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Equatorial Guinea

Executive Summary

The Republic of Equatorial Guinea is endowed with oil and gas resources and hosts billions of dollars in direct U.S. investment that has been instrumental to extracting those resources.  Discovery of oil in the 1990s resulted in rapid economic growth in the early 2000s. However, according to certain businesses, corruption, perceptions of a biased judiciary, and a burdensome, inefficient bureaucracy undermine the general investment climate in the country.  Growth has slowed as operational oil fields have matured and are now in decline. International watchdog organizations give Equatorial Guinea one of the world’s lowest rankings in various global indices, including those for corruption, transparency, and ease of doing business. Companies have reports that these ratings underscore the challenging and opaque environment in which both local and foreign businesses must operate.  The government of the Republic of Equatorial Guinea is seeking investment in several sectors: agribusiness; fishing; energy and mining; petrochemicals, plastics and composites; travel and tourism; and finance. Most of these sectors are undeveloped. The Equatoguinean domestic market is small, with an estimated population of one million, although the country is a member of the Central African Monetary and Economic Union (CEMAC) sub-region, comprising more than 50 million people.  The zone has a central bank and a common currency – the CFA franc, which is pegged to the euro.

The government of the Republic of Equatorial Guinea has worked with international partners, including the World Bank and the International Monetary Fund (IMF) since March 2014 to analyze ways to improve the business climate.  The government implemented some recommendations, launching a one-stop-shop for investors and entrepreneurs on January 14, 2019, and instituting certain tax exemptions and other incentives to attract investment.

Equatorial Guinea has made significant advances on the country’s Horizon 2020 social development plan, specifically in infrastructure construction, electrification, and access to water, healthcare, and education.  Equatorial Guinea expresses pride in having some of the region’s best roads and other essential infrastructure, including development of its ports and pending completion of a new airport terminal. After oil prices started dropping in 2014, the government began extending timelines for completing infrastructure projects, and put many on hold as the country slumped into a recession that continues in 2019.  Investors have reported that past commercial disputes have involved delayed payment, or non-payment, by the government of the Republic of Equatorial Guinea to foreign firms for delivered goods and services and that certain companies exited the country with millions in unpaid bills. Some claim that much work remains, especially on diversifying the economy, and improving healthcare and education.

Equatorial Guinea does not require U.S. citizens to obtain visas.  Visas may be difficult to obtain for third-country nationals. Residency and work permits can be similarly difficult to obtain and or renew.  In March 2018, to ease the conditions of entry and residence in the country, the government reduced the cost of permits by half. Residency and work permits have not been issued regularly since 2017, requiring expatriates to leave the country every 90 days.

Despite the various challenges being reported, U.S. businesses have had success in the hydrocarbons sector, and some U.S. businesses have profited in other sectors, such as technology and computer services.  U.S. businesses will likely continue to invest in the country in light of opportunities in the market.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 172 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report “Ease of Doing Business” 2018 177 of 190 https://www.doingbusiness.org/rankings
Global Innovation Index 2018 Not ranked https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2017 $654 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 $7,050 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The government of the Republic of Equatorial Guinea is actively soliciting foreign investments.  The government announced in August 2018 that 2019 would be the “Year of Energy” with new licensing rounds for hydrocarbons fields and various events to encourage investment.  In 2017, the Government started the donor facilitation initiative with the World Bank, as part of a strategy towards membership in the World Trade Organization. The government also passed a law to establish a “one-stop-shop” for investors and simplify the process to register a business, which launched in January 2019.  The government of the Republic of Equatorial Guinea equipped facilities for processing applications and has started training staff.

Statutorily, the Minister of Economy, Finances and Planning approves investment permits.  A new state entity, Holdings Equatorial Guinea 2020, was created to help guide diversification efforts.  This entity was expected to serve as a hub for foreign investors. For now, however, investors still work with the relevant government ministries to negotiate contracts.

The government, including at the highest levels, has regular meetings and conferences with business leaders and investors, though we are unaware of any formal business roundtable.  For example, in November 2018 the World Bank and the Singapore Cooperation Programme led a conference in Equatorial Guinea on improving the business climate.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Foreign Investment Law (Decree 72/2018 of April 2018) modified the provisions of decree 127/2004 stipulating that shareholder capital firms and companies operating in the petroleum sector must have Equatoguinean shareholders.  The government requires that Equatoguinean partners hold at least 35 percent of share capital of foreign companies or companies created by foreigners in the hydrocarbons sector only. Equatoguinean partners must also account for one third of the representatives on the Board of Directors.  Apart from the hydrocarbons sector, investments must not be part of public-private partnerships with a government entity.

