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Cablegate: Nigeria: 2010 Investment Climate Statement

VZCZCXYZ0000
RR RUEHWEB

DE RUEHUJA #0064/01 0211749
ZNR UUUUU ZZH
R 211208Z JAN 10
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC 0023
INFO RUCPCIM/CIM NTDB WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHOS/AMCONSUL LAGOS 0020
RUEHUJA/AMEMBASSY ABUJA

UNCLAS ABUJA 000064

SIPDIS
STATE FOR EEB/IFD/OIA DAVID J. AHN AND THOMAS J. WALSH

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC NI
SUBJECT: NIGERIA: 2010 INVESTMENT CLIMATE STATEMENT

REF: 10 STATE 124006

1. Nigeria is Africa's most populous nation with an estimated
population of over 150 million. It offers investors a low-cost
labor pool, abundant natural resources, and potentially the largest
domestic market in sub-Saharan Africa. Despite these advantages,
much of that market potential is unrealized. Impediments to
investment include inadequate infrastructure, corruption, an
inefficient property registration system, an inconsistent
regulatory environment, restrictive trade policies, and slow and
ineffective courts and dispute resolution mechanisms.

2. Potential investors will need to understand the Nigerian
business environment and engage in problem-solving with local
staff, Nigerian partners, and government officials. There were at
least three prominent cases in 2009 where the judicial system or
law enforcement agencies were manipulated by local companies or
government officials in order to exert undue pressure on U.S.
companies and individuals for commercial or personal advantage. In
all three cases, arrest warrants were issued and senior officials
of the U.S. companies were detained with the understanding that the
cases would be dropped if certain conditions were met.

3. Potential investors will also need to cope with poorly
maintained power, road, and port infrastructure, and arbitrary
policy changes, such as the reversal of privatization efforts in
the power and downstream oil and gas sectors. Security is of
special concern due to high rates of violent crime. Kidnapping for
ransom has expanded beyond the Niger Delta where it originated to
roughly half of Nigeria's states. Attacks on oil installations and
the associated kidnappings of oil workers in the oil-rich Niger
Delta region have significantly declined since the implementation
of a government amnesty, but tensions remain because promises made
for the post-amnesty period have not yet been implemented.
Inadequate law enforcement compounds the country's high crime rate,
and sporadic outbreaks of communal violence due to ethnic and
religious conflicts continue.

4. Military rule ended with the inauguration of a civilian
administration in May 1999. Nigeria conducted its last general
election in April 2007, resulting in a civilian-to-civilian
hand-over of power from former President Olusegun Obasanjo to
President Umar Musa Yar'Adua. However, the elections were
characterized by significant irregularities and many of the results
were challenged in electoral tribunals and courts. The
presidential election outcome was challenged as well, with the
Supreme Court in December 2008 upholding President Yar'Adua's
election. The courts overturned the announced results in six of
the 36 governors' races, are still responding to appeals in five
additional cases, and forced re-runs in others.

5. The Nigerian government (GON) embarked on a medium-term
economic reform program in late 2003 called the National Economic
Empowerment and Development Strategy (NEEDS) for 2003-2007. NEEDS
focused on privatization, good governance, macroeconomic stability,
anti-corruption, and public service reforms. NEEDS has been
modified to incorporate President Yar'Adua's "Seven Point Agenda,"
which focuses on power and energy, food security and agriculture,
wealth creation and employment, mass transportation, land reform,
security, and education system. An economic reform document called
"Vision 20:2020" has been presented to the Federal Executive
Council (the Cabinet) and is expected to be unveiled soon to the
public. Vision 20:2020 programs aim to make Nigeria one of the top
twenty economies in the world by the year 2020.

6. The GON also plans to reform how oil and gas business is
conducted in Nigeria. In a bid to achieve this, the GON has
introduced the Petroleum Industry Bill (PIB) that would change
existing contracts and increase the GON's share of oil and gas
revenues from mandated joint ventures. Stakeholders in the sector,
including oil and gas production and service companies, have been
advocating changes in the fiscal and non-fiscal terms of the PIB to
make it more attractive to private sector investment. Both houses
of the National Assembly have passed the PIB, which is expected to
be submitted to the National Assembly for a final reading in early

2010.

7. Freedom of expression and of the press is broadly observed,
although most publications practice self-censorship regarding
sensitive issues. Human rights violations have been reduced from
the time of military rule, but the country's overall human rights
record remains poor. Controls over foreign investment have been
loosened, and military government decrees inhibiting competition or
conferring monopoly powers on public enterprises have been repealed
or amended. The policymakers' protectionist bent remains strong
despite these actions. Trade policy is inconsistent and the GON
prohibits the importation of many goods, ostensibly to foster
domestic production. In a bid to further support domestic
production, the GON has introduced the Local Content Bill (LCB)
that would require oil and gas production and service companies to
use local resources for the delivery of services that are currently
sourced from outside the country. Concerns about the LCB include
its restrictive trade practices in violation of WTO agreements as
well as transfer of technology requirements that would violate a
company's intellectual property rights. Both houses of the
National Assembly have passed the LCB, which is expected to be
submitted to the National Assembly for a final reading in early
2010.

Nigeria's Selected Indices and Rankings

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8. The following table indicates Nigeria's ranking according to
various metrics of transparency and good governance in 2009:

Measure Index/Ranking

Transparency International Corruption Index - 130

Heritage Economic Freedom Index - 117 (World); 19 (Region)

World Bank Doing Business Index - 125

MCC Govt. Effectiveness - 35%

MCC Rule of Law - 22%

MCC Control of Corruption - 29%

MCC Fiscal Policy - 84%

MCC Trade Policy - 29%

MCC Regulatory Quality - 42%

MCC Business Start-up - 43%

MCC Land Rights Access - 11%

MCC Natural Resources Management - 23%

Openness to Foreign Investment

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9. The GON continues to solicit foreign investment and has
implemented various reforms to attract it.

