2023 Investment Climate Statements: Nigeria

Policies Towards Foreign Direct Investment

The Nigerian Investment Promotion Commission (NIPC) Act of 1995, amended in 2004, dismantled controls and limits on FDI, allowing for 100% foreign ownership in all sectors, except those prohibited by law for both local and foreign entities. These include arms and ammunitions, narcotics, and military apparel. In practice, however, some regulators include a domestic equity requirement before granting foreign firms an operational license. Nevertheless, foreign investors receive largely the same treatment as domestic investors in Nigeria, including tax incentives. The Act also created the NIPC with a mandate to encourage and assist investment in Nigeria. The NIPC features a One-Stop Investment Center (OSIC) that includes participation by 27 governmental and parastatal agencies to consolidate and streamline administrative procedures for new businesses and investments. The NIPC is empowered to negotiate special incentives for substantial and/or strategic investments. The Act also provides guarantees against nationalization and expropriation. The NIPC occasionally convenes meetings between investors and relevant government agencies with the objective of resolving specific investor complaints. The NIPC’s role and effectiveness is limited to that of convenor and moderator in these sessions as it has no authority over other government agencies to enforce compliance. The NIPC’s ability to attract new investment is thus limited due to its inability to resolve cany such investment challenges.

The Nigerian government continues to promote import substitution policies such as trade restrictions, foreign exchange restrictions, and local content requirements in a bid to funnel investment toward domestic production capacity and to reduce Nigeria’s reliance on imports. The import bans and high tariffs used to advance Nigeria’s import substitution goals have been undermined by smuggling of targeted products through the country’s porous borders, and by corruption in the import quota systems developed by the government to incentivize domestic investment. The government opened land borders in December 2020, which had been progressively closed to commercial trade starting in August 2019 with the aim of curbing smuggling and bolstering domestic production.

Limits on Foreign Control and Right to Private Ownership and Establishment

Investment by foreign and domestic private entities is prohibited in industries contained in the “negative list.” These include production of arms and ammunition, narcotic drugs and psychotropic substances, and military and paramilitary wear and accoutrements. The Federal Executive Council maintains the right to amend the list as it deems fit. There are currently no limits on foreign control of investments; however, some Nigerian regulatory bodies have insisted on domestic equity as a prerequisite to doing business. The NIPC Act of 1995, amended in 2004, liberalized the ownership structure of business in Nigeria, allowing foreign investors to own and control 100% of the shares in any company. While ownership of all mineral resources is vested in the federal government, 100% ownership of firms is allowed in the oil and gas sector. However, the dominant models for oil extraction are joint venture and production sharing agreements between oil companies (both foreign and local) and the federal government. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Act reviewed in 2020. A foreign company intending to operate in Nigeria must incorporate a company or subsidiary. A company may apply for an exemption to this requirement if it meets certain conditions including working on a specialized project specifically for the government, or on a project funded by a multilateral or bilateral donor or a foreign state-owned enterprise. However, a foreign entity can invest in a Nigerian company without incorporation. The Nigerian government is increasingly “encouraging” digital companies to establish a physical presence in the country. It mandated one digital firm, whose access to the Nigerian web space had been revoked for a separate matter, to establish a local office during negotiations to restore its access. Importers of foreign technology must obtain a certificate from the National Office of Technology Acquisition and Promotion (NOTAP). One of the prerequisites for obtaining the certificate is the provision of a Technology Transfer Agreement duly approved by NOTAP. The NIPC Act prohibits the nationalization or expropriation of foreign enterprises except in cases of national interest and stipulates modalities for “fair and adequate” compensation should that occur.

Other Investment Policy Reviews

The World Bank published an Investment Policy and Regulatory Review of Nigeria in 2022. It provides an overview of Nigeria’s legal and regulatory framework as it affects FDI, foreign investors, and businesses at large and is available athttps://openknowledge.worldbank.org/handle/10986/38522

Business Facilitation

The government established the Presidential Enabling Business Environment Council (PEBEC) in 2016 with the objective of removing constraints to starting and running a business in Nigeria. PEBEC’s implementation was supported by Presidential Executive Orders and aimed at improving business transparency and efficiency. PEBEC’s focus areas include: starting a business, cross-border and domestic movement of people and goods, obtaining credit and resolving insolvency, enforcing contracts, registering property, acquiring construction permits and electricity, and paying taxes. PEBEC’s significant achievements have been in the areas of starting a business, acquiring construction permits and electricity, registering property, and enforcing contracts. Despite these improvements, Nigeria remains a difficult place to do business, with companies suffering from regulatory uncertainty, policy inconsistency, poor infrastructure, foreign exchange shortages and customs inconsistency and inefficiency. These many challenges are reflected in the fact that Nigeria’s leading trade indices lag behind regional averages.

The One-Stop Investment Center (OSIC), housed within the NIPC, co-locates 27 relevant government agencies including the Central Bank of Nigeria (CBN), the Corporate Affairs Commission (CAC), and the Immigration Service to provide fast-tracked, efficient, and transparent services to investors. Among other issues, the OSIC assists with visas for investors, company incorporation, business permits and registration, tax registration, immigration, and customs issues. At OSIC, investors may also obtain relevant documents and approvals that are statutorily required to establish an investment project in Nigeria. In 2021, NIPC launched the electronic OSIC which allows investors to register businesses, submit documents, and pay fees remotely on its Single Window Investors’ Portal (SWIP).