Investors work with the relevant government ministries to negotiate contracts.  The Minister of Mines and Hydrocarbons generally approves any major deal in the hydrocarbons sector.  Decisions regarding larger investment deals may rise to the presidential level. U.S. investors may reach out to the Equatoguinean Embassy in the United States for guidance regarding connection to the appropriate ministry for outreach efforts.

The Hydrocarbons Law and National Content regulation establishes various requirements for international oil and gas companies that wish to operate in Equatorial Guinea.  This includes a minority partner stake for either the state oil company (GE Petrol) or the state gas company (Sonagas). In addition, there are national content requirements, several of which were established in 2014 by the Ministry of Mines, Industry, and Energy, which apply to both producers and service companies, including: 70% of staff must be Equatoguineans, the company must procure a significant portion of services (ranging from 50-100% depending on the category) from national company partners, and the company must dedicate a percentage of its revenue to corporate social responsibility projects which the government must approve.  (The government restructured the cabinet and there is now a Ministry of Mines and Hydrocarbons and a separate Ministry of Industry and Energy.)

Other Investment Policy Reviews

In the past three years, the government of the Republic of Equatorial Guinea has not conducted an investment policy review through any institutions, such as the Organization for Economic Cooperation and Development, the World Trade Organization, or the United Nations Conference on Trade and Development.

Business Facilitation

According the World Bank’s Doing Business 2018 report, starting a business in Equatorial Guinea requires 16 procedures and usually takes 33 days, an improvement over 2017.  Equatorial Guinea was ranked 184 of 190 in the World Bank’s Doing Business Report 2018 for ease of “starting a business.”

In 2017, the government of the Republic of Equatorial Guinea passed Decree No. 67/2017, published on September 12, 2017 to establish a “one-stop-shop” or a “single window” to simplify the process to register a business and speed the process to seven business days.  The “single window” was launched on January 14, 2019, after the Government of the Republic of Equatorial Guinea equipped facilities for processing applications, and trained staff. There is a webpage with information (https://www.ventanillaempresarialge.com/en/welcome/  ) but businesses cannot register online.  Generally, business must register with various agencies at the national level and some local offices.  The one-stop-shop does not eliminate steps but it does consolidate visits to five offices into one. The below chart illustrates the steps that an entrepreneur can completed at the one-stop-shop:

BEFORE NOW
Public Notary one-stop-shop
Trade register one-stop-shop
Ministry of Finance one-stop-shop
Ministry of Commerce – General Direction of Commerce one-stop-shop
Ministry of Commerce – Department of Business Promotion one-stop-shop
Ministry of Labor Ministry of Labor
Social Security Administration (INSESO) Social Security Administration (INSESO)
Chamber of Commerce Chamber of Commerce
City Hall City Hall
Sectoral Ministries according to the activity of the company Sectoral Ministries according to the activity of the company

The country does not have a business facilitation mechanism for equitable treatment of women and underrepresented minorities in the economy.  There are laws that make it illegal to discriminate against women. There is an ongoing effort from the government to include people with disabilities in public administration, including with internship programs and contracts.

Outward Investment

Although Equatoguinean citizens may legally invest outside the country, the government of the Republic of Equatorial Guinea does not promote any outward investment that is not government led.  Equatoguineans owning businesses abroad are not praised or showcased in the news. There are not any known restrictions on domestic investors who seek to invest abroad. However, some report that certain individuals and companies have faced delays when transferring money overseas or converting local currency into foreign exchange.

2. Bilateral Investment Agreements and Taxation Treaties

Equatorial Guinea and the United States have not signed a Bilateral Investment Agreement, a Free Trade Agreement, nor a Bilateral Taxation Treaty.  Equatorial Guinea is not eligible for AGOA this year.

Equatorial Guinea has a bilateral investment agreement with Spain that came into force in 2003.  The government signed a cooperation framework agreement with Cape Verde on April 16, 2019, including double taxation avoidance and tax evasion, and reciprocal protection of investments in the two nations.