10. Legal Framework: With a few exceptions, the Nigerian
Investment Promotion Commission (NIPC) Decree of 1995 allows
100-percent foreign ownership of firms outside the petroleum
sector, where investment is limited to existing joint ventures or
production-sharing agreements. Industries considered crucial to


national security, such as firearms, ammunition, and military and
paramilitary apparel, are reserved for domestic investors. Foreign
investors must register with the NIPC after incorporation under the
Companies and Allied Matters Decree of 1990. The decree prohibits
the nationalization or expropriation of foreign enterprises except
in cases of national interest.

11. Nigerian laws apply equally to domestic and foreign investors.
These include the Central Bank of Nigeria Act of 2007, the Money
Laundering Act of 2003, the Securities and Exchange Act of 1999,
the Foreign Exchange Act of 1995, the Banking and Other Financial
Institutions Act of 1991, and the National Office of Technology
Acquisition and Promotion Act of 1979.

12. Privatization: The Privatization and Commercialization Act of
1999 established the National Council on Privatization, the
policymaking body overseeing the privatization of state-owned
enterprises (SOEs), and the Bureau of Public Enterprises (BPE), to
implement the program. BPE has focuses 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 GON repealed or amended decrees that inhibited
competition or conferred monopoly powers on parastatal firms. From
1999 to date, BPE raised over $4 billion by privatizing and
concessioning more than 140 enterprises, including cement
manufacturing firms, banks, hotels, a petrochemical plant, aviation
cargo handling companies, and vehicle assembly plants. No
substantive SOE has been privatized Since President Yar'Adua's
inauguration in 2007. The Infrastructure Concession Regulatory
Commission (ICRC) was inaugurated in 2008 with the goal of
identifying greenfield infrastructures for concessioning. The
Lagos-Ibadan Expressway, a major highway in the southwestern part
of the country, was concessioned to Bi-Courtney Highway Services
under a Design-Build-Operate-Transfer scheme for 25 years. The GON
also plans to use a Public-Private-Partnership Framework for future
infrastructure provision.

13. The passage of the Power Sector Reform Bill in 2005 created
the Nigerian Electricity Regulatory Commission (NERC), a power
regulator with responsibility for tariff regulation and economic
and technical regulation of the electricity supply industry. The
NERC has issued twenty nine licenses to independent power producers
in the electricity industry since its inception. Three IPP plants
were operational by the end of 2009. Major hurdles facing the IPPs
are the failure to fully implement the Electric Power Sector Reform
Act of 2005 and the insufficient supply of natural gas to power the
plants.

14. The expected privatization of the Power Holding Company of
Nigeria (PHCN) through the Electric Power Sector Reform Act of 2005
appears to no longer be a priority. The GON is rehabilitating
existing power infrastructure and is investing in new power
projects, with the aim to meet the GON's 6,000 Megawatts (MW)
target by the end of 2009 and 10,000 MW target by the end of 2011.
The 2009 goal was missed with only 3,600 MW generated at the end of
the year. Nigeria also needs an effective transmission and
distribution system since its current grid is in need of repair and
upgrade.

15. The GON has substantially opened Nigeria's telecommunications
sector. The Telecommunications Act of 2001 authorizes the Nigerian
Communications Commission (NCC) to issue licenses to existing and
prospective service providers. Nigeria's state-owned
telecommunications operator, Nigerian Telecommunications Limited
(NITEL) and five private companies, including Etisalat, which
commenced operations in 2008, have licenses. Globacom won mobile,
fixed, and international gateway licenses as Nigeria's second
national telecommunications operator in mid-2002. According to the
NCC, the estimated total number of phone lines (both mobile and
fixed line) in Nigeria at the end of September 2009 was 70.3
million with a teledensity of 50.24. This is an improvement from
the September 2008 figure of 57.07 million lines and a teledensity
of 40.77. Licenses for the 2.3GHz spectrum, which were awarded
through a competitive bidding process in May 2009, were cancelled
due to alleged administrative procedures that were not adhered to

by the NCC. A fresh bidding round will be initiated by the NCC and
full details are expected soon. Three carriers in the 800MHz
spectrum band were awarded to Visafone Communications in a
competitive auction process in July 2007 that included Visafone
Communications, GiCell Wireless Limited, Multilinks
Telecommunication Limited, and TC Africa Telecoms Network Limited.
Four licenses for a 10MHz lot in the 2GHz spectrum were also issued
to Alheri Engineering Co. Limited, Celtel Nigeria Limited, Globacom
Limited, and MTN Nigeria Communications Limited in March 2007.

16. The NCC commenced the unified licensing regime in May 2006,
awarding the first batch of unified licenses to four
telecommunications service providers. The unified license permits
telecommunications companies to offer services across-the-board in
telecommunications, including fixed line, wireless, data services,
etc. This marks the end of the five-year exclusivity incentive
granted the mobile telephone licensees in 2001.

17. Telecommunications deregulation has led to the issuance of
licenses for fixed wireless networks, internet services, and VSAT
(very small aperture terminal) satellite telecommunications
equipment services. However, the GON's hefty fees and
infrastructure deficiencies such as inadequate power supply slow
the impact and implementation of these technologies.

18. The ICT sector should receive a boost in May 2010 when two
broadband cables, from Glo and MainOne, are expected to land in
Lagos. Current bandwidth in Nigeria is through the SAT-3 cable of
350 gigabits. The Glo and MainOne cables will increase the
broadband capacity by 2.6 terabits for a total of almost 3.0
terabits for the entire country.

