Transparency of the Regulatory System

Nigeria’s legal, accounting, and regulatory systems comply with international norms, but application and enforcement remain 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 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, but assessment methodologies 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: federal, 36 state governments and Federal Capital Territory (FCT) Abuja, and 774 local government areas (LGAs).  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 can collect internally generated revenues, which vary from state to state.  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 federal government’s finances are more transparent as budgets are made public and the financial data are published by the Central Bank of Nigeria (CBN), Debt Management Office (DMO), the Budget Office of the Federation, and the National Bureau of Statistics.  The state-owned oil company’s (Nigerian National Petroleum Corporation) financial data is very opaque.

The DMO puts Nigeria’s total debt stock at USD 84 billion as of December 2019 – USD 27.7 billion or nearly 33 percent of which is external.  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 Information and Communication Technology (ICT) sector may conflict with Nigeria’s commitments under TRIMS.

In 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.  The 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 to provide 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 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 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 toward all Nigerian and foreign companies.  All ICT companies, including Nigerian companies, use foreign manufactured equipment 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 NCS was set up to develop the implementation work plans that were consistent with national and ECOWAS regulations.  The CET was slated to be fully harmonized by 2020, but in practice some ECOWAS Member States have maintained deviations from the CET beyond the January 1, 2020, deadline.  The country has put in place a CET monitoring committee domiciled at the Ministry of Finance, consisting of several ministries, departments, and agencies (MDAs) related to the CET.  Nigeria applies five tariff bands under the CET:  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.  The CET permits ECOWAS member governments to calculate 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.  Most business transactions are governed by common law modified by statutes to meet local demands and conditions.  The Supreme Court is 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 frequently fail to appear for trials and court officials lack proper equipment and training.

The constitution and law provide for an independent judiciary; however, 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 2020, ranked Nigeria 73 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 376 days in Lagos.  In the case of Lagos, the 376 days includes 40 days for filing and service, 194 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 percent of the claim.  In comparison, in OECD countries the corresponding figures are an average of 589.6 days and averaging 21.5 percent of the claim and in sub-Saharan countries an average of 654.9 days and averaging 41.6 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 NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in case 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 (FCCPC) Act in February 2019.  The act 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 act prohibits agreements made to restrain competition, such as price fixing, price rigging, collusive tendering, etc. (with specific exemptions for collective bargaining agreements and employment, among other items).  The act 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.  The law mandates a fine of up to 10 percent of the company’s annual turnover in the preceding business year for offences.  The law harmonizes oversight for consumer protection, consolidating it under the FCCPC.

Expropriation and Compensation

The FGN 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:

• 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.
• 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.
• 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.

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 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.

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 2020 Report, Nigeria ranked 183 out of the 190 countries surveyed for registering property, a decline of one point over its 2019 ranking.  Property registration in Lagos required an average of 12 steps over 105 days at a cost of 11.1 percent of the property value while in Kano registering property averages 11 steps 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.  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) remains in need of further development and more funding, even though there are laws on the books for enforcing most IPR. The areas in which the legislation is deficient include online piracy, geographical indications, and plant and animal breeders’ rights.  A bill to establish the industrial property commission to take over the functions of registration of trademarks, patents, designs, plant varieties, animal breeders and farmers’ rights, and 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 Nigerian Copyright Commission, a division of the Ministry of Justice, administers the Act.  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 two WIPO treaties that it signed in 1997:  the Copyright Treaty and the Performances and Phonograms Treaty.  These treaties address important digital communication and broadcast issues that have become increasingly relevant in the 18 years since Nigeria signed them.  The  Draft Copyright Bill in 2016 was revised to bring it into compliance with these two treaties and sent to the National Assembly in 2017, but it was never enacted.

In 2013, he Ministry of Communication Technology (MCT) issued local content guidelines (Guidelines for Nigerian Content Development in Information and Communications Technology) that  raised IPR concerns. Among other issues,  there is concern about the future ability of the Nigerian government to protect data and trade secrets because of the localization processes requiring the disclosure of source code and other sensitive design elements as a condition of doing business.  The ICT 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 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 ICT capacity building programs.

Violations of Nigerian IPR laws continue to be widespread largely due 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 Nigerian Copyright Commission (NCC) has primary responsibility for copyright enforcement but 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 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 delivery of the consignment of fake goods for purposes of further investigation because the NCC has the statutory responsibility to investigate and prosecute copyright violations.  The NCC bears the costs of moving and storing infringing goods.   If, after investigations, any persons are identified with the infringing materials, a decision to prosecute may be made. Where no persons are identified or could be traced, the NCC may obtain an order of court to enable it to destroy such works.  The NCC works in cooperation with rights owners’ associations and stakeholders in the copyright industries on such matters.

Nigeria is not listed in the United States Trade Representative (USTR) Special 301Report or the Notorious Markets List. For additional information about treaty obligations and points of contact at local IP offices, please see the WIPO country profiles at http://www.wipo.int/directory/en/ .