The country has several bilateral taxation treaties with the following countries:

  • China, signed in 2005, entered into force in 2006
  • Ethiopia, signed in 2009, not currently in force
  • France, signed in 1982, entered into force in 1983
  • Morocco, signed in 2005, not currently in force
  • Russia, signed in 2011, not currently in force
  • South Africa, signed in 2004, not currently in force
  • Spain, signed in 2003, entered into force in 2003
  • Ukraine, signed in 2005, not currently in force

Equatorial Guinea is also party to various other economic agreements, namely the following:

  • Cotonou Agreement EU, entered into force in 2003
  • African Union Treaty, entered into force in 1994
  • Economic Community of Central African States Treaty, entered into force in 1984
  • CEMAC Convention on Liberalization, entered into force in 1972
  • CEMAC Investment, entered into force in 1966
  • The African Continental Free Trade Agreement signed March 21, 2018, not currently in force

China has granted Equatorial Guinea preferential trade status.  The two countries are currently engaged in negotiations for a free trade agreement.

6. Financial Sector

Capital Markets and Portfolio Investment

The  banking sector is accounted to provide limited financing to businesses.  The government reports that 2 microfinance institutions operate in country and the government has started a microcredit program for SMEs.  The country does not have its own stock market.  According to investors, capital markets are non-existent.

Credit is available but interest rates are  high, ranging from 12 to 18 percent for mortgages, and about 15 percent for personal loans.  Business loans generally require significant collateral, limiting opportunities for entrepreneurs, and may have rates of 20 percent or greater.  It is unclear if foreigners could obtain credit.

Money and Banking System

There is banking coverage throughout the country and it is concentrated in urban centers.  There is little information available about assets and the health of the banking system. The Equatorial Guinea National Bank (BANGE) has 29 branches throughout the country.  According to a November 2017 article, BANGE had over 80,000 clients, approximately 10 percent of the population. CCEI/CCIW Bank de Guinea Ecuatorial has four branches in the largest cities and is a subsidiary of First Bank Afriland (Cameroon).  BGFIBank Guinée Equatoriale operates as a subsidiary of BGFI Holding Corporation (Gabon). Pan-African EcoBank (Togo) and Societal Générale (France) also operate in Equatorial Guinea. According to the United Nations, in 2016 approximately 20 percent of the population had deposits in commercial banks.  If a bank does not have a branch in the location where an individual wants to do business, they would not have access their funds there. ATMs are in limited locations.

The Government of the Republic of Equatorial Guinea is a member of the Economic and Monetary Community of Central African States (CEMAC) and shares a regional Central Bank with other CEMAC members.  Members have ceded regulatory authority over their banks to CEMAC, but also are entitled to national BEAC Branches. Bata and Malabo each have a branch. The government of the Republic of Equatorial Guinea is also a member of the Banking Commission of Central African States within CEMAC.

Foreigners must provide proof of residency to establish a bank account.

The country is an almost entirely cash economy, with credit cards available, but not widely used in the general population.  Primarily visitors or wealthy citizens use credit cards at international hotels, international airlines, and major supermarkets.

The banking sector is affected by = relatively lengthier bureaucratic procedures and a lack of computerized record-keeping. Customers have reported that currency is not always available on demand, and  occasional problems making transfers or exchanging local currency into foreign exchange.

Foreign Exchange and Remittances

Foreign Exchange Policies

Decree No. 54/1994 provides the right to freely transfer convertible currency abroad at the end of each fiscal year. Many businesses have reported that limited financial services create barriers to successfully executing international transfers.  On April 1, 2019 the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a 6-month moratorium until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process.  It is unclear if this applies to all accounts in the region.

Local currency is not widely available in the Central African Franc zone, but can be relatively easily obtained in the Republic of Equatorial Guinea.

Equatorial Guinea does not engage in currency manipulation as the CFA franc currently has a fixed exchange rate to the euro: 100 CFA francs = 1 former French (nouveau) franc = 0.152449 euro; or 1 euro = 655.957 CFA francs exactly.  Thus, the exchange rate of the currency fluctuates according to the value of the euro.

Remittance Policies

On April 1, 2019 the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a 6-month moratorium until October 1, 2019.  Account holders are theoretically able to convert funds to foreign exchange through an administrative process. It is unclear if this applies to all accounts in the region.

Sovereign Wealth Funds

The Government of the Republic of Equatorial Guinea established a sovereign wealth fund, the Fund for Future Generations, in 2002.  According to investors, the fund has little transparency regarding how the fund it is managed or the value of the fund. A 2017 press report estimated the fund to have USD 413 million, or 1.6% of Equatorial Guinea’s GDP.  The Sovereign Wealth Fund Institute estimates assets under management of USD 165.5 million. There is no publically available information on its allocations.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2017 $12,294 www.worldbank.org/en/country  
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2017 $654 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm  
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2016 $2 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm  
Total inbound stock of FDI as % host GDP N/A N/A 2017 117.4% UNCTAD data available at

https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

*Equatorial Guinea does not regularly produce figures for public consumption in regards to their finances.

