against profit.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Nigerian Export Processing Zone Authority (NEPZA) allows duty-free import of all equipment and raw materials into its export processing zones.  Up to 100 percent of production in an export processing zone may be sold domestically based on valid permits and upon payment of applicable duties. Investors in the zones are exempt from foreign exchange regulations and taxes and may freely repatriate capital.  The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program, resulting in the establishment of the Lekki FTZ (owned by Lagos state), and the Olokola FTZ (which straddles Ogun and Ondo states and is owned by those two states, the federal government, and private oil companies).  Workers in FTZs may unionize, but may not strike for an initial ten-year period.

Nigeria ratified the WTO Trade Facilitation Agreement (TFA) in 2016 and the Agreement entered into force in February 2017.  Nigeria already implements items in Category A under the TFA and has identified, but not yet implemented, its Category B and C commitments.  In August 2016, Nigeria requested additional technical assistance to implement and enforce its Category C commitments.  (See https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm   )

Performance and Data Localization 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 (when applicable) to conduct business in Nigeria.  Manufacturing companies sometimes must meet local content requirements. Long-term expatriate personnel do not require work permits, but they remain subject to needs quotas requiring them to obtain residence permits that allow salary remittances abroad. Expatriates looking to work in Nigeria on a short-term basis can either request a temporary work permit, which is usually granted for a two-month time period but can be extended up to six months, or a business visa, if only traveling to Nigeria for the purpose of meetings, conferences, seminars, trainings, or other brief business activities.  Authorities permit larger quotas for professions deemed in short supply, such as deep-water oil-field divers. U.S. companies often report problems in obtaining quota permits. The Nigerian government’s Immigration Regulations 2017 introduced additional means by which foreigners can obtain residence in Nigeria. Foreign nationals who have imported an annual minimum threshold of capital over a certain period of time may be issued a permanent residence permit, as long as the investment is not withdrawn. The Nigerian Oil and Gas Content Development Act, 2010 (NOGCDA) restricts the number of expatriate managers to 5 percent of the total number of personnel for companies in the oil and gas sector.

Technology Transfer Requirements

The National Office of Industrial Property Act of 1979 established the National Office for Technology Acquisition and Promotion (NOTAP).  NOTAP’s main objective is to regulate the international acquisition of technology while creating an environment conducive to local technology.  To this end, NOTAP recommends local technical partners to Nigerian users in a bid to reduce the level of imported technology, which currently accounts for over 90 percent of technology in use in Nigeria.  One of NOTAP’s major activities is the review of Technology Transfer Agreements (TTAs), a requirement for importing technology into Nigeria and for companies operating in Nigeria to access foreign currency.  NOTAP reviews three major aspects prior to approval of TTAs and subsequent issuance of a certificate:

• Legal – ensuring that the clauses in the agreement are in accordance with Nigerian laws and legal frameworks within which NOTAP operates;
• Economic – ensuring prices are fair for the technology offered; and
• Technical – ensuring transfer of technical knowledge.

One of the chief complaints among American firms concerning the TTA is the length of the approval process which can take up to three months.  NOTAP took steps to automate the TTA approval process in order reduce the approval process to one month or less. However, total number of days for processing TTAs by NOTAP from the date of filing the application to the issuance of confirmation of reasonableness is still 60 business days. See https://notap.gov.ng/sites/default/files/stages_involved.pdf  .

The NOGCDA has technology-transfer requirements that may violate a company’s intellectual property rights.

Data Storage

The Guidelines for Nigerian Content Development in the ICT sector issued by the National Information Technology Development Agency (NITDA) on December 3, 2013, require ICT companies to host all consumer and subscriber data locally to ensure the security of government data and promote development of the ICT by mandating all government ministries, departments and agencies to source and procure software from only local and indigenous software development companies.  Enforcement of the guidelines is largely absent as the Nigerian government lacks capacity and resources to monitor digital data flows. Federal government data is hosted locally in data centers that meet international standards. In 2019 NITDA updated the 2013 Guidelines for Data Protection (https://nitda.gov.ng/wp-content/uploads/2019/01/Nigeria percent20Data percent20Protection percent20Regulation.pdf) and rolled out the regulatory framework for providers of public internet access services such that only registered, verified and vetted providers can provide public internet access service in Nigeria.