19. Glo-One is an initiative of Globacom Limited. MainOne will
offer a 1.92 terabit facility that will provide the largest
bandwidth in the region. Glo-One is expected to be commissioned in
early 2010, while Main One is scheduled for commissioning in June
2010. Both projects will provide broadband data and internet
capacity, which will increase the country's Internet density and
capacity. They will likewise break NITEL's fiber-optic-cable
quasi-monopoly and will reduce the cost of broadband to one-tenth
of the current cost. Damage to the SAT-3 cable, Nigeria's only
link to the global communications system, in July 2009 affected 70
percent of the country's bandwidth and crippled bank services and
Internet access nationwide.

Conversion and Transfer Policies

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20. The Foreign Exchange Monitoring Decree of 1995 opened
Nigeria's foreign exchange market. In February 2006, in accordance
with its plan to liberalize the foreign exchange market, Nigeria
adopted a Wholesale Dutch Auction System (WDAS). The WDAS provides
greater control of the foreign exchange market, although the
Central Bank still retains its supervisory role over the market.

21. Foreign companies and individuals can hold
non-naira-denominated accounts in domestic banks. Account holders
have unlimited use of these funds, and foreign investors are
allowed unfettered repatriation of capital. There is a $4,000
quarterly Personal Travel Allowance for foreign exchange and a
$5,000 quarterly Business Travel Allowance per individual for
naira-denominated accounts. Foreign exchange for travel is usually
issued in cash by commercial banks while some authorized dealers
also issue pre-paid credit cards that can be used on ATM machines
worldwide. Purchase of foreign exchange for business purposes,
such as importing equipment and raw materials, and for paying
school fees abroad, must be routed through banks, Nigeria's only
licensed foreign exchange agents. This can only be done with
proper documentation, such as filling out the Form M and presenting
copies of the certificate of incorporation of the company.

22. The NIPC guarantees investors unrestricted transfer of
dividends (net a 10 percent withholding tax). Companies must
provide evidence of income earned and taxes paid before receiving
remittances. Money transfers usually take not more than 48 hours
if the necessary documentation is provided. All transfers are
required by law to be made through banks.

Expropriation and Compensation

-----------------------------------------

23. The GON has not expropriated or nationalized foreign assets
since the late 1970s.

Dispute Settlement

-------------------------

24. Investment Disputes: Nigeria's civil courts handle disputes
between corporate bodies and the GON as well as between Nigerian
businesses and foreign investors. The courts occasionally rule
against the GON. However, the settlements in these cases are not
always expeditiously paid. Nigerian law allows the enforcement of
foreign judgments after proper hearings in Nigerian courts.
Plaintiffs receive monetary judgments in the currency specified in
their claims.

25. Legal System: Nigeria has a complex, three-tiered legal system
composed of English common law, Islamic law, and Nigerian customary
law. Most business transactions are governed by "common law" as
modified by statutes to meet local demands and conditions. At the
pinnacle of the judicial system is the Supreme Court, which 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 has too few court facilities, lacks computerized
document-processing systems, and poorly remunerates judges and
other court officials, all of which encourages corruption and
undermines enforcement. Debtors and creditors rarely have recourse
to Nigeria's pre-independence bankruptcy law. In the Nigerian
business culture, businessmen generally do not seek bankruptcy
protection. Claims often go unpaid, even in cases where creditors
obtain a judgment against defendants.

26. The public increasingly resorts to the court system and is
more willing to litigate and seek redress. However, use of the
courts does not automatically imply fair or impartial judgments.
In the World Bank's publication, Doing Business 2010, which
surveyed 183 countries, Nigeria was ranked 94 out of 183 countries
on the enforcement of contracts, compared with its 2009 ranking of
92 out of 181 countries surveyed. In addition, the report revealed
that contract enforcement required 39 procedures and an average of
457 days, the cost of which averaged 32 percent of the value of the
contract, compared to contract enforcement in OECD countries that
required 30.6 procedures, spanning an average of 462.4 days at a
cost of 19.2 percent of the cost of the contract, and sub-Saharan
African countries that required 39.2 procedures, an average of
643.9 days, and 49.3 percent of the claim.

27. Alternative Dispute Resolution: The Arbitration and
Conciliation Act of 1988 (the Arbitration Act) provides for a
unified and straightforward legal framework for the fair and
efficient settlement of commercial disputes by arbitration and

conciliation. The Act established internationally competitive
arbitration mechanisms, established proceeding schedules, provided
for the application of the UNCITRAL (United Nations Commission on
International Trade Law) arbitration rules or any other
international arbitration rule acceptable to the parties, and made
the Convention on the Recognition and Enforcement of Arbitral
Awards (New York Convention) applicable to contract enforcement,
based on reciprocity. The Act allows parties to challenge
arbitrators and provides that an arbitration tribunal shall ensure
that the parties are accorded equal treatment, and that each party
has full opportunity to present its case.

Performance Requirements/Incentives

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28. Nigeria regulates investment in line with the World Trade
Organization's Trade-Related Investment Measures (TRIMS) Agreement.
Foreign companies operate successfully in Nigeria's service sector,
including telecommunications, accounting, insurance, banking, and
advertising. The Securities and Exchange Act of 1988, amended and
renamed the Investment and Securities Act in 1999, forbids
monopolies, insider trading, and unfair practices in securities
dealings.

29. To meet performance requirements, foreign investors must
register with the Nigerian Investment Promotion Commission,
incorporate as a limited liability company (private or public) with
the Corporate Affairs Commission, procure appropriate business
permits, and register with the Securities and Exchange Commission
(when applicable). Manufacturing companies are sometimes required
to meet local content requirements. Expatriate personnel do not
require work permits, but they are subject to "needs quotas"
requiring them to obtain residence permits that allow salary
remittances abroad. Larger quotas are allowed for professions
deemed in short supply, such as deepwater oilfield divers. U.S.
companies often report problems obtaining quota permits.

