Nigeria’s economy – Africa’s largest – exited recession in 2017, assisted by the Central Bank of Nigeria’s more rationalized foreign exchange regime. No growth is expected in the near term and although 2019 ended with a real growth rate of 2.3 percent this is still below Nigeria’s population growth rate of 2.6 percent. With the largest population in Africa (estimated at nearly 200 million), Nigeria continues to represent a large consumer market for investors and traders. Nigeria has a very young population with nearly two-thirds under the age of 25. It offers abundant natural resources and a low-cost labor pool and enjoys mostly duty-free trade with other member countries of the Economic Community of West African States (ECOWAS). Nigeria’s full market potential remains unrealized because of pervasive corruption, inadequate power and transportation infrastructure, high energy costs, an inconsistent regulatory and legal environment, insecurity, a slow and ineffective bureaucracy and judicial system, and inadequate intellectual property rights protections and enforcement. The Nigerian government has undertaken reforms to help improve the business environment, including making starting a business faster by allowing electronic stamping of registration documents, and making it easier to obtain construction permits, register property, get credit, and pay taxes. Reforms undertaken since 2017 have helped boost Nigeria’s ranking on the World Bank’s annual Doing Business rankings to 131 out of 190.
Nigeria’s underdeveloped power sector remains a bottleneck to broad-based economic development. Power on the national grid currently averages 4,000 megawatts, forcing most businesses to generate much of their own electricity. The World Bank currently ranks Nigeria 169 out of 190 countries for ease of obtaining electricity for business. Reform of Nigeria’s power sector is ongoing, but investor confidence continues to be shaken by tariff and regulatory uncertainty. The Nigerian Government, in partnership with the World Bank, published a Power Sector Recovery Plan (PSRP) in 2017. However, three years after its launch, differing perspectives on various PSRP interventions have delayed implementation. The Ministry of Finance is driving the implementation effort and has convened three Federal Government of Nigeria committees charged with moving the process forward in the areas of regulation, policy, and finances. Discussions between the government and the World Bank are continuing, but some sector players report skepticism that the World Bank’s USD 1 billion loan will be enacted, though FGN may proceed without it. The plan is ambitious and will require political will from the administration, external investment to address the accumulated deficit, and discipline in implementing plans to mitigate future shortfalls. It is, nevertheless, a step in the right direction, and recognizes explicitly that the Nigerian economy is losing on average approximately USD 29 billion annually due to lack of adequate power.
Nigeria’s trade regime remains protectionist in key areas. High tariffs, restricted forex availability for 44 categories of imports, and prohibitions on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth. Nigeria’s imports rose in 2019, largely as a result of the country’s continued recovery from the 2016 economic recession. U.S. goods exports to Nigeria in 2018 were valued at USD 2.7 billion, up nearly 23 percent from the previous year, while U.S. imports from Nigeria totaled USD 5.6 billion, a decrease of 20.3 percent. U.S. exports to Nigeria are primarily refined petroleum products, used vehicles, cereals, and machinery. Crude oil and petroleum products continued to account for over 95 percent of Nigerian exports to the United States in 2018 (latest data available). The stock of U.S. foreign direct investment (FDI) in Nigeria was USD 5.6 billion in 2018, a substantial increase from USD 3.8 billion in 2016, but only a modest increase from 2015’s USD 5.5 billion in FDI. U.S. FDI in Nigeria continues to be led by the oil and gas sector.
Given the corruption risk associated with the Nigerian business environment, potential investors often develop anti-bribery compliance programs. The United States and other parties to the Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention aggressively enforce anti-bribery laws, including the U.S. Foreign Corrupt Practices Act (FCPA). A high-profile FCPA case in Nigeria’s oil and gas sector resulted in U.S. Securities Exchange Commission (SEC) and U.S. Department of Justice rulings in 2010 that included record fines for a U.S. multinational and its subsidiaries that had paid bribes to Nigerian officials. Since then, the SEC has charged an additional four international companies with bribing Nigerian government officials to obtain contracts, permits, and resolve customs disputes. See SEC enforcement actions at https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml.