Customs

The Nigerian Customs Service (NCS) and the Nigerian Ports Authority (NPA) exercise 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 to minimize tariffs and lower landed costs.  Others ship their goods to ports in neighboring countries, primarily Benin, after which they transport overland and smuggle into the country. The Nigerian government implements a destination inspection scheme whereby all inspections occur upon arrival into Nigeria, rather than at the ports of origin.  In December 2013, the NCS regained the authority to conduct destination inspections, which had previously been contracted to private companies. NCS also introduced the Nigeria Integrated Customs Information System (NICIS) platform and an online system for filing customs documentation via a Pre-Arrival Assessment Report (PAAR) process but the NCS still carries out 100 percent cargo examinations and shipments take more than 20 days to clear through the process.

Shippers report that efforts to modernize and professionalize the NCS and the NPA have largely been unsuccessful – port congestion persists and clearance times are long.  The 2017 presidential directive for the Apapa Port, which handles over 40 percent of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance is not effective.  The port is congested, inefficient and the proliferation of customs units incentivizes corruption from official and unofficial middle men who complicate and elongate the clearance process.  Freight forwarders usually resort to bribery of customs agents and port officials to avoid extended delays clearing imported goods through the NPA and NCS.  Other ports are not viable or efficient and are virtually idle. Smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

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.  In 2018, Nigeria instituted a visa-on-arrival system, which generally works relatively well, but still requires lengthy processing at an embassy or consulate abroad before an authorization is issued. Some U.S. businesses have reported being solicited for bribes in the visa-on-arrival program.  Visa on arrival is not valid for employment or residence. Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost from USD 1,000 to USD 3,000 in facilitation fees. The Nigerian government announced a new visa rule in August 2011 to encourage foreign investment, under which legitimate investors can obtain multiple entry-visas at points of entry into Nigeria.  Obtaining a visa prior to traveling to Nigeria is strongly encouraged.

Real Property

The Nigerian government recognizes secured interests in property, such as mortgages.  The recording of security instruments and their enforcement remain subject to the same inefficiencies as those in the judicial system.  In the World Bank Doing Business 2019 Report, Nigeria ranked 184 out of the 190 countries surveyed for registering property, a decline of five points over its 2018 ranking.  In Lagos, property registration required an average of 12 procedures over 105 days at a cost of 11.1 percent of the property value while in Kano registering property averages 11 procedures over 47 days at a cost of 11.8 percent of the property value.

Fee simple property rights remain rare.  Owners transfer most property through long-term leases, with certificates of occupancy acting as title deeds.  Property transfers are complex and must usually go through state governors’ offices, as state governments have jurisdiction over land ownership.  Authorities have often compelled owners to demolish buildings, including government buildings, commercial buildings, residences, and churches, even in the face of court injunctions. Therefore, acquiring and maintaining rights to real property can be problematic.

Clarity of title and registration of land ownership remain significant challenges throughout rural Nigeria, where many smallholder farmers have only ancestral or traditional use claims to their land.  Nigeria’s land reforms have attempted to address this barrier to development but with limited success.

Intellectual Property Rights

Nigeria’s legal and institutional infrastructure for protecting intellectual property rights (IPR) is in need of further development and funding.  Even though there are laws for enforcing most IPR, the legislation is deficient with respect to online piracy, geographical indications, and plant and animal breeders’ rights.  A bill to establish the Industrial Property Commission to oversee the registration of trade marks, patents, designs, plant varieties, animal breeders and farmers’ rights, as well as supervise the new registries created under the Industrial Property Act, has been in the works since 2016.  No new IPR legislation has been enacted.