30. The GON maintains many different and overlapping incentive
schemes. The Industrial Development/Income Tax Relief Act No. 22
of 1971, amended in 1988, provides incentives to pioneer industries
deemed beneficial to Nigeria's economic development and to
labor-intensive industries, such as apparel. Companies that
receive pioneer status may benefit from a non-renewable,
100-percent tax holiday of five years (seven years if the company
is located in an economically disadvantaged area). Industries that
use 60 to 80 percent of local raw materials in production may
benefit from a 30-percent tax concession for five years, and
investments employing labor-intensive modes of production may enjoy
a 15-percent tax concession for five years. Additional incentives
exist for the natural gas sector, including allowances for capital
investments and tax-deductible interest on loans. The GON
encourages foreign investment in agriculture, mining and mineral
extraction (non-oil), oil and gas, and the export sector. In
practice, these incentive programs meet with varying degrees of
success.

31. Technology Transfer Requirements: The National Office of
Industrial Property Act of 1979 established the National Office of
Technology Acquisition and Promotion (NOTAP) to facilitate the
acquisition, development, and promotion of foreign and indigenous
technologies. NOTAP registers commercial contracts and agreements
dealing with the transfer of foreign technology and ensures that
investors possess licenses to use trademarks and patented
inventions and meet other requirements before sending remittances
abroad. In cooperation with the Ministry of Finance, NOTAP
administers 120-percent tax deductions for research and development
expenses if carried out in Nigeria and 140-percent tax deductions
for research and development using local raw materials.

32. NOTAP has shifted its focus from regulatory control and
technology transfer to promotion and development. With the
assistance of the World Intellectual Property Organization, NOTAP

has established a patent information and documentation center for
the dissemination of technological information to end-users. The
office has a mandate to commercialize institutional research and
development with industry.

33. Import Policies: Tariffs provide the GON its second largest
source of revenue after crude oil exports. The GON issued the
2008-2012 Common External Tariff (CET) Book that harmonizes its
tariffs with its West African neighbors under the Economic
Community of West African States (ECOWAS) Common Economic Tariff
(CET), in September 2008. The CET has five tariff bands and import
duties were reduced on a number of items, such as rice, cigars, and
manufactured tobacco. The five CET tariff bands are: zero duty on
capital goods, machinery, and essential drugs not produced locally;
five percent on imported raw materials; ten percent on intermediate
goods; 20 percent on finished goods; and 35 percent on luxury goods
and in certain sectors that the GON wants to protect. The fifth
band proposed by the GON has been accepted by ECOWAS member
countries as part of the CET, but each member country can include
products it deems appropriate. The reduction in the number of
tariff bands has been accompanied by an increase in the number of
import taxes in recent years. The tariff policy reduces the number
of banned tradable imports from 44 to 26 items, and there is a
reduction in tariff on a wide range of items. Items that remain
banned include: frozen poultry; pork; beef; cassava; pasta; fruit
juice in retail packs; toothpicks; soaps and detergents; refined
vegetable oil; beer and non-alcoholic beverages; some textiles; and
plastics.

34. The Nigerian Customs Service (NCS) and the Nigerian Ports
Authority (NPA) have exclusive jurisdiction over customs services
and port operations. Nigerian law allows importers to clear goods
on their own, but most importers employ clearing and forwarding
agents. Many importers under-invoice shipments and engage in
currency arbitrage to minimize tariffs and lower their landed
costs. Others ship their goods to ports in neighboring countries,
after which they are transported overland. The GON began a
destination inspection regime in January 2006, which had been
shelved on four occasions between 2002 and 2005. Under the
destination inspection scheme, all imports are inspected upon
arrival into Nigeria, rather than at the ports of origin.
Guidelines for the new scheme were announced and three companies
were awarded a seven-year contract to act as inspection agents at
Nigeria's seaports, border posts, and airports. The companies are
Cotecna, SGS, and Global Scan. The exclusive contract will expire
by 2012, if NCS officials have completed training on the new scheme
and on the handling of the scanning machines, which would be handed
over to the NCS at the expiration of the contract.

35. Shippers report that efforts to modernize and professionalize
the NCS and the NPA have reduced port congestion and clearance
times. These efforts include an ongoing program to achieve the
stated goal of 48-hour cargo clearance, particularly at Lagos'
Apapa Port, which handles over 40 percent of Nigeria's trade.
Nevertheless, bribery of customs and port officials is common, and
smuggled goods routinely enter Nigeria's seaports and cross its
land borders. Efficient functioning of concessioned container
terminals has significantly reduced container ship wait times, but
the final release of containers still can take four weeks or longer
due to delays in NCS container-processing and clearing.

36. Export Incentives: Most export incentives have been abolished.
However, the Nigerian Export Promotion Council continues to
implement the Export Expansion Grant scheme to improve non-oil
export performance. The Nigerian Export-Import Bank provides
commercial bank guarantees and direct lending to facilitate export
sector growth, although these practices are underused. The
Nigerian Export-Import Bank'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 meant to promote industrial exports remain
burdened by uneven management, vaguely defined policy guidelines,
and corruption. Nigeria's high production costs because of
inadequate infrastructure also leave Nigerian exporters at a
disadvantage.

37. Government Procurement: The GON awards contracts under an
open-tender system, advertising tenders in Nigerian newspapers and
a "tenders" journal, and opening the tenders to domestic and
foreign companies. Procurement has become slightly more
transparent, but corruption persists in the awarding of government
contracts. Procurement for capital projects is often subject to
over-invoicing, which permits improper payments to private and
public sector officials. Many U.S. companies claim they are
disadvantaged in obtaining GON contracts, even when they appear to
have the best bids in technical and financial terms. Unsuccessful
U.S. bidders sometimes allege collusion between foreign competitors
and key GON officials.