Security remains a concern to investors in Nigeria due to high rates of violent crime, kidnappings for ransom, and terrorism. The ongoing Boko Haram and Islamic State in West Africa (ISIS-WA) insurgencies have included attacks against civilian and military targets in the northeast of the country, causing general insecurity and a major humanitarian crisis there. Militant attacks on oil and gas infrastructure in the Niger Delta region restricted oil production and export in 2016, but a restored amnesty program and more federal government engagement in the Delta region have brought a reprieve in violence and allowed restoration of oil and gas production. The longer-term impact of the government’s Delta peace efforts, however, remains unclear and criminal activity in the Delta – in particular, rampant oil theft – remains a serious concern. Maritime criminality in Nigerian waters, including incidents of piracy and crew kidnapping for ransom, has increased in recent years, and law enforcement efforts have been ineffectual. International inspectors have voiced concerns over the adequacy of security measures at some Nigerian port facilities onshore. Businesses report that bribery of customs and port officials remains common to avoid delays, and smuggled goods routinely enter Nigeria’s seaports.
Although the constitution and laws provide for freedom of speech and press, the government frequently restricts these rights. A large and vibrant private, domestic press frequently criticizes the government, but critics report being subjected to threats, intimidation, and sometimes violence as a result. Security services increasingly detain and harass journalists, including for reporting on sensitive topics such as corruption and security. As a result, some journalists practice self-censorship on sensitive issues. Journalists and local NGOs claim security services intimidate journalists, including editors and owners, into censoring reports perceived to be critical of the government.
|TI Corruption Perceptions Index||2019||146 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||131 of 190||http://www.doingbusiness.org/
|Global Innovation Index||2019||114 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||USD
|World Bank GNI per capita||2018||USD 1,960||http://data.worldbank.org/indicator/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Nigerian Investment Promotion Commission (NIPC) Act of 1995 dismantled controls and limits on FDI, allowing for 100 percent foreign ownership in all sectors, except the petroleum sector where FDI is limited to joint ventures or production-sharing contracts. It also created the NIPC with a mandate to encourage and assist investment in Nigeria. The NIPC features a One-Stop Investment Center (OSIC) that nominally includes participation of 27 governmental and parastatal agencies (not all of which are physically present at the OSIC) to consolidate and streamline administrative procedures for new businesses and investments. Foreign investors receive largely the same treatment as domestic investors in Nigeria, including tax incentives. The NIPC’s ability to attract new investment has been limited because of the unresolved challenges to investment and business.
The Nigerian government continues to promote import substitution policies such as trade restrictions, foreign exchange restrictions, and local content requirements in a bid to attract investment that would develop domestic production capacity and services that would otherwise be imported. The import bans and high tariffs used to advance Nigeria’s import substitution goals have been undermined by smuggling of targeted products (most notably rice and poultry) through the country’s porous borders, and by corruption in the import quota systems developed by the government to incentivize domestic investment. The government began closing land borders to commercial trade in August 2019 to try and curb smuggling. Investors generally find Nigeria a difficult place to do business despite the government’s stated goal to attract investment.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are currently no limits on foreign control of investments; however, Nigerian regulatory bodies may insist on domestic equity as a prerequisite to doing business. The NIPC Act of 1995 liberalized the ownership structure of business in Nigeria allowing foreign investors to own and control 100 percent of the shares in any company except the petroleum industry. Ownership prior to the NIPC Act was limited to a 60/40 percentage in favor of majority Nigeria control. The foreign control of investments applies to all industries minus a few exceptions. Investment in the oil and gas sector is limited to joint ventures or production-sharing agreements. Laws also control investment in the production of items critical to national security (i.e. firearms, ammunition, and military and paramilitary apparel) to domestic investors. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990. The NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in case of national interest.
Other Investment Policy Reviews
The OECD completed an investment policy review of Nigeria in 2015. ( ). 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 .
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 ). The recommendations from its reports continue to be valid: Nigeria needs to diversify FDI away from the oil and gas sector by improving the regulatory framework, investing in physical and human capital, taking advantage of regional integration and reviewing external tariffs, fostering linkages and local industrial capacity, and strengthening institutions dealing with investment and related issues. NIPC and the Federal Inland Revenue Service published a compendium of investment incentives which is available online at .
Although the NIPC offers the OSIC, Nigeria does not have an online single window business registration website, as noted by Global Enterprise Registration ( ). 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” ( ). Many steps for business registration can be completed online, but the final step requires submitting original documents to a CAC office to complete registration. On average, a foreign-owned limited liability company (LLC) in Nigeria (Lagos) can be established in 10 days through eight steps. This average is significantly faster than the 23-day average for Sub-Saharan Africa. Timing may vary in different parts of the country. Only a local legal practitioner accredited by the CAC can incorporate companies in Nigeria. According to the Nigerian Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, foreign capital invested in an LLC must be imported through an authorized dealer, which will issue a Certificate of Capital Importation. This certificate entitles the foreign investor to open a bank account in foreign currency. Finally, a company engaging in international trade must get an import-export license from the Nigerian Customs Service (NCS).