Copyright protection in Nigeria is governed by the Copyright Act of 1988, as amended in 1992 and 1999, which provides an adequate basis for enforcing copyright and combating piracy.  The Act is administered by the Nigerian Copyright Commission (NCC), a division of the Ministry of Justice. The International Anti-Counterfeiting Coalition (IACC) has long noted that the Copyright Act should be amended to provide stiffer penalties for violators.  Nigeria is a member of the World Intellectual Property Organization (WIPO) and in 2017 passed legislation to ratify the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, both of which it signed in 1997. These treaties have becoming increasingly relevant since they address important digital communication and broadcast issues.  The 2016 Draft Copyright Bill was revised to bring it into compliance with these two treaties and was sent to the National Assembly in December 2017.

Local content guidelines issued by the Ministry of Communication Technology (MCT) in 2013 and titled the Guidelines for Nigerian Content Development in Information and Communications Technology have raised IPR concerns about the future ability of the Nigerian government to protect data and trade secrets since the localization processes require the disclosure of source code and other sensitive design elements as a condition of doing business.  The IT industry in Nigeria has pushed back strongly against several of the measures in those guidelines, which remain in effect but have not been fully enforced. While the National Information Technology Development Agency (NITDA) does not currently require in-country product manufacturing due to the difficult business environment in Nigeria, it has noted that it would continue to press for local information and communications technology (ICT) capacity building programs.

Violations of Nigerian IPR laws continue to be widespread due in large part to a culture of inadequate enforcement.  That culture stems from several factors, including insufficient resources among enforcement agencies, lack of political will and focus on IPR, porous borders, entrenched trafficking systems that make enforcement difficult (and sometimes dangerous), and corruption.  The NCC, which has primary responsibility for copyright enforcement, is widely viewed as understaffed and underfunded relative to the magnitude of the IPR challenge in Nigeria. Nevertheless, the NCC continues to carry out enforcement actions on a regular basis. According to its report for 2018, the NCC conducted five anti-piracy operations and seized 288 copyrighted works, including DVDs, books, MP3s, and software.  Anti-piracy operations in 2018 led to seven arrests.

The Nigeria Customs Service (NCS) has general authority to seize and destroy contraband.  Under current law, copyrighted works require a notice issued by the rights owner to Customs to treat such works as infringing, but implementing procedures have not been developed and this procedure is handled on a case-by-case basis between the NCS and the NCC.  Once seizures are made, the NCS invites the NCC to inspect and subsequently take control of the fake goods for further investigation since the NCC has the statutory responsibility to investigate and prosecute copyright violations. The NCC is responsible for the cost of moving and storing infringing goods.  If, after investigations, any persons are identified as associated with the infringing materials, a decision may be taken to prosecute. When no person is identified, the NCC may obtain an order of court to destroy such works. The NCC works in cooperation with rights owners’ associations and stakeholders in the copyright industries on such matters.

Many U.S. government agencies, including the Department of Justice, the U.S. Patent and Trademark Office, the U.S. Copyright Office, the Department of Homeland Security, the Internal Revenue Service, and others have recently led or participated in IPR capacity building efforts that have included participants from Nigeria’s Economic and Financial Crimes Commission, the Nigerian Customs Service, the Nigerian Police, the Nigerian Copyright Commission, the Nigerian Trademarks, Patents, and Designs Registry, the Standards Organization of Nigeria, and the National Agency For Food and Drug Administration and Control.

Nigeria was not included in the United States Trade Representative (USTR) 2019 Special 301 Report or the 2018 Notorious Markets List.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The NIPC Act 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.

After a strong performance in 2017, the NSE experienced significant contractions and decline in 2018, losing nearly 20 percent on its all-share index year-on-year.  The stark reverse in performance was mostly attributed to government regulatory uncertainty and the 2019 presidential elections. As of December 2018, the NSE had 169 listed companies and a total market capitalization of USD 32.5 billion, a 13.9 percent decrease from 2017.  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 NSE, but those proposals have not been enacted to date.

The government employs debt instruments, issuing bonds of various maturities ranging from two to 20 years.  Nigeria has issued bonds to restructure the government’s domestic debt portfolio from short-term to medium- and long-term instruments.  Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital.  The Nigerian Securities and Exchange Commission (NSEC) has issued stringent guidelines for states wishing to raise funds on capital markets, such as requiring credit assessments conducted by recognized credit rating agencies.