38. The Bureau of Public Procurement, the successor agency to the
Budget Monitoring and Price Intelligence Unit (BMPIU) after the
enactment of the public procurement legislation in May 2007, acts
as a clearinghouse for government contracts and procurement, and
monitors the implementation of projects to ensure compliance with
contract terms and budgetary restrictions. Procurements above N50
million (about $333,333) are subject to full "due process," as the
process is called. An amendment to the public procurement
legislation is being considered by the National Assembly. The
proposed amendment contains provisions for decentralizing
government procurement and increasing the procurement authorization
limits for ministries, departments, and agencies, unlike the
earlier legislation which centralized government procurement. It
is expected that the public procurement legislation would also be
passed at the lower tiers of government.

39. Visa Requirements: 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 Nigerian Investment

Promotion Commission (NIPC), and request residency permits from the
Nigerian Immigration Service. Investors report that this
cumbersome process can take from two to 24 months and cost from
$1,000 to $3,000 in facilitation fees.

Right to Private Ownership and Establishment

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40. In accordance with the NIPC Decree of 1995, the GON supports
competitive business practices and protects private property.

Protection of Property Rights

------------------------------------

41. The GON recognizes secured interests in property, such as
mortgages. The recording of security instruments and their
enforcement are subject to the same inefficiencies as those in the
judicial system. In the World Bank's publication, Doing Business
2010, Nigeria was ranked 178 of the 183 countries surveyed for
registering property, requiring 13 procedures and an average of 82
days at a cost of 20.9 percent of the property value. According to
the report, property registration in OECD countries requires an
average of 4.7 procedures, an average of 25 days, and a cost of 4.6
percent of property values, while in sub-Saharan African countries
it requires an average of 6.8 procedures, and average of 80.7 days,
and a cost of 9.9 percent of property value.

42. Fee simple property rights are rare. Most property consists
of long-term leases with certificates of occupancy acting as title
deeds. Transfers are complex and must usually go through state
governor's offices. In Abuja, the Federal Capital Territory
government cancelled and began a process of reregistering all
property allotments, refusing to renew those it deemed not in
accordance with the city's master plan. Buildings on these

property allotments have frequently been demolished, even in the
face of court injunctions. Therefore, acquiring and maintaining
rights to real property is a major challenge.

43. Nigeria is a member of the World Intellectual Property
Organization (WIPO) and a signatory to the Universal Copyright
Convention, the Berne Convention and the Paris Convention (Lisbon
text). The Patents and Design Decree of 1970 governs the
registration of patents, and the Registry of Trademarks, Patents
and Designs in the Ministry of Commerce and Industry is responsible
for registering patents, trademarks, and designs. Once conferred,
a patent conveys exclusive rights to make, import, sell, or use a
product or apply a process. The Trademarks Act of 1965 gives
trademark holders exclusive rights to use registered trademarks for
a specific product or class of products. The Copyright Decree of
1988, subsequently amended in 1992 and 1994 and later codified as
the Copyright Act Chapter C 28 Laws of the Federation of Nigeria
2004 is based on WIPO standards and U.S. copyright law, and makes
it a crime to export, import, reproduce, exhibit, perform, or sell
any work without the permission of the copyright owner. However
under the Copyright Act, owners of copyrights do not register their
works. Rather, they notify the Nigerian Copyright Commission
(NCC). Nigeria's copyright statutes also include the National Film
and Video Censors Board Act and the Nigerian Film Policy Law of
1993.

44. The Copyright Decree was amended in 1999 to incorporate
trade-related aspects of intellectual property rights (TRIPS)
protection for copyrights, except provisions to protect
geographical indications and undisclosed business information.
There is confusion among the various GON agencies regarding
proposed legislation which is expected to put all intellectual
property agencies under a single and uniform authority.
Concomitantly, a private bill that would establish an Industrial
Property Commission is being considered by the National Assembly.
This private bill would amend the Patents and Design Decree to make
comprehensive provisions for the registration and proprietorship of
patents and designs, amend the Trademarks Act to improve existing
legislation relating to the recording, publishing, and enforcement
of trademarks, and provide protection for plant varieties
(including biotechnology) and animal breeds. However, there are
competing plans by the Ministry of Commerce and Industry and the
Ministry of Justice to send similar bills to the National Assembly
for consideration. This ongoing division has lasted since at least
2006. The GON has signed the WIPO Internet treaties but has yet to
ratify them. However, the NCC claims that it is already
implementing the terms of the treaties.

45. Patent and trademark enforcement remains weak, and judicial
procedures as well as application of enforcement measures are slow
and subject to corruption. Relevant Nigerian institutions suffer
from poor training and limited resources. A key deficiency is
inadequate appreciation of the benefits of IPR protection among
regulatory officials, distributor networks, and consumers. The
over-stretched and under-trained Nigerian police have little
understanding of intellectual property rights. The new tariff
policy released in September 2008 empowers the Nigerian Customs
Service (NCS) to seize pirated works and prosecute offenders.
Though the NCS has received some WIPO-sponsored and USG-sponsored
training, it admits that the technical capacity of its officers
needs to be enhanced for it to be able to combat piracy
effectively.

46. Companies do not often seek trademark or patent protection,
the enforcement mechanisms of which they consider ineffective.
Nonetheless, recent efforts to curtail abuse have yielded some
results. The Nigerian police and the NCC in conjunction with the
Economic and Financial Crimes Commission have raided compact disc
replicating plants and enterprises producing and selling pirated
software and videos. A number of businesses have also filed
high-profile charges against IPR violators. Most raids involving
copyright, patent, or trademark infringement appear to target small
rather than large and well-connected pirates. Very few cases have
been successfully prosecuted. Most cases are settled out of court,
if at all. Those adjudicated in court are handled primarily by the
Federal High Court, whose judges are generally familiar with
intellectual property rights law.

Transparency of the Regulatory System

--------------------------------------------- ----

47. Nigeria's legal, accounting, and regulatory systems are
consistent with international norms, but enforcement is uneven.
There are sometimes opportunities for public comment and input into
proposed regulations. Professional organizations set standards for
the provision of professional services, e.g., accounting, law,
medicine, engineering, and advertising. These standards are
usually consistent with international norms. No legal barriers
prevent entry into this sector.