All businesses, both foreign and local, are required to register with CAC before commencing operations. CAC began online registration as part of PEBEC reforms. Online registration is straightforward and consists of three major steps: name search, reservation of business name, and registration. A registration guideline is available on the website as is a post-registration portal for enacting changes to company details. The CAC online registration website is https://pre.cac.gov.ng/home . The registration requires the signature of a Legal Practitioner and attestation by a Notary Public or Commissioner for Oaths. Business registration can be completed online but the certificate of incorporation is usually collected at a CAC office upon presentation of the original application and supporting documents. Online registration can be completed in as little as three days if there are no issues with the application. On average, a limited liability company (LLC) in Nigeria can be established in seven days. This average is significantly less than the 22-day average for Sub-Saharan Africa. It is also faster than the OECD average of nine days. Timing may vary in different parts of the country.

Companies must register with the Federal Inland Revenue Service (FIRS) for tax payments purposes. If the company operates in a state other than the Federal Capital Territory, it must also register with the relevant state tax authority. CAC issues a Tax Identification Number (TIN) to all businesses on completion of registration which must be validated on the FIRS website https://apps.firs.gov.ng/tinverification/  and subsequently used to register to pay taxes. The FIRS then assigns a tax office with which the business will engage for tax payments purposes. Some taxes may also be filed and paid online on the FIRS website.

Foreign companies are also required to register with NIPC which maintains a database of all foreign companies operating in Nigeria. Investors can register online through NIPC’s SWIP platform: https://swip.nipc.gov.ng/auth.php?a=r .

Companies which import capital must do so through an authorized dealer, typically a bank, after which they are issued a Certificate of Capital Importation. This certificate entitles the foreign investor to open a bank account in foreign currency and provides access to foreign exchange for repatriation, imports, and other purposes.

A company engaging in international trade must get an import-export license from the Nigerian Customs Service (NCS). Businesses may also be required to register with and/or obtain licenses from other regulatory agencies which supervise the sector within which they operate.

Outward Investment

Nigeria does not actively promote outward direct investments. Instead, it focuses on promoting exports especially as a means of reducing its reliance on oil exports and diversifying the sources of its foreign exchange earnings. Since 2017, the Nigerian Export Promotion Council (NEPC) has administered a revised Export Expansion Grant (EEG) for which the federal government has allocated a total of about 300billion naira (about $600 million). 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 such 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 demand. Most Nigerian manufacturers remain unable to or uninterested in competing in the international market, given the size of Nigeria’s domestic market.

Domestic firms are not restricted from investing abroad. However, the Central Bank of Nigeria (CBN) mandates that export earnings be repatriated to Nigeria, and controls access to the foreign exchange required for such investments. Noncompliance with the directive carries sanctions including expulsion from the financial services and the foreign exchange markets.

Nigeria’s Securities and Exchange Commission (SEC) in April 2020 prohibited investment and trading platforms from facilitating Nigerians’ purchase of foreign securities listed on other stock exchanges. In defending this action, the SEC cited Nigeria’s Investment and Securities Act of 2007, which mandates that only foreign securities listed on a Nigerian exchange should be sold to the Nigerian investing public.

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 rarely 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.

The Nigerian federal government has at times proposed or enacted legislation that allows or would allow the government to directly compete with the private sector. Alternatively, provisions in such legislation frequently allow for the government to select private sector firms to be exempted from the constraints of regulation, deviating from a market-driven economy.

Ministries and regulatory agencies are meant to develop and make public anticipated regulatory changes or proposals and publish proposed regulations before their application. The general public should have the opportunity to comment through targeted outreach, including business groups and stakeholders, and during the public hearing process before a bill becomes law, but this is not always the case. 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. However, the federal government can demand states meet predefined minimum fiscal transparency requirements as prerequisites for obtaining federal loans. For instance, compliance with the 22-point Fiscal Sustainability Plan, which focused on ensuring better state financial performance, more sustainable debt management, and improved accountability and transparency, was a prerequisite for obtaining a federal government bailout in 2016. 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 (Nigerian National Petroleum Corporation (NNPC)) began publishing audited financial data in 2020.

International Regulatory Considerations

Foreign companies operate successfully, if not without certain, attendant challenges, 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.

ECOWAS 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 Nigerian Customs Service (NCS) was set up to develop the implementation work plans that were consistent with national and ECOWAS regulations. In April 2022, the Nigeria Customs Service (NCS) migrated to the new CET (2022 – 2027) following the expiration of the previous regime in 2021. The country applies five tariff bands under the CET: zero duty on capital goods, machinery, and essential drugs not produced locally; 5% duty on imported raw materials; 10% duty on intermediate goods; 20% duty on finished goods; and 35% duty on goods in certain sectors that the Nigerian government seeks to protect including palm oil, meat products, dairy, and poultry. 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%) for up to 3% 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 generally 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 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 an average of 476 days in Kano but 376 days in Lagos. In the case of Lagos, this figure of 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% 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% of the claim. In comparison, in OECD countries the corresponding figures are an average of 589.6 days and averaging 21.5% of the claim and in sub-Saharan countries an average of 654.9 days and averaging 41.6% of the claim.