Money and Banking System

The Central Bank of Nigeria (CBN) currently licenses 21 deposit-taking commercial banks in Nigeria.  Following a 2009 banking crisis, CBN officials intervened in eight of 24 commercial banks (roughly one-third of the system by assets) due to insolvency or serious undercapitalization and established the government-owned Asset Management Company of Nigeria (AMCON) to address bank balance sheet disequilibria via discounted purchases of non-performing loans.  The Nigerian banking sector emerged stronger from the crisis thanks to AMCON and a number of other reforms undertaken by the CBN, including the adoption of uniform year-end IFRS financial reporting to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks. In 2013 the CBN introduced a stricter supervision framework for the country’s top eight banks, identified as “Systemically Important Banks” (SIBs) as they account for more than 70 percent 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.  These eight banks are: First Bank of Nigeria, United Bank for Africa, Zenith Bank, Access Bank, Ecobank Nigeria, Guaranty Trust Bank, Skye Bank, and Diamond Bank. Under the new 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 percent. In September 2018, the CBN revoked the operating license of Skye Bank Plc, due to the deterioration of its share capital and its board’s failure to recapitalize the bank. The CBN reported that total non-performing loans (NPLs) grew by 14.8 per cent in 2017 while they dropped to 14.2 percent of outstanding loans at the end of 2018.  Nigerian government and private sector analysts assess that the volume of non-performing loans may be higher than these figures, owing in part to banks not reporting non-performing insider loans made to banks’ owners and directors.

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.  There are five licensed merchant banks – Altitude Microfinance Bank Limited, Coronation Merchant Bank Limited, FBN Merchant Bank, FSDH Merchant Bank Ltd and Rand Merchant Bank Nigeria Limited.

The CBN has issued regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country.  Foreign institutions’ aggregate investment must not be more than 10 percent of the latter’s total capital.

Foreign Exchange and Remittances

Foreign Exchange Policies

Foreign currency for most transactions is procured through local banks in the inter-bank market.  Low value foreign exchange may also be procured at a premium from foreign exchange bureaus, called Bureaus De Change.  Nigerian, American, and other foreign businesses have frequently expressed 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 because of 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; the number of categories has since been increased to 43.  Affected businesses (American and Nigerian) have complained publicly and privately that the policy in effect bans the import of some 700 individual items and severely hampers their ability to source inputs and raw materials.  While the CBN has often referred to the list as temporary, the restriction remains in place, with an additional item added in 2018, bringing the number to 43. In February 2019, the Governor of the Central Bank commented that the Bank is currently considering adding more items to the list and bringing the number as high as 50 items.

https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf 

In 2017, the CBN began providing more foreign exchange to the interbank market via wholesale and retail forward contract auctions, in order to meet some of the demand that had been forced to the parallel market.  These actions satisfied some of the pent-up demand for dollars in the economy and resulted in a strengthening of the naira at the parallel market from a low of 520 naira to the dollar in January 2017 to around 390 naira to the dollar in April 2017.  The CBN also established an “investors and exporters” window in 2017 which allows trades through that window to occur at around 360 naira to the dollar. This, combined with increased oil revenue, has boosted CBN reserves and helped stabilize the foreign exchange market.  Most trade happens at the investors and exporters window, which provides the value of the naira quoted by financial markets globally, while the CBN continues to peg the official interbank rate at 305 naira to the dollar for government transactions. The CBN also maintains separate window for “invisibles” such as education and medical expenses abroad, and a retail window which subsidizes imports of petroleum products, raw materials, agricultural equipment and the aviation sector.

Remittance Policies

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 repatriating dividends from Nigeria. Money transfers usually take no more than 48 hours.  In 2015, the CBN implemented restrictions on foreign exchange remittances. All such transfers must occur 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.  Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement (http://www.imf.org/External/Pubs/FT/AA/index.htm#art7  ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) is the manager of Nigeria’s sovereign wealth fund.  It was created by the Nigeria Sovereign Investment Authority Act in 2011 and began operation the following year with seed capital of USD 1 billion.  Its most recent annual report (calendar year 2017) reported total assets of nearly USD 533.88 million, an almost 27 percent increase over 2016. It was created to receive, manage, and grow a diversified portfolio that will eventually replace government revenue currently drawn from non-renewable resources, primarily hydrocarbons.