48. Taxation: Nigeria's tax laws generally do not impede
investment, but the imposition and administration of taxes is
highly uneven and lacks transparency. Tax evasion is common, and
individuals and businesses often collude with relevant officials to
avoid paying taxes. Nigeria has signed double taxation agreements
with several countries, including the United Kingdom, France, the
Philippines and Japan. The GON imposes a 7.5-percent tax rate on
dividends, interest, rent, and royalties when paid to a bona-fide
beneficiary under a tax treaty. Multiple taxes are a problem for
businesses at state and local levels. Companies within concurrent
state and local jurisdictions may be expected to pay several taxes
and levies.

Efficient Capital Markets and Portfolio Investment

--------------------------------------------- -----------------

49. The Nigerian Investment Promotion Commission Decree of 1995
liberalized Nigeria's foreign investment regime, which has
facilitated access to credit instruments provided by 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 lending rates and the short maturities
of local debt instruments.

50. Trading on the NSE has witnessed significant declines in value
since March 2008 due to a combination of factors, including the
freeze on margin loans by local banks, the sale of large quantities
of shares by bank debtors to pay back margin loans, and the exit of
foreign portfolio investors and hedge funds due to the global
economic and financial crisis. Market capitalization opened at
about 7 trillion naira ($46.7 billion) at the beginning of 2009,
but closed at about 5 trillion naira ($33.3 billion) on December
31, 2009. The NSE All Shares Index opened 2009 at about 31,450
points but fell to 20,827 points on December 31, 2009. The
exchange operates nine branches nationwide, and the volume of
shares listed continues to rise due to new companies listing their
shares on the NSE. The introduction of the contributory pension
system in late 2005, the GON's divestment of equity in parastatal
companies, and the initial public offerings (IPOs) and issuances of
additional shares by listed companies have contributed to the NSE's
growth. The NSE continues to expand its membership and investor
pool. Currently, 214 equities are listed on the exchange.

51. Government debt instruments are available. Since the
inception of the civilian government in 1999, the federal
government has issued bonds of various maturities ranging from 2 to
20 years aimed at restructuring its domestic debt portfolio from
short-term to medium and long-term instruments. There has been
renewed interest in bonds since the decline in the equities market
in March 2008. Some state governments issued bonds to finance
development projects; while some domestic banks also plan to raise
additional capital from the bond market. The Nigerian Securities
and Exchange Commission (SEC) has issued stringent guidelines for
states that wish to raise funds on capital markets, such as a

credit assessment conducted by a recognized credit rating agency.
The credit rating agencies recognized by the SEC are Agusto and Co.
and Global Credit Rating (GCR) of South Africa.

52. Banking System: Twenty-four commercial banks were operating
in Nigeria as of December 2009. The Central Bank of Nigeria (CBN)
recently concluded a special audit of the 24 banks to ascertain
whether they have classified their loans in line with mandated
prudential guidelines and are also well-capitalized. The outcome
of the special audit led to the replacement of the executive
management of eight banks, while two banks have been ordered to
raise additional capital. CBN also provided 620 billion naira
($4.1 billion) in long-term loans to the eight banks to boost their
liquidity. The remaining 14 banks were given a clean bill of
health, though they were asked to make further provisions for
non-performing loans granted to petroleum product importers and
capital market operators. Some of the banks have published their
financial results in line with the CBN's new directive of making
full provision for bad loans, showing a loss position.

Competition from State-Owned Enterprises (SOEs)

--------------------------------------------- ------------------

53. Most State-Owned Enterprises (SOEs) have been privatized in
order to make them more efficient. The remaining SOEs are a major
drain on government finances. The state-owned telecommunications
company, NITEL, and its mobile subsidiary, MTEL, have lost
considerable market share to privately owned competitors. Both
NITEL and MTEL have been slated for privatization. The four
state-owned petroleum refineries located in Port-Harcourt, Warri,
and Kaduna operate far below their installed capacity. The Kaduna
and Port-Harcourt refineries were sold to a private consortium
during the Obasanjo administration, but the transaction was later
reversed by President Umaru Yar'Adua. The GON's management of the
refineries has been poor. There is an ongoing drive to encourage
private investment in refineries and, in a bid to attract such
investment, the GON says it plans to fully deregulate the
downstream sector and allow market forces to determine the price of
petroleum products. The GON has also abolished the $1 million
non-refundable deposit requirement for investors applying to build
refineries. There are also plans to attract private investment to
the railway sector through public-private partnerships (PPPs).

54. Sovereign Wealth Fund: The GON desires to establish a
Sovereign Wealth Fund (SWF). Discussions are still ongoing within
the GON on the SWF's objectives and how it would be operated. SWF
legislation would be required.

Corporate Social Responsibility

---------------------------------------

55. Both local and foreign enterprises generally follow Corporate
Social Responsibility (CSR) principles as a way of identifying with
the communities in which they operate and sometimes to display
support for GON initiatives. Generally, firms that pursue CSR are
viewed favorably.

Political Violence

-----------------------

56. Social unrest, religious and ethnic strife, and crime affect
many parts of Nigeria. In the oil-rich Niger Delta region, decades
of neglect, persistent poverty, and environmental damage caused by

energy projects have aggravated unrest. Sabotage and vandalism of
pipelines and other installations and kidnapping of Nigerian and
expatriate oil workers have been regular occurrences. President

Yar'Adua's unconditional amnesty for Niger Delta militants in 2009
induced all major militant leaders to put down their arms and join
a political reconciliation process. However, the subsequent
rehabilitation and reintegration process for former militants, as
well as promised massive investment in infrastructure and
development in the region, have failed to materialize. Many
observers fear that, absent major progress on these fronts,
militancy could return in 2010.