Laws and Regulations on Foreign Direct Investment

The Nigerian Investment Promotion Commission (NIPC) Act allows 100% foreign ownership of firms. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Act of 2020. 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 any such interference by the government. The NIPC website (nipc.gov.ng) provides information on investing in Nigeria, and its One-Stop Investment Center co-locates 27 government agencies with equities in the foreign company registration process.

The Investments and Securities Act (2007) empowers the Securities and Exchange Commission (SEC) to regulate investments and maintain a register of foreign portfolio investments.

Competition and Antitrust Laws

The Nigerian government enacted the Federal Competition and Consumer Protection (FCCPC) Act in 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% 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.

An entity may seek redress from a court of law if it is not satisfied with the ruling of the FCCPC.

Expropriation and Compensation

The federal government has not expropriated or nationalized foreign assets recently, and the NIPC Act 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.

The federal government’s drive to domesticate foreign investments has led to a number of seemingly discriminatory actions against a prominent South African firm. Nigeria’s attorney general demanded the payment of $2 billion which he alleged the company owed in taxes over ten years, an action which was later dropped in 2020 in favor of negotiations with the FIRS. In 2018, the company paid $53 million to settle a CBN case in which it was accused of illegally repatriating $8.1 billion. Another South African company filed several suits against the FIRS in 2021 after the tax authority demanded $4.7 billion in back taxes and sought to freeze the company’s bank accounts. The tax dispute was resolved in an out-of-court settlement in 2022.

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 for 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 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:
   • 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
   • 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
   • 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.

Nigeria’s constitution grants the Federal High Court exclusive jurisdiction over matters relating to the taxation of companies and stipulates that tax matters are not arbitrable.

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 the Companies and Allied Matters Act (CAMA) revised in 2020. Insolvency solutions in CAMA 2020 focus on rescuing insolvent corporates, where debt recovery options are feasible, instead of the former objective which focused largely on the wind-up process. Once determined insolvent, company shareholders are allowed to enter into a binding agreement with creditors or apply to a court to appoint an administrator thereby obviating the need for claims by creditors. The debt threshold required for triggering compulsory liquidation is 200,000 naira (currently about $430 at the official exchange rate). The Act also ranks the claims of secured creditors above all other claims and forbids shareholders or administrators from favoring a creditor above another within the same creditor class. The Embassy is not aware of U.S. companies that have had to avail themselves of the insolvency provisions under Nigerian law.

Investment Incentives

The Nigerian government maintains different and overlapping incentive programs. The Industrial Development/Income Tax Relief Act 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 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% tax holiday for seven years and an additional 5% depreciation allowance over and above the initial capital depreciation allowance. Additional tax incentives are available for investments in domestic research and development, for companies that invest in local government areas deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios. The NIPC in conjunction with FIRS published a compendium of investment which houses all fiscal incentives backed by Nigerian law as well as sectoral fiscal concessions approved by the government. The compendium is available at https://www.nipc.gov.ng/compendium/preface/ . The 2022 Finance Bill aims to phase out existing tax incentives for mature industries and gradually transition away from what the government calls “expensive and redundant” tax incentives.

The Nigerian Export Promotion Council (NEPC) administers an Export Expansion Grant (EEG) scheme to improve non-oil export performance. The program was suspended in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export. It was revised and relaunched in 2018. 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% 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% of expenses are allowed. Long-term research will be regarded as a capital expenditure and written off against profit.

The government similarly offers incentives for the importation of equipment, parts, and machinery used in renewable energy generation, transmission, and/or storage. Solar cells in modules or panels attract zero import duty and are exempt from paying value added tax (VAT). Solar-powered coolers, solar-powered generators, wind-powered generators, battery-manufacturing inputs, and nuclear reactors are subject to a relatively low duty rate of 5% and are exempt from paying VAT.

The CBN offers preferential access to foreign exchange to importers it deems to have invested sufficiently in local manufacturing, backward integration, and other domestic industries.

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% 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. Foreign investors still face challenges with unreliable implementation of the regulations applied to export processing zones and are sometimes asked to pay import duties or restricted from accessing foreign exchange. The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program. There are three types of FTZs in Nigeria: federal or state government-owned, private sector-owned, and public-private partnerships. NEPZA regulates Nigeria’s FTZs regardless of the ownership structure. 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 https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm )

Performance and Data Localization Requirements

Foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the 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 of 2010 restricts the number of expatriate managers to 5% 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% 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 TTA approval process 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: https://notap.gov.ng/new_dev/register-a-technology-transfer-agreement/ .

The Nigerian Oil and Gas Content Development Act of 2010 contains certain technology-transfer requirements that may violate a company’s intellectual property rights.