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 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.  NSIA does not take an active role in management of companies. The Embassy has not received any report or indication that the activities of the NSIA limit private competition.

The Nigerian government does not have an established practice that is consistent with the OECD guidelines on Corporate Governance for State-Owned Enterprises (SOEs), but SOEs do have enabling legislation that governs their ownership.  To legalize the existence of SOEs, provisions have been made in the Nigerian constitution under socio-economic development in section 16 (1) of the 1979 and 1999 constitutions respectively. The government has privatized many former SOEs to encourage more efficient operations, such as the state-owned telecommunications company, Nigerian Telecommunications (NITEL) and its mobile subsidiary Mobile Telecommunications, (MTEL) in 2014.

Nigeria does not operate a centralized ownership system for its SOEs.  The enabling legislation for each SOE stipulates its ownership and governance structure.  The Boards of Directors are usually appointed by the President on the recommendation of the relevant Minister.  The Boards operate and are appointed in line with the enabling legislation which usually stipulates the criteria for appointing Board members.  Directors are appointed by the Board within the relevant sector. In a few cases, however, some Board appointments have been viewed as a reward to political affiliates.

In the case of Nigeria’s most prominent SOE, the Nigerian National Petroleum Corporation (NNPC), Board appointments are made by the presidency but the day-to-day running of business is overseen by the Group Managing Director (GMD).  The GMD reports to the Minister of Petroleum and although in the current administration the President has retained that ministerial role for himself, the appointed Minister of State for Petroleum acts as the de facto Minister of Petroleum in the President’s stead.  Nigeria’s National Assembly passed a Petroleum Industry Governance Bill in March 2018 but the President sent it back to the National Assembly, requesting amendments to the bill. The bill would clarify regulatory, policy, and operational roles in the petroleum sector and pave the way for partial privatization of NNPC.

Responsible for exploration, refining, petrochemicals, products transportation, and marketing, the NNPC is Nigeria’s biggest and arguably most important state-owned enterprise.  It owns and operates Nigeria’s four refineries (one each in Warri and Kaduna and two in Port Harcourt), all of which operate far below their original installed capacity. Nigeria’s tax agency receives taxes on petroleum profits and other hydrocarbon-related levies, while the Department of Petroleum Resources collects rents, royalties, license fees, bonuses, and other payments.  In an effort to provide greater transparency in the collection of revenues that accrue to the government, the Buhari administration requires these revenues, including some from the NNPC, to be deposited in the Treasury Single Account.

Another key SOE is the Transmission Company of Nigeria (TCN), responsible for the operation of Nigeria’s national electrical grid.  Private power generation and distribution companies have accused the TCN grid of significant inefficiency and inadequate technology which greatly hinder the nation’s electricity output and supply.  The TCN emerged from the defunct National Electric Power Authority (NEPA) as an incorporated entity in November 2005. It was the only major component of Nigeria’s electric power sector not to have been privatized in 2013.

Privatization Program

The Privatization and Commercialization Act of 1999 established the National Council on Privatization, the policy-making body overseeing the privatization of state-owned enterprises (SOEs), and the Bureau of Public Enterprises (BPE), the implementing agency for designated 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.

Since 1999, the BPE has privatized and concessioned more than 140 enterprises, including an aluminum complex, a steel complex, cement manufacturing firms, hotels, a petrochemical plant, aviation cargo handling companies, vehicle assembly plants, and electricity generation and distribution companies.  The electricity transmission company remains state-owned. Foreign investors can and do participate in BPE’s privatization process. The BPE also retains partial ownership in some of the privatized companies. (It holds a 40 percent stake in the power distribution companies, for instance.)

The National Assembly has questioned the propriety of some of these privatizations, with one ongoing case related to an aluminum complex privatization the subject of a Supreme Court ruling on ownership.  In addition, the failure of the 2013 power sector privatization to restore financial viability to the sector has raised criticism of the privatized power generation and distribution companies. Nevertheless, the government’s long-delayed sale in December 2014 of the state-owned NITEL and MTEL shows a continued commitment to the privatization model.