57. The Niger Delta Development Commission (NDDC) has a mandate to
implement social and economic development projects in the Delta
region, but the NDDC has been ineffective. State and local
governments offer few social services and Niger Delta residents
continue to seek direct payments and other assistance from oil
companies. Some oil companies have implemented their own
socioeconomic development programs to assist local communities, but
many communities consider the company programs inadequate. In
2009, the federal government established the Ministry for the Niger
Delta, to oversee Niger Delta development projects.

58. Violent clashes between police and militant members of Boko
Haram (Western Education Is Sin) in four northern states between
July 26 and 29, 2009, resulted in over 700 reported deaths and
4,000 people displaced. The violence began when followers of an
extremist Islamic leader attacked a police station in retaliation
for the arrest of several of the group's leaders. Violence quickly
spread, and the police and military were accused of using excessive
force to end it, including the alleged extrajudicial execution by
police of the leader.

Corruption

---------------

59. Domestic and foreign observers recognize corruption as a
serious obstacle to economic growth and poverty reduction. Nigeria
was ranked 130 out of 180 countries in Transparency International's
2009 Corruption Perception Index (CPI), dropping nine places from
its 121 ranking in the 2008 CPI. Nigeria's corruption levels
remain high and its main anti-corruption institution, the Economic
and Financial Crimes Commission (EFCC), has underperformed on the
issue.

60. The Corrupt Practices and Other Related Offences Act of 2001
established an Independent Corrupt Practices and Other Related
Offences Commission (ICPC) to prosecute individuals, government
officials, and businesses accused of corruption. Over 19 offenses
are punishable under the Act, including accepting or giving bribes,
fraudulent acquisition of property, and concealment of fraud.
Nigerian law stipulates that giving and receiving bribes are
criminal offences and, as such, are not tax deductible. Despite
the legislation, ICPC investigations have resulted in less than
fifteen convictions since 2001.

61. The EFCC was established to prosecute individuals involved in
financial crimes and other acts of economic "sabotage." It has
been most successful in prosecuting low-level internet scam
operators, but some high-profile convictions have taken place, such
as a former governor of Bayelsa State, a former Inspector General
of Police, and a former Chairman of the Board of the Nigerian Port
Authority. However, many other cases languish in the courts
without resolution. Concerns about the EFCC's commitment grew
after its change in leadership in December 2007 and redeployment of
some personnel in July 2008. In May 2007, Nigeria was admitted
into the Egmont Group of Financial Intelligence Units (FIUs). The
Paris-based Financial Action Task Force removed Nigeria from its
list of Non-Cooperative Countries and Territories in June 2006.
Nigeria is a pilot participant in the Extractive Industry
Transparency Initiative (EITI), which seeks to ensure audits of
Nigeria's oil accounts. Nigeria has also ratified the UN
Anticorruption Convention.

Bilateral Investment Agreements

-----------------------------------------

62. Investment Agreements: A Trade and Investment Framework
Agreement (TIFA) has been signed with the United States. A
bilateral investment treaty (BIT) with the U.S. is not in place,
but President Yar'Adua has expressed interest in negotiating one.
Nigeria has bilateral investment agreements with the United
Kingdom, Germany, Belgium, South Africa, Italy, Argentina, Egypt,
South Korea, China, Jamaica, Sweden, Switzerland, Turkey, Uganda,
France, Taiwan, the Netherlands and Romania.

OPIC and Other Investment Insurance Programs

--------------------------------------------- ---------------

63. The U.S. Overseas Private Investment Corporation offers all
its products to U.S. investors in Nigeria.

Labor

--------

64. Nigeria's skilled labor pool has declined over the past decade
as vocational and university educational standards have fallen,
mainly because of poor funding. The low employment capacity of
Nigeria's formal sector means that over half of all Nigerians work
in the informal sector and agriculture. Companies involved in
formal sector businesses such as banking and insurance possess an
adequately skilled workforce (often trained abroad in private
institutions or at the better-funded universities). Manufacturing
sector workers often require additional training and supervision,
but there are too few supervisory personnel to ensure that this is
done well. Labor-management relations are strained in some
sectors, especially in the profitable oil and gas and public
education sectors.

65. The Right of Association: Nigeria's constitution guarantees
the rights of free assembly and association and protects workers'
rights to form or belong to trade unions. Several statutory laws
nonetheless restrict the rights of workers to associate or
disassociate with labor organizations. The Trade Union Amendment
Act of 2005 allows non-management senior staff to join unions. The
Act also gives the Trade Union Congress and the Nigeria Labor
Congress, Nigeria's most influential organized labor federations,
representation on Nigeria's National Labor Advisory Council (NLAC),
which advises the Minister of Labor and Productivity on labor
matters.

66. Nigeria's largest labor federation, the Nigeria Labor Congress
(NLC), contains thirty-seven industrial unions, while the second
largest, Trade Union Congress (TUC), includes 18. According to
figures provided by the Ministry of Labor and Productivity, total
union membership at the end of 2009 was approximately 7.4 million.
Approximately 30 percent of the total work force is unionized in
both the private and public sectors. Workers in the agricultural
sector, which employs the bulk of the work force, are not
organized.

67. Collective Bargaining: Collective bargaining occurred
throughout the public sector and the organized private sector in
2007 and 2008. However, public sector employees have become
increasingly concerned about the GON's failure to honor its
agreements from the collective bargaining process. According to
the NLC and TUC, the GON's failure to honor its agreements
threatens to "devalue the enviable record of dialogue,
consultation, and mutual trust that has characterized the
relationship between the GON and labor unions since 1999." A bill
is currently in its final stages in the National Assembly which


would allow for better tripartite representation, dialogue, and
mediation during labor disputes.

68. Collective bargaining in the petroleum industry is relatively
efficient compared to other sectors. Issues pertaining to
salaries, benefits, health and safety, and working conditions tend
generally to be resolved quickly through negotiations. One
exception is a longstanding unresolved dispute over the industry's
use of contract labor. Organized labor's efforts to address broad
political issues have resulted in industrial actions, such as
general strikes over fuel price increases, which continue to affect
industry productivity.