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. NITDA re-issued an updated version of the Guidelines in 2019. The Guidelines require telecommunications companies to ensure that at least 80% of network infrastructure value and volume be locally sourced, use indigenous companies to build network infrastructure, and use locally developed or manufactured software components. The Guidelines also require multinational ICT equipment manufacturers operating in Nigeria to provide a detailed local content development plan for the creation of jobs, recruitment of Nigerians, human capital development, use of indigenous ICT products and services for value creation; all government agencies to procure at least 40% computer hardware and associated devices from NITDA-approved original equipment manufacturers; and ICT companies to host all consumer and subscriber data locally. Enforcement of the Guidelines is largely inconsistent. The 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 of the Guidelines is to promote development of domestic production of ICT products and services for the Nigerian and global markets, but some assessments indicate they 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.

The Nigerian Customs Service (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. The Nigerian government closed land borders to trade in August 2019, purportedly to stem the tide of smuggled goods entering from neighboring countries. Nigeria reopened land borders to trade in December 2020, but it continues to restrict the import of items such as rice and vehicles through its land borders. The NCS maintains a wider import prohibition list available at https://customs.gov.ng/?page_id=3075 , while the CBN continues to restrict access to foreign exchange for the importation of 44 classes of goods. The initial list that contained 41 items ( https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf ) has since been expanded to include fertilizer, maize, dairy products, and sugar (except for three companies that the CBN exempts from the lack of access to foreign exchange for sugar imports) with the CBN adding items in an ongoing basis as part of its “backward integration” strategy.

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% cargo examinations, and shipments take more (sometimes significantly more) than 20 days to clear through the process. In addition to creating significant delays and additional fees for security and storage for items awaiting customs clearance, NCS’s continued reliance on largely manual customs processes creates opportunities for significant variation, individual discretion, and corruption in the application of customs regulations. At the time of this report, a growing number of companies were engaged in disputes with the customs agency due to NCS arbitrarily reclassifying their imports into new classification categories with higher import tariffs.

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% of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance has not met its stated goals. 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. Delays for goods entering the country via the Apapa Port were exacerbated under COVID; U.S. companies have reported wait times to berth ships at the port of up to 90 days. Freight forwarders usually resort to bribery of customs agents and port officials to avoid long delays clearing imported goods through the NPA and NCS. The NPA set up an Electronic Truck Call-up System in January 2021 to increase efficiency in the management of cargo movement across the Apapa Port. However, the impact made by this initiative remains to be felt. 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 and expected to be operational by 2023.

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. The visa-on-arrival system is not an option for employment or residence. Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost $1,000 to $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.

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% of the property value while in Kano registering property averages 11 steps over 47 days at a cost of 11.8% of the property value.

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, or the Minister of the Federal Capital Territory for lands located in the federal capital, as state governments have jurisdiction over land ownership. Authorities have often compelled owners to demolish buildings deemed to be in contravention of building codes or urban masterplans, 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. Proof of ownership in the absence of land titles may be established through traditional history of ownership, proving possession over a sufficient length of time, and showing sustained enjoyment of the land. The government may acquire land for an overriding public purpose which may be excised to an individual or entity if the land has not been committed.

Intellectual Property Rights

Nigeria’s legal and institutional infrastructure for protecting intellectual property rights (IPR) remains in need of further development, even though laws on the books can enforce most IPR. The Nigerian government has undertaken useful initiatives over the past year to strengthen intellectual property protection. For example, in September 2022, Nigeria’s IP agencies and a team of national and international experts collaborated with the World Intellectual Property Organization (WIPO) to draft its National IP Policy and Strategy. These included representation from the WIPO Nigeria Office (WNO), a network of only seven WIPO external offices, to promote awareness raising, training, and capacity building. Some strategic objectives of the policy include: (1) strengthening the legal framework for the protection of IPR in Nigeria; (2) strengthening the institutional framework for the administration and management of IPR in Nigeria; and (3) strengthening the legal and institutional framework for the enforcement of IPR in Nigeria.

In March 2023, President Buhari signed legislation updating copyright protection via the Copyright Act, 2022. Among other things, it defines technological protection measures (known as TPMs), remuneration rights, and broadcasting. It also provides anti-piracy penalties and prohibits the circumvention of TPMs as well as the falsification, alteration, or removal of electronic rights management information (RMI). The Nigerian Copyright Commission (NCC), an agency supervised by the Ministry of Justice, administers the Act. Nigeria is a WIPO member and in 2017 it ratified two WIPO treaties that it signed in 1997: the WIPO Copyright Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT), as well as the Beijing Treaty on Audiovisual Performances, and the Marrakesh Treaty to Facilitate Access to Published Works for persons who are Blind, Visually impaired persons, or otherwise Print disabled.  These treaties address important digital communication, broadcast, and online infringement issues that have become increasingly relevant in the globalized economy. The Copyright Act, 2022 domesticates those treaties. The NCC has primary responsibility for copyright enforcement but is understaffed and underfunded relative to the magnitude of the copyright challenges in Nigeria. Nevertheless, the NCC continues to carry out enforcement actions on a regular basis. The NCC’s 2022 annual report details their enforcement actions, prosecution of cases, improving collective management administration, and training of staff. It recognizes that more can be done now with tools in the Copyright Act, 2022. Enforcement of IPR in Nigeria faces challenges in three areas: (1) limited capacity within the judicial and law enforcement systems, (2) weak regulatory and statutory regimes, (3) and poor funding and resource allocation. The areas in which the legislation is deficient include, geographical indications, trade secrets, and animal breeders’ rights. In 2021, Nigeria enacted a new law giving plant breeders IPR over new and improved seeds for increased crop production.