There is no specific Responsible Business Conduct (RBC) law in Nigeria.  Several legislative acts incorporate within their provisions certain expectations that directly or indirectly regulate the observance or practice of Corporate Social Responsibility.  In order to reinforce responsible behavior, various laws have been put in place for the protection of the environment. These laws stipulate criminal sanctions for non-compliance. There are also regulating agencies which exist to protect the rights of consumers.  While the Nigerian government has no specific action plan regarding OECD RBC guidelines, most government procurements are done transparently and in line with the Public Procurement Act which stipulates advertisement and a transparent bidding process.

Nigeria participates in the Extractive Industries Transparency Initiative (EITI) and is an EITI compliant country.  Specifically, in February 2019 the EITI Board determined that Nigeria had made satisfactory progress overall with implementing the EITI Standard after having fully addressed the corrective actions from the country’s first Validation in 2017.  The next EITI Validation study of Nigeria will occur in 2022.

The Department of Petroleum Resources (DPR), an arm of the Ministry of Petroleum Resources, also ensures comprehensive standards and guidelines to direct the execution of projects with proper consideration for the environment.  The DPR Environmental Guidelines and Standards (EGAS) of 1991 for the petroleum industry is a comprehensive working document with serious consideration for the preservation and protection of the Niger Delta.

The Nigerian government provides oversight of competition, consumer rights, and environmental protection issues.  The Federal Competition and Consumer Protection Commission (FCCPC), the National Agency for Food and Drug Administration and Control, the Standards Organization of Nigeria, and other entities have the authority to impose fines and ensure the destruction of harmful substances which otherwise may have sold to the general public.  The main regulators and enforcers of corporate governance are the Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (which register all incorporated companies). Nigeria has adopted multiple reforms on corporate governance. Environmental pollution by multinational oil companies has resulted in fines being imposed locally while some cases have been pursued in foreign jurisdictions resulting in judgments being granted in favor of the oil producing communities.

The Companies Allied Matter Act 1990 (CAMA) and the Investment Securities Act provide basic guidelines on company listing.  More detailed regulations are covered in the Nigeria Stock Exchange Listing rules. Publicly listed companies are expected to disclose indicate their level of compliance with the Code of Corporate Governance in their Annual Financial Reports.

Government Procurement

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 has 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 on occasion 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 (NOCOPO) in 2017 under the Bureau of Public Procurement (BPP).

The Public Procurement Law of 2007 established the BPP as the successor agency to the Budget Monitoring and Price Intelligence Unit.  The BPP 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 (about USD 277,550) reportedly undergo full “due process,” but government agencies routinely flaunt 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 Nigerian National Petroleum Company (NNPC).  Although U.S. companies have won contracts in a number of 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.

In July 2016, Nigeria announced its participation in the Open Government Partnership (OGP), a potentially significant step forward on public financial management and fiscal transparency.  In December 2016, the Ministry of Justice presented Nigeria’s National Action Plan (NAP) for the OGP.  Implementation of its 14 commitments has been slow, but some progress has been made, particularly on the issues such as tax transparency, ease of doing business, and asset recovery. The NAP, which runs through 2019, covers five major themes: ensuring citizens’ participation in the budget cycle, implementation of open contracting and the 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 NAP would be a significant step forward for Nigeria’s fiscal transparency, although Nigeria has not fully completed any commitment to date.

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.

Domestic and foreign observers identify corruption as a serious obstacle to economic growth and poverty reduction.  Nigeria scored 27 out of 100 in Transparency International’s 2018 Corruption Perception Index (CPI), placing it in the 144th position out of the 180 countries ranked, a one-point decline from its 2016 score of 28 and a stagnant score from 2017.  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 encountered the most success in prosecuting low-level internet scam operators.  A relative 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 Port Authority. However, in the case of the convicted governor of Bayelsa State, the President of Nigeria pardoned him in March 2013.  The case of the former governor of Adamawa, who was convicted in 2017, is under appeal and he is currently free on bail.