Table 3: Sources and Destination of FDI

Data not available.


Table 4: Sources of Portfolio Investment

Data not available.

Nigeria

Executive Summary

Nigeria’s economy – Africa’s largest – exited recession in 2017, assisted by the Central Bank’s more rationalized foreign exchange regime.  Growth is expected to remain weak in the near term however – the IMF forecasts growth of 2.1 percent in 2019 and 2.53 percent in 2020, still under Nigeria’s population growth rate of around 2.6 percent.  With the largest population in Africa (estimated at over 195 million), Nigeria continues to represent a large consumer market for investors and traders. A very young country with nearly two-thirds of its population under the age of 25, Nigeria 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 significant impediments such as 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.  In 2017, these reforms helped boost Nigeria’s ranking on the World Bank’s annual Doing Business rankings from 169th to 145th place out of 190 economies. In 2018, it dropped one spot to 146th place.

Nigeria’s underdeveloped power sector remains a particular 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 171 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 privatization of distribution and generation companies in 2013 was based on projected levels of transmission and progress toward a fully cost reflective tariff to sustain operations and investment. However, tariff increases were reversed in 2015, and revenues have been severely impacted due to decreased transmission levels and currency devaluation, as well as high aggregate technical, commercial, and collections losses, resulting in a severe liquidity crisis throughout the power sector value chain.  The Nigerian government, in partnership with the World Bank, published a Power Sector Recovery Plan (PSRP) (approved by the Federal Executive Council) in March 2017. However, two years after its launch, differing perspective on various PSRP interventions have complicated implementation. The Ministry of Finance appears to be driving the implementation effort and has convened three Federal Government of Nigeria (FGN) committees charged with moving the process forward in the areas of regulation, policy, and finances.  Discussions between FGN and World Bank appear to going forward, but sector players report skepticism that the World Bank’s USD 1 billion loan will be enacted, though FGN may proceed without itThe 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 43 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 2018, largely as a result of the country’s continued recovery from the 2016 economic recession. U.S. goods exports to Nigeria in 2017 were USD 2.16 billion, up nearly 60 percent from the previous year, while U.S. imports from Nigeria were USD 7.05 billion, an increase of 68.7 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 2016. The stock of U.S. foreign direct investment (FDI) in Nigeria was USD 5.8 billion in 2017 (latest data available), 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. There is also investment from the United States and other countries in Nigeria’s power, telecommunications, real estate (commercial and residential), and agricultural sectors.

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 Organisation 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 2010 U.S. Securities Exchange Commission (SEC) and U.S. Department of Justice rulings 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.  Multiple bombings (the majority linked to the insurgent groups) of high-profile targets with multiple deaths have occurred outside of Nigeria’s northeast region as well since 2010, but the pace of such attacks has dipped significantly in recent years.  In the Niger Delta region, militant attacks on oil and gas infrastructure 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 shut-in 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 kidnap for ransom, has increased in recent years and law enforcement efforts have been limited or ineffectual.  Onshore, international inspectors have voiced concerns over the adequacy of security measures at some Nigerian port facilities. Businesses report that bribery of customs and port officials remains common to avoid delays, and smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Freedom of expression and of the press remains broadly observed, with the media often engaging in open, lively discussions of challenges facing Nigeria.  However, security services detain and harass journalists in some cases, including for reporting on sensitive topics such as corruption and security. Some journalists practice self-censorship on sensitive issues.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 144 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report “Ease of Doing Business” 2019 146 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 118 of 126 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in Nigeria ($M USD, stock positions) 2017 $5,800 http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2017 $2,100 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

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.

2. Bilateral Investment Agreements and Taxation Treaties

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.

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 (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.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($B USD) 2018 $355,000 2017 $375,750 www.worldbank.org/en/country   
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in Partner Country ($M USD, stock positions) 2018 N/A 2016 $2,480 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm   
Host Country’s FDI in the United States ($M USD, stock positions) 2018 N/A 2016 $53 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm   
Total Inbound Stock of FDI as % host GDP 2018 N/A 2017 26.0% UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

* https://www.nigerianstat.gov.ng/   


Table 3: Sources and Destination of FDI

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 $78,322 100% No Data Available
Bermuda $13,639 17.4%
Netherlands $13,278 16.9%
France $8,847 11.3%
United Kingdom $7,995 10.2%
United States $7,471 9.5%
“0” reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Data not available.

Investment Climate Statements
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