69. Workers under collective bargaining agreements cannot
participate in strikes unless their unions comply with the
requirements of the law, which includes provisions for mandatory
mediation and referral of disputes to the GON. The law provides
the GON the option of referring matters to a labor conciliator, an
arbitration panel, a board of inquiry, or the National Industrial
Court (NIC). The law forbids employers from granting general wage
increases to workers without prior government approval, but the law
is not often enforced. Strikes occur frequently in both the
private and public sectors. There were more than a dozen
threatened or actual strikes carried out among unions in the
aviation, education, health, judicial, government, entertainment,
and transportation sectors in 2009.

70. The Nigerian Minister of Labor and Productivity may refer
unresolved disputes to the Industrial Arbitration Panel (IAP) and
the NIC. Union officials question the effectiveness and
independence of the NIC in view of its refusal to resolve disputes
stemming from the GON's failure to fulfill contract provisions for
public sector employees. Union leaders criticize the arbitration
system's dependence on the Minister of Labor and Productivity's
referrals.

71. Child Labor: Nigeria has ratified the International Labor
Organization (ILO) convention on the elimination of the worst forms
of child labor. The 1974 Labor Decree and the 1979 Constitution
prohibit forced or compulsory labor and restrict the employment of
children under the age of 15 to home-based agricultural or domestic
work for no more than eight hours per day. The 1974 Labor Decree
allows the apprenticeship of youths as of the age of 13 under
specific conditions. Nigeria's poor distribution of income has
forced many children into commercial activities to enhance family
income. The law, which sets a general minimum age of 12 years for
employment, did not protect children from exploitation in the
workplace and was not effectively enforced by the government.
Child labor was widespread, and the Ministry of Labor and
Productivity and the National Agency for the Prohibition of Traffic
in Persons (NAPTIP) estimated there were more than 15 million
children involved in child labor. The federal government passed the
Child Rights Act of 2003, but implementation was required by each
state government. Only 21 of the 36 states passed a version of the
Child Rights Act establishing laws providing protecton of
children's rights as of the end of 2009. The 2005, UNICEF State of
the World's Children report estimated that 39 percent of children
aged five to 14 were involved in child labor (not necessarily
exploitative) in Nigeria. Similarly, a 2003 study conducted by the
Nigerian National Bureau of Statistics in conjunction with the ILO
estimated as many as 15 million children were working in Nigeria,
with as many as 40 percent of them at risk of being trafficked for
forced labor.

72. Acceptable Conditions of Work: Nigeria's 1974 Labor Decree
provides for a 40-hour work week, two to four weeks of annual
leave, and overtime and holiday pay for all workers except
agricultural and domestic. No law prohibits compulsory overtime.
The Decree establishes general health and safety provisions, some
of which are specific to young or female workers, and requires the
factory division of the Ministry of Labor and Productivity to
inspect factories for compliance with health and safety standards.
Under-funding and limited resources undermine the agency's
oversight capacity, and construction sites and other non-factory
work sites are often ignored. Nigeria's labor law requires

employers to compensate injured workers and dependent survivors of
workers killed in industrial accidents, but the Ministry of Labor
and Productivity has been ineffective in identifying violators and
has failed to implement ILO recommendations to update its
inspection program and accident reporting.

73. The Ministry of Labor and Productivity deals specifically with
child labor problems and operates an inspections department to
enforce legal provisions on conditions of work and protection of
workers. The Ministry of Labor and Productivity conducted over 150
child labor inspections and 50 full investigations with 408
officers in 2009. The Inspections Department employed nearly 400
inspectors for all business sectors, but there were fewer than 50
factory inspectors for the entire country. Labor inspections were
mostly random, but occasionally occurred when there was suspicion
of, rather than actual complaints of, illegal activity.

Foreign Trade Zones/Free Trade Zones

--------------------------------------------- ---

74. The GON established the Nigerian Export Processing Zone
Authority (NEPZA) in 1992 to attract export-oriented investment.
NEPZA allows duty-free import of all equipment and raw materials
into its zones. Up to 25 percent of production in an export
processing zone may be sold domestically upon payment of applicable
duties. Investors in the zones are exempt from foreign exchange
regulations and taxes and may freely repatriate capital. Only two
of the five export processing zones established under NEPZA, those
in Calabar and Onne, function properly. In 2001, both were
converted into free trade zones, thereby freeing them from the
export requirement. As a result, investment is quickly moving into
Calabar, almost exclusively in industries that add value to
imports. Another free trade zone, the Tinapa Free Trade Zone owned
by the Cross River state government was commissioned during the
first quarter of 2007, and several shops and bank branches are
operating there. Oil and gas companies use the Onne free port zone
as a bonded warehouse for supplies and equipment and for the export
of liquefied natural gas. Recently, the GON has encouraged private
sector participation and partnership with the federal government
and state and local governments under the free trades zones scheme.
This has resulted in the establishment of specialized zones, such
as Lekki and Olokola, which are under construction.

Foreign Direct Investment

---------------------------------

75. According to data from the United Nations World Investment
Report of 2009, the stock of foreign direct investment (FDI) in
Nigeria in 2008 was estimated at $83.07 billion, which accounted
for 38.7 percent of GDP. Total FDI Inflow was $20.28 billion in
2008 and accounted for 103.1 percent of gross fixed capital
formation. This FDI inflow is mostly concentrated in the oil
industry. The $20.28 billion figure represents 78 percent of total
FDI in West Africa and 23.1 percent of total FDI in Africa
(including North Africa) and places Nigeria as the top recipient of
FDI in Africa. Some FDI is channeled into telecommunications and
manufacturing, but total investment in the non-oil and gas sector
remains small relative to investment in the oil and gas sector.
SANDERS

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