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 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 April 2014, a presidential committee set up to review Nigeria’s ministries, departments, and agencies (MDAs) 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.

Nigeria gained admittance into the Egmont Group of Financial Intelligence Units (FIUs) in May 2007.  In September 2018, the Egmont Group lifted its suspension of Nigeria’s membership, put in place in July 2017 due to concerns about the Nigeria FIU’s operational autonomy and ability to protect classified information.  The suspension was lifted due to the Nigerian government’s efforts to address the concerns, through the passage of the Nigerian Financial Intelligence Agency Act in July 2018.

The Paris-based Financial Action Task Force (FATF) removed Nigeria from its list of Non-Cooperative Countries and Territories in June 2006.  In October 2013, the FATF decided that Nigeria had substantially addressed the technical requirements of its FATF Action Plan and agreed to remove Nigeria from its monitoring process conducted by FATF’s International Cooperation Review Group (ICRG).  Nigeria, as a member of the Inter-governmental Action Group Against Money Laundering in West Africa (GIABA), is an associated member of FATF.

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 (EITI), 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.

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

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 the Islamic State in West Africa (ISIS-WA) have waged a violent 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 carried 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 targeted acts of violence and intimidation against civilians in order 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, 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 increased rural violence in the Middle Belt.

Due to challenging security dynamics in the North, the U.S. Diplomatic Mission to Nigeria has significantly limited official travel north of Abuja.  Such trips occur only with security measures designed to mitigate the threats of car-bomb attacks and abductions.

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 percent 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.  Attacks on oil installations have since decreased due to a revamped amnesty program and continuous high-level engagement with the region.

Other security challenges facing Nigeria include increasing rural violence caused by criminal actors and by conflicts between migratory pastoralists and farmers, and thousands of refugees fleeing to Nigeria from Cameroon’s English-speaking region due to tensions there.

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, 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 governors 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.

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. 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) representing 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

Collective bargaining occurred throughout the public sector and the organized private sector in 2018.  However, public sector employees have become increasingly concerned about the Nigerian governments’ and state governments’ failure to honor previous agreements from the collective bargaining process.

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 2018. The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced.  Major negotiations between the main labor unions and the federal government occurred in 2018 regarding the minimum wage and the unions’ demands for it to be raised from 18,000 naira (USD 50) per month to 30,000 naira (USD 83) per month. The National Assembly passed the 2019 Appropriations bill which included the newly agreed upon minimum wage in January 2019, though it has yet to be fully implemented. The minimum wage bill awaits the president’s assent although several state governments already announced their inability to pay.

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 National Industrial Court 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.

Child Labor

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 in all 36 states of 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, 24 states and the Federal Capital Territory have ratified the CRA, with all 12 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 for the Elimination of the Worst Forms of Child Labor in Nigeria (NSC) 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 on March 26, 2015.  While not specifically directed against child labor, many sections of the new law support anti-child labor efforts.   The Violence against Persons Prohibition Act was signed into law in on May 25, 2015 and again 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.

Acceptable Conditions of Work

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.

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.

Foreign Workers

Admission of foreign workers is overseen by the Federal 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.

For long-term assignments, the employer should apply for a “subject-to-regularization” visa (STR). To apply for an STR, an employer must apply for and obtain an expatriate quota.  The expatriate quota lists positions in the company that will be occupied by expatriate staff. Upon arrival in Nigeria, the employee will need to validate his or her visa by applying for a work and residence permit.

The U.S. Overseas Private Investment Corporation (OPIC) offers all its credit and risk products to U.S. investors in Nigeria.  OPIC has a number of active projects in Nigeria, which primarily include power generation, finance (micro and SME), insurance, and education (including the American International School in Abuja).  Nigeria concluded an investment incentive agreement with OPIC in 1999.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* https://www.nigerianstat.gov.ng/   

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Trade and Investment Officer
Plot 1075 Diplomatic Drive
Abuja, Nigeria
Telephone: +234 9 461 4000
Email: EconNigeria@state.gov