Violations of IPRs continue to be widespread. Anti-counterfeiting groups such as the International AntiCounterfeiting Coalition (IACC) report that the Nigerian police work to combat counterfeiting and readily engage with trademark owners but lacks the capacity to fully enforce these laws. Authorized penalties for counterfeiting and trademark infringements remain relatively low and rightsholders note that offenses are typically met with non-deterrent, modest fines. A Senator introduced legislation, the Trademarks Bill 2019, which could address some of these issues; although it was not enacted, with the new IP policy and strategy along with momentum created by the Copyright Act, 2022, stakeholders are optimistic about industrial property reform. In the meantime, the current Trademarks Act, the Patents and Designs Act, and the Merchandise Marks Act remain the basis for industrial property protection in Nigeria. Depending on the scale and type of counterfeiting involved, the National Agency for Food and Drug Administration and Control (NAFDAC) and the Federal Competition and Consumer Protection Commission (FCCPC) would be responsible for enforcing counterfeiting and trademark infringement offenses.

The Nigerian Customs Service (NCS) has general authority to seize and destroy contraband. If NCS suspects unauthorized importation of copyright protected works, it will require the presumed copyright owner to issue a notice for NCS to treat such works as infringing. The implementing procedures for this practice have not been developed as it 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. Similarly, NAFDAC and FCCPC work in cooperation with rights owners’ associations and stakeholders in the counterfeiting and trademark industries.

Nigeria is not listed in the United States Trade Representative (USTR) Special 301 Report 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/ .

Capital Markets and Portfolio Investment

The NIPC Act of 1995, amended in 2004, liberalized Nigeria’s foreign investment regime, which has facilitated access to credit from domestic financial institutions. The government, and the CBN in particular, has sought to diversify foreign exchange inflows by encouraging foreign portfolio investments (FPI). High returns on the CBN’s open market operation (OMO) bills as well as the exclusion of certain classes of domestic investors from the market yielded high levels of FPI. However, an unfavorable macroeconomic environment, foreign exchange shortages, and capital restrictions have led to a persistent decline in FPI. This decline was worsened in 2022 by global monetary policy tightening which led to capital flight from Nigeria as returns on portfolio investments in more stable economies increased.

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 Exchange Group (NXG), a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments. Financial institutions provide credit on market terms, but rates are relatively high due to high inflation and a high benchmark interest rate. The NXG completed a demutualization process in 2021 which transformed the company, previously privately held and called the Nigerian Stock Exchange, to a public company limited by shares. The NGX swam against global trends in the stock market to return 20% in 2022; stocks yielded an average of 6% in 2021 and 50% in 2020. The NXG all-share index closed 2022 with 51,251 points, a 20% increase from the end of 2020. As of December 2022, the NXG all-share index had an equity market capitalization of 28 trillion naira ($61 billion), an increase of 27% from 2021. The share of foreign investment in equity fell to 17% – the lowest in over a decade – from 22% in 2021and over 50% in 2018. This decline is indicative of foreign investors’ diminishing appetite for Nigerian securities especially as repatriation concerns continue to mount. It is also attributable to the small size of free float in the ownership structure, which foreign institutional investors typically find volatile.

The Securities and Exchange Commission (SEC) is the government agency tasked with regulating and developing the capital market. SEC creates operational guidelines and licenses securities and market intermediaries. 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 NXG to encourage greater corporate participation and sectoral balance in the Nigerian stock exchange, but those proposals have not been enacted.

The government employs debt instruments, issuing treasury bills of one year or less, and bonds of various maturities ranging from two to 30 years. Nigeria is increasingly relying on the domestic bond market and central bank loans to finance its widening deficit. The Nigerian government shelved plans to borrow from the international capital market following skyrocketing yields on Nigeria’s Eurobonds, further putting pressure on the domestic bonds market. In addition, Nigeria’s reluctance to accept certain conditionalities attached to multilateral borrowing has increasingly limited its access to World Bank and Africa Development Bank budget support loans that have required it to free the exchange rate and eliminate subsidies amongst other macro/fiscal reforms.

Domestic borrowing accounted for 93% of new government borrowings in the first eleven months of 2022. Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital. Nigeria’s SEC 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 is the apex monetary authority of Nigeria; it was established by the CBN Act of 1958 and commenced operations on July 1, 1959. It has oversight of all banks and other financial institutions and is designed to be operationally independent of political interference although the CBN governor is appointed by the president and confirmed by the Senate. The amended CBN Act of 2007  mandates the CBN to have the overall control and administration of the monetary and financial sector policies of the government. The new Banking and Other Financial Institutions Act (BOFIA) of 2020 broadens CBN’s regulatory oversight function to include financial technology companies as it prohibits the operations of unlicensed financial institutions. The revised BOFIA also grants partial immunity to the CBN and its officials from judicial intervention on actions arising from activities undertaken to implement the Act. Furthermore, the Act forbids restorative orders and limits remedies sought against the CBN, where it has revoked a license, to monetary compensation.