Although not online, the OSIC co-locates relevant government agencies to provide more efficient and transparent services to investors. The OSIC assists with visas for investors, company incorporation, business permits and registration, tax registration, immigration, and customs issues. Investors may pick up documents and approvals that are statutorily required to establish an investment project in Nigeria. The Nigerian government has not established uniform definitions for micro, small, and medium enterprises (MSMEs) with different agencies using different definitions, so the process may vary from one company to another.
The Nigerian Export Promotion Council (NEPC) administered an Export Expansion Grant (EEG) scheme to improve non-oil export performance, but the government suspended the program in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export. The program was revised and re-launched in 2018 when the federal government set aside 5.12 billion naira (roughly USD 14.2 million) in the 2019 budget for the EEG scheme. The Nigerian Export-Import (NEXIM) Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused. NEXIM’s Foreign Input Facility provides normal commercial terms of three to five years (or longer) for the importation of machinery and raw materials used for generating exports.
Agencies created to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption. Nigeria’s inadequate power supply and lack of infrastructure coupled with the associated high production costs leave Nigerian exporters at a significant disadvantage. Many Nigerian businesses fail to export because they find meeting international packaging and safety standards is too difficult or expensive. Similarly, firms often are unable to meet consumer demand for a consistent supply of high-quality goods in sufficient quantities to support exports and meet domestic demand. Most Nigerian manufacturers remain unable to or uninterested in competing in the international market, given the size of Nigeria’s domestic market.
4. Industrial Policies
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 added to the list in 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 company 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 five 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 LGAs deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios. For a full list of incentives, refer to the NIPC website at .
The NEPC administers an EEG scheme to improve non-oil export performance. The program was suspended in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export. It 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 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 research and development (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and relate to 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. Long-term research will be regarded as a capital expenditure and 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 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 2016, Nigeria requested additional technical assistance to implement and enforce its Category C commitments. (See )
Performance and Data Localization Requirements
Foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the CAC, 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 are 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 period and extendable 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 oilfield 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 may be issued a permanent residence permit, if the investment is not withdrawn. The Nigerian Oil and Gas Content Development Act, 2010 restricts the number of expatriate managers to five percent of the total number of personnel for companies in the oil and gas sector.
The National Office of Industrial Property Act of 1979 established the National Office for Technology Acquisition and Promotion (NOTAP) to regulate the international acquisition of technology while creating an environment conducive to developing local technology. 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. NOTAP reviews the Technology Transfer Agreements (TTAs) required to import 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.
U.S. firms complain that the approval process for TTAs is lengthy and can routinely take three months or more. NOTAP took steps to automate the TTA process to reduce processing time to one month or less; however, from the date of filing the application to the issuance of confirmation of reasonableness, TTA processing still requires 60 business days. .
The Nigerian Oil and Gas Content Development Act of 2010 has technology-transfer requirements that may violate a company’s intellectual property rights.
The Guidelines for Nigerian Content Development in the ICT sector issued by the NITDA in 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 sector 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 ( ) 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.
The NCS and the Nigerian Ports Authority (NPA) exercise exclusive jurisdiction over customs services and port operations respectively. 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 legally or smuggle into the country. The Nigerian government began closing land borders to trade in August 2019, reportedly to stem the tide of smuggled goods entering from neighboring countries and has not reopened borders as this year’s report. The Nigerian government implements a destination inspection scheme whereby all inspections occur upon arrival into Nigeria, rather than at the ports of origin. In 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. 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. A presidential directive in 2017 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 middlemen who complicate and extend the clearance process. Freight forwarders usually resort to bribery of customs agents and port officials to avoid long delays clearing imported goods through the NPA and NCS. Other ports face logistical and security challenges leaving most operating well below capacity. Nigeria does not currently have a true deep-sea port although one is under construction near Lagos but not expected to be finished before 2021. Smuggled goods routinely enter Nigeria’s seaports and cross its land borders.
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 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 USD 1,000 to USD 3,000 in facilitation fees. The Nigerian government announced a visa rule in 2011 to encourage foreign investment, under which legitimate investors can obtain multiple-entry visas at points of entry. Obtaining a visa prior to traveling to Nigeria is strongly encouraged.
6. Financial Sector
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, a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments.
