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.

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.