Foreign banks and investors are allowed to establish banking business in Nigeria provided they meet the current minimum capital requirement of 25 billion naira ($60 million) and other applicable regulatory requirements for banking license as prescribed by the CBN. The CBN regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country stipulate that the foreign institutions’ aggregate investment must not be more than 10% of the latter’s total capital.

Any foreign-owned bank in Nigeria that wishes to acquire or merge with a local bank must have operated in Nigeria for a minimum of five years. To qualify for merger or acquisition of any of Nigeria’s local banks, the foreign bank must have achieved a penetration of two-thirds of the states of the federation, that is, to have branches in at least 24 out of the 36 states in Nigeria. The CBN also stipulates that the foreign bank or investors’ shareholding arising from the merger or acquisition should not exceed 40% of the total capital of the resultant entity.

The CBN currently licenses 22 conventional deposit-taking commercial banks in Nigeria. Following a 2009 banking crisis, CBN officials intervened in eight commercial banks and worked to stabilize the sector through reforms, including the adoption of uniform year-end International Financial Reporting Standards to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks. The CBN has since intervened in the sector using bridge banks and capital injections to avoid bank failures. The CBN has licensed three non-interest banks since it released operational guidelines in 2011. There are six licensed merchant banks which provide asset management and capital market activities, the latter through a subsidiary registered by SEC, and 893 microfinance banks (including four non-interest microfinance banks) licensed by the CBN to provide services largely to those not served by conventional banks.

The CBN reiterated its commitment to increasing the level of financial inclusion in the country from 60% in 2020 to 95% by 2024. The CBN plans to achieve this goal by leveraging technology and relaxing its criteria for financial services market entry. Most notably, telecom companies previously excluded from providing financial services are now eligible for payment service banking and digital financial services licenses. The CBN also licenses agents to provide financial services on behalf of commercial banks and other licensed financial services providers in underserved areas. According to the IMF’s Financial Access Survey for 2022, there were 5,109 bank branches in Nigeria in 2021 which amounted to 4.3 branches per 100,000 adults; the number of automated teller machines per 100,000 adults was to 16.1; and there were 517 mobile money agents per 100,000 adults.

The banking sector remained resilient in 2022 despite the risks and challenges posed by worsening macroeconomic conditions. The CBN reported that non-performing loans (NPLs) remained below the 5% prudential threshold at 4.9%, in September 2022. The steady fall in NPLs is attributable to the CBN’s post-COVID forbearance measures as well as increased banking sector recoveries, disposals, and write-offs. The industry average capital adequacy ratio (CAR) was 13.8% as of September 2022, compared to a minimum regulatory threshold of 10%. A stress test conducted by the CBN in June 2022 indicated that the banking system could absorb a 100% increase in NPLs as the CAR would remain above the regulatory threshold of 10%. The oil and gas sector accounted for the largest share of credit issued with 22% all banking industry loans. This was followed by manufacturing (17%) and government (9%). According to the CBN’s 2022 Half-Year Financial Stability Report, five banks were designated Domestic Systemically Important Banks (D-SIBs) each of whose failure would have significant impact on the financial system. D-SIBs accounted for 58% of banking assets, 60% of industry deposits, and 56% of industry loans. D-SIBs are subject to extra scrutiny, including a bi-annual assessment, and more stringent regulatory thresholds. The CBN reported that D-SIBs complied with their prudential requirements in the first half of 2022 including meeting a higher CAR threshold of 15%.

Total banking sector assets rose from59 trillion naira ($128 billion) in 2021 to 65 trillion naira ($141 billion) in the first half of 2022 while total deposits increased to 42 trillion naira ($91 billion) during the same period. D-SIBs recorded combined total assets of 38 trillion naira ($82 billion) and held 25 trillion naira ($54 billion) of total deposits in the first half of 2022.

The CBN has continued its system of liquidity management using unorthodox monetary policies. The measures included an increase in the cash reserve ratio (CRR) to 32.5% – among the highest globally – to absorb the excess liquidity within the system which was a direct consequence of the lack of investment opportunities. The CBN arbitrarily debited banks for carrying excess loanable deposits on their books resulting in the effective CRR for some banks rising as high as 50%, which limited banks’ capacity to lend. The CBN also enforced a 65% minimum loan to deposit ratio aimed at increasing private sector credit and boosting productivity.

Under Nigerian laws and banking regulations, one of the conditions any foreigner seeking to open a bank account in Nigeria must fulfill is legal residency in Nigeria. The foreigner must have obtained the Nigerian resident permit, known as the Combined Expatriate Residence Permit and Aliens Card which can only be processed by a foreigner that has been employed by a Nigerian company through an expatriate quota. Another requirement is the biometric BVN, which every account holder in Nigeria must have according CBN regulations.

Only a company duly registered in Nigeria can open a bank account in the country. Therefore, a foreign company is not entitled to open a bank account in Nigeria unless its subsidiary has been registered in Nigeria.