The Nigeria Stock Exchange (NSE) was reflective of the sluggishness in the larger economy in 2019 as it posted a negative return of -14.6 percent to close the year with its All Share Index at 26,842.07. The poor performance was mostly attributed to government regulatory uncertainty and the 2019 presidential elections. However, the equity market capitalization increased by 11 percent to USD 36.0 billion from USD 32.5 billion in 2018, largely due to the notable listings of telecom companies MTN Nigeria Communications Plc and Airtel Africa which had been long awaited. As of December 2019 the NSE had 164 listed companies. The total number of securities listed increased by 26 percent to 361 from 286 securities in 2018, largely due to a growth in government bonds. The Nigerian government has considered requiring companies in certain sectors such as telecoms, oil and gas, or over a certain size to list on the NSE as a means to encourage greater corporate participation and sectoral balance in the Nigerian Stock Exchange, but those proposals have not been enacted 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- 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 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 CBN currently licenses 22 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. At the same time, it 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 International Financial Reporting Standards (IFRS) 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 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 banks are: First Bank of Nigeria, United Bank for Africa, Zenith Bank, Access Bank, Ecobank Nigeria, Guaranty Trust Bank, and Polaris 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 one of the SIBs, due to the deterioration of its share capital and its board’s failure to recapitalize the bank, making it the fourth bank to be nationalized.
The CBN reported that total deposits increased by N2.34tn or 10.7 percent and aggregate credit grew by N2.2tn or 14.5 percent by December 2019. Non-performing loans (NPLs) declined to 6.1 percent in December, 2019 from 14.2 percent in 2018. However, NPLs are expected to rise following the CBN’s directive to banks to increase their loan to deposit ratio to 6 percent or be penalized. This has forced several banks to grant more credits, many of which may result in default. Nigerian government and private sector analysts assess that the volume of NPLs 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. A second non-interest bank, Taj Bank, started operations in December 2019. There are five licensed merchant banks: Coronation Merchant Bank Limited, FBN Merchant Bank, FSDH Merchant Bank Ltd, NOVA Merchant Bank, 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 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. Domestic and 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 44. 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. 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.
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. The CBN also established the “investors and exporters” window in 2017, which allows trade to occur at prevailing market rates (around 360 naira to the dollar in December 2019). In March 2020, the CBN announced it had collapsed its multiple exchange rate policy following a currency adjustment such that the investor and exporters window rate was increased to 380 naira to the dollar, and government transactions are now contracted at approximately 360 naira to the dollar.
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 Articles of Agreement ( ).
Sovereign Wealth Funds
The Nigeria Sovereign Investment Authority (NSIA) manages Nigeria’s sovereign wealth fund. It was created by the NSIA Act in 2011 and began operations in October 2012 with USD 1 billion seed capital and received an additional USD 500 million in 2017. In its most recent annual report, the total assets being managed by NSIA, increased to N617.7 billion (USD 2.0 billion) in 2018, an increase of 15.7 percent from 2017. The NSIA also posted total comprehensive income of N44.3 billion (USD 144.9 million) in 2018, a 58.8 percent growth over the 2017 figure of N27.9 billion (USD 91.2 million). 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. The NSIA does not take an active role in management of companies. The Embassy has not received any report or indication that NSIA activities limit private competition.
10. Political and Security Environment
Political, religious, and ethnic violence continue to affect Nigeria. The Islamist group Jama’atu Ahl as-Sunnah li-Da’awati wal-Jihad, popularly known as Boko Haram, and the 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 were forced to carry out many of the attacks. There were multiple reports of Boko Haram killing entire villages suspected of cooperating with the government. ISIS-WA targeted civilians with attacks or kidnappings less frequently than Boko Haram. ISIS-WA employed 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 rural violence in the Nigeria’s north-central states caused by criminal actors and by conflicts between migratory pastoralist and farming communities, often over scarce resources. Another major trend is the rise in kidnappings for ransom and attacks on villages by armed gangs.
Due to challenging security dynamics throughout the country, the U.S. Mission to Nigeria has significantly limited official travel in the northeast and travel to other parts of Nigeria requires security precautions.
Decades of neglect, persistent poverty, and environmental damage caused by oil spills have left Nigeria’s oil rich Niger Delta region vulnerable to renewed violence. Though each oil-producing state receives a 13 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 thousands of refugees fleeing to Nigeria from Cameroon’s English-speaking region due to tensions there and kidnappings for ransom.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||Amount||100%||Total Outward||Amount||100%|
|Bermuda||15,684||17%||Data Not Available|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
Data not available.