Foreign Exchange and Remittances

Foreign Exchange

Foreign currency for most transactions is procured through local banks in the inter-bank market, irrespective of investment type. Funds are freely convertible into major world currencies irrespective of type of investment. Low value foreign exchange, typically in U.S. dollars, British pounds or the Euro, may also be procured at a premium from foreign exchange bureaus, called Bureaus de Change. The CBN continues to maintain the capital restrictions originally put in place to manage investment outflows during the COVID-19 pandemic in 2020. Domestic and foreign businesses frequently express strong concern about the CBN’s foreign exchange restrictions, which they report prevent them from importing needed equipment, goods, and services; paying foreign debt obligations; and repatriating earnings. Foreign exchange demand remains high due to the dependence on foreign inputs for manufacturing and refined petroleum products. The CBN is still clearing a backlog of pent-up dollar demand estimated in the billions of dollars which began significantly accumulating in 2020.

In 2015, the CBN published a list of 41 product categories which could no longer be imported using official foreign exchange channels ( https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf ). The list has since been increased to include fertilizer, dairy products, and maize bringing the total number of product categories to 44.

The CBN maintains a managed-float exchange rate regime; in reality, the exchange rate is fixed with little room to maneuver. The CBN also maintains several “windows” through which foreign exchange is sold to different clients at different rates. While the CBN had been able to maintain convergence between its various rates in 2019, the forex shortages experienced in 2020 caused a divergence of exchange rates starting March 2020. In 2021, the CBN adopted the Investors and Exporters (I&E) foreign exchange rate, used by businesses to repatriate and trade at a market-clearing price, effectively devaluing the official exchange rate from 379 naira to the dollar to 411 naira to the dollar. Consequently, the I&E window has transformed to a tightly controlled managed-float in which the CBN frequently intervenes. This official exchange rate depreciated to 450 naira to the dollar in 2022. The retail market rate at the Bureaus de Change continued to depreciate from 565 naira to the dollar as of December 2021 to 730 naira to the dollar in December 2022 after the CBN stopped supplying foreign exchange to the market in July 2021. The divergence of the official and parallel market exchange rates has led to increased arbitrage further distorting the free-flowing parallel market price.

Remittance Policies

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10% 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 mandated that all foreign exchange remittances be transferred through banks. Investors must obtain a Certificate of Capital Importation at the point of importing capital to enable them remit investments. Such remittances may take several weeks depending on the size of the transfer and the availability of foreign exchange at the remitting bank. Due to the forex shortages currently being experienced in Nigeria, remittances take longer than usual. CBN foreign exchange supplies to the market consistently fall short of demand thereby increasing the backlog of dollar demand for remittances, imports, and other international payments. Transfers of currency are protected by Article VII of the International Monetary Fund Articles of Agreement ( http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) manages Nigeria’s sovereign wealth fund. It was created by the NSIA Act in 2011 to harness Nigeria’s robust oil revenues toward economic stability, wealth creation, and infrastructure development. The NSIA received $1 billion seed capital in 2013 which grew to $2.7 billion in 2021 as a result of additional investments and retained earnings. The NSIA manages an additional $1.2 billion from third-party-managed funds for a total assets under management of $3.9 billion.

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 ring-fenced funds:

• the Future Generations Fund is assigned 30% of NSIA’s assets with the objective of preserving and growing the value of said assets for the benefit of future Nigerians. The minimum investment horizon is 20 years, the investment base currency is the U.S. dollar, and the minimum target return is U.S. inflation + 4%. The Fund invests primarily in “growth assets,” “deflation hedges,” and “inflation hedges.”
• the Nigeria Infrastructure Fund aims to plug Nigeria’s infrastructure gap by investing in, and catalyzing foreign investments for, domestic infrastructure projects. The Fund is assigned 50% of NSIA’s assets. Investments are in naira and U.S. dollars and the return-on-investment target is U.S. inflation plus 5%. The Fund cannot allocate more than 50% of its assets to investment managers (not more than 25% to a single manager) or more than 35% to a single infrastructure sector. The Fund may also invest not more than 10% of its assets in “development projects’ in underserved regions or sectors. Priority sectors are power, healthcare, real estate, technology and communications infrastructure, aviation assets, agriculture, water and sewage treatment and delivery, roads, port, and rail.
• the Stabilization Fund was created to act as a buffer against short-term economic instability and is assigned 20% of NSIA’s assets. The Fund invests in conservative, short-term, and liquid assets since it may be drawn down to augment government revenue shortages. The base currency is the U.S. dollar. Investment options range from global sovereign and corporate debt, credit focused debt, cash, and to an extent, derivatives. The minimum credit quality rating is “A” over a 12-month period.

At least 50% of the NSIA’s total assets are invested domestically in infrastructure projects. About 21 percent of the Stabilization Fund was invested in U.S. treasury bonds which track the
Bloomberg Barclays’ U.S. Treasury bond 1-3-year index. A smaller portion of the fund is invested in short-duration U.S. corporate credit, asset-backed securities, and other fixed income instruments. A portion of the Future Generations Fund is also invested in developed market equities which includes instruments from the United States.

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

Privatization Program

The Privatization and Commercialization Act of 1999 established the National Council on Privatization, the policy-making body overseeing the privatization of state-owned enterprises, and the Bureau of Public Enterprises (BPE), the implementing agency for designated privatizations. The BPE has focused on the privatization of key sectors, including telecommunications and power, and calls for core investors to acquire controlling shares in formerly state-owned enterprises.

The BPE has privatized and concessioned more than 140 enterprises since 1999, including an aluminum complex, a steel complex, cement manufacturing firms, hotels, a petrochemical plant, aviation cargo handling companies, vehicle assembly plants, and electricity generation and distribution companies. The electricity transmission company remains state-owned. Foreign investors can and do participate in BPE’s privatization process. The government also retains partial ownership in some of the privatized companies. The federal government and several state governments hold a 40% stake, managed by BPE, in the power distribution companies.

The National Assembly has questioned the propriety of some of these privatizations, with one ongoing case related to an aluminum complex which is the subject of a Supreme Court ruling on ownership. In addition, the failure of the 2013 power sector privatization to restore financial viability to the sector has raised criticism of the privatized power generation and distribution companies.

The federal government estimates it will raise 91 billion naira ($218 million) from privatization proceeds in 2022. The government did not earn any revenues from privatization in 2021 despite a 205-billion-naira ($492 million) budget projection.

BPE has several ongoing transactions including the sale of government assets in the agricultural sector, the concession of trade fair complexes, and private-public partnership in the Nigeria Commodity Exchange amongst others. Additional information on ongoing transactions can be found on the BPE website: https://bpe.gov.ng/category/transactions/on-going-transactions/ .

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Climate Issues

Nigeria actively worked to improve its strategy and regulations concerning climate change. During COP27, Nigeria published its Oil and Gas Methane Guidelines and became the first country in Africa to enact regulations to curb methane emissions in the upstream energy sector. The President signed the Climate Change Act into law at the end of 2021, appointed a National Climate Change Council (NCCC) director (with a four-year term) in mid-2022, and approved the NCCC’s work and staffing plan in February 2023. NCCC is envisioned as the climate clearing house – and guiding body – for the climate work of all Nigerian ministries, departments and agencies and is tasked with the implementation of the country’s Energy Transition Plan approved in 2021. The ETP is supplemented by the National Climate Change Policy for 2021-2030, a holistic framework that defines the country’s vision and response plan to address climate change while incorporating critical mitigation and adaptation elements. It prescribes sectoral and cross-sectoral strategic policy actions for the management of climate change within the country’s pursuit of climate resilient sustainable development. Nigeria has adopted additional policies, strategies, and action plans related to addressing climate change, including an update of its Nationally Determined Contribution in 2021, National Action Plan to reduce short-lived climate pollutants in 2019, the National Biodiversity Strategy and Action Plan of 2016, the National Policy on Drought and Desertification of 2007, the Great Green Wall for the Sahara and Sahel Initiative National Strategic Action Plan of 2012, and the Reduce Emissions from Deforestation and Forest Degradation (REDD+ Strategy) of 2019, among others.

Environmental programs and the ministries and agencies that oversee them are chronically underfunded and underequipped. This will impact Nigeria’s success in meeting climate aspirations such as reducing emissions to meet announced timelines. Nigeria is a member of the fledgling African Carbon Credit Market announced at COP27 and the President announced plans in February 2023 to develop a carbon trading market to fund the countries climate ambitions. The National Sovereign Investment Authority continues to develop innovative and sophisticated green financial solutions to raise funds.

Widespread and endemic illegal logging continue to decimate Nigeria’s remaining forested areas. The National Strategy to Combat Forest and Wildlife Crime passed in 2022 may help but enforcement is limited. On January 19, the Minister of Environment conditionally lifted the ban on the export of wood and charcoal, stating it had not been effective and had resulted in the loss of wildlife, legitimate jobs, and income in the forestry sector. At the same event, the Minister released the Nigeria Timber Legality Standards and Guidelines and announced the formation of a joint task force to help ensure implementation. The Public Procurement Act of 2007 and the Public Procurement (Goods and Works) Regulations of 2007 mandate environmental considerations during examination of bids and disposal of public property, respectively, but enforcement is a challenge.

Resources to Report Corruption

Economic and Financial Crimes Commission:
Headquarters:
No. 5, Fomella Street, Off Adetokunbo Ademola Crescent, Wuse II, Abuja,
Nigeria. Branch offices in Ikoyi, Lagos State; Port Harcourt, Rivers State; Independence Layout,
Enugu State; Kano, Kano State; Gombe, Gombe State.
Hotline: +234 9 9044752 or +234 9 9044753
Eagle Eye App (Google Play and the App Store)

Independent Corrupt Practices and Other Related Offences Commission:
Abuja Office – Headquarters
Plot 802 Constitution Avenue, Central District, PMB 535, Garki Abuja
0800-CALL-ICPC i.e 0800-2255-4272
MTN: 0803-123-0280, 0803-123-0281
GLO: 0705-699-0190, 0705-699-0191
Phone/Fax: 234 9 523 8810
Email: info@icpc.gov.ng 
Wahala Dey App (Google Play and the App Store)