BY THRESHING FIELDS LAW
WHY IS NIGERIA AN INVESTMENT
1. ABUNDANT RESOURCES
Nigeria has enormous resources, most of which are yet to be fully exploited. Tremendous investment opportunity
exists in the solid minerals sector. Mineral resources include coal, tin, iron ore and others. Agricultural products
include, among others, groundnuts, palm oil, cocoa and coconut. Nigeria also has a booming leather and textile
industry and is one of the largest oil producers on the continent creating huge inflows of foreign investment.
2. POLITICAL STABILITY
In spite of persistent crises in some parts of the country relating to banditry and terrorist acts, Nigeria offers a stable
political environment. In February 2019, the Independent National Electoral Commission organized legislative,
gubernatorial, and presidential elections and is scheduled to do so again in February 2023. While imperfect, the
elections were considered Nigeria’s most successful since its return to multiparty democracy in 1999, and reversed a
downward trajectory of successively flawed election processes. The international business community increasingly
sees Nigeria as the central driver of a vast African market.
3. ATTRACTIVE INCENTIVES
The Nigerian government has put in place a comprehensive package of investment incentives to stimulate private sector investment from within and
outside the country. Among them are the Companies Income Tax Act which has been amended to encourage potential and existing investors and
entrepreneurs; Pioneer status gives industries a fiveyear tax holiday; and tax relief is provided for research and development.
4. FREE MARKET ECONOMY
The Nigerian government has created a favorable climate for business and industrial ventures. Administrative and bureaucratic procedures have been
greatly streamlined. The government has put in place policies and programs that guarantee a free market economy. In recent years, it privatized the only
government-owned petrochemical company and sold its interest in eight oil service companies. It overturned a number of suspect contracts awarded by
5. FAST-GROWING ECONOMY
Nigeria’s gross domestic product remains strong and steady, growing at an average rate of 7% from 2000-2014. Despite the disruptions occasioned by
COVID-19 pandemic in 2020, the GDP grew by 3.98% in the fourth quarter of 2021.
6. STRONG BANKING AND FINANCIAL SECTOR
In 2009, Nigeria took significant steps to strengthen the banking sector. These reforms came on top of a major banking overhaul in
2006 that reduced the number of banks and increased a bank’s minimum capital requirement. Retail, corporate and internet banking
are seen as intensively competitive, and the home loan market is considered moderately competitive. Since 1999, the Nigerian Stock
Exchange has enjoyed strong performance.
7. LUCRATIVE TELECOMMUNICATIONS MARKET
Nigeria is also home to the most lucrative telecoms market in Africa, which is growing at twice the African average. The explosion of
industries such as the mobile telecommunications market and the unparalleled success of foreign companies such as South Africa’s
MTN have demonstrated that potential can be turned into reality.
8. LARGE CONSUMER MARKET
With a population of more than 216 million, Nigeria is the most populous country in Africa (one in every six Africans a Nigerian) and is
the seventh most populous country in the world. The structure of its population with 70% of the populace under age 30 and an excellent regional distribution of eight “anchor” cities each with populations exceeding 1 million suggests a healthy growth picture going forward.
CRITICAL STEPS IN DOING BUSINESS IN NIGERIA
- Register your business with the Corporate Affairs Commission
- Complete tax registration
- Obtain necessary licenses and permits
- Always have complete documentation when applying for licenses and
- Apply for licenses, permits and approvals early to avoid pressure
- Conduct due diligence on potential partners and service providers
WHAT IS CORRUPTION?
The World Bank defines corruption as:
The abuse of public office for private gains. Public office is abused for private gain when an official accepts, solicits or extorts a bribe. It is also
abused when private agents actively offer bribes to circumvent public policies and processes for competitive advantage and profit. Public office
can also be abused for personal benefit even if no bribery occurs, through patronage.
THE COST OF CORRUPTION
Although these expenses are difficult to estimate, the number of bribes paid each year in both emerging and developed nations gives you an idea of the scope of the problem.. Bribery alone costs between between $1.5 and $2 trillion every year, (roughly 2 percent of global GDP). Because bribes
are only one type of corruption, the entire economic and social consequences of corruption in its entirety are likely to be substantially higher. Companies that are caught or suspected of engaging in corrupt activities not only end up spending a lot of money on restitution measures, but their integrity and goodwill are almost completely destroyed.
THE ANTI-CORRUPTION LANDSCAPE IN NIGERIA
Nigeria has the largest economy in Africa, with deep potential for growth in the energy, technology, and financial services sectors. However, entrenched public corruption and terrorist violence continue to plague this nation of more than 216 million, complicating
the economic calculus for international business actors.
Corruption is endemic in Nigeria, with Transparency International ranking it the 154th least corrupt country out of the 180 included in its 2021 survey.
However, over the last two decades, Nigeria has enacted a number of anti-corruption laws, including the Code of Conduct Bureau and Tribunal Act of 1991; Corrupt Practices and Other Related Offences Act of 2000; the Economic and Financial Crimes Establishment Act of 2004 (“EFCC Act”); and the Money Laundering (Prohibition) Act of 2011. The EFCC Act established the Economic and Financial Crimes Commission (“EFCC”), which has the authority to investigate and prosecute financial crimes such as fraud and money laundering.
ANTI-CORRUPTION LEGAL FRAMEWORK IN NIGERIA
The major laws that deal with corruption in Nigeria are:
a. EFCC Establishment Act 2004.
b. Independent Corrupt Practices & Other Related Offences Act 2000
c. Advance Fee Fraud and Other Related Offences Act 2006
d. Money Laundering (Prohibition) (Amendment) Act 2012
e. Miscellaneous Offences Act
f. Code of Conduct Act
ANTI-CORRUPTION LEGAL FRAMEWORK IN NIGERIA
g. Nigerian Extractive Industries Transparency Initiative Act.
h. Freedom of Information Act 2011
i. Fiscal Responsibilities Act 2010
j. Penal Code Laws of Federation of Nigeria 2004
k. Criminal Code Law of Federation of Nigeria 2004
l. Banks and Other Financial Institutions (Amendment) Act 1991
m. Failed Banks (Recovery of Debts) and Financial Malpractices in
Banks (Amendment) Act 1994.
FOREIGN ANTI-CORRUPTION LEGISLATIONS
The United Nations International Convention against Corruption: The only legally binding universal anti-corruption instrument is the United Nations Convention against Corruption. The Convention’s broad scope and the fact that many of its provisions are mandatory make it a one-of-a-kind tool for formulating a comprehensive response to a global problem. The Convention is ratified by the vast majority of United Nations member states Nigeria inclusive and it was signed on December 9 2003 and ratified on December 14 2004.
FOREIGN ANTI-CORRUPTION LEGISLATIONS
The African Union Anti-Corruption Convention
The Convention was signed by delegates on December 12, 2003 and ratified on September 26 2006. In a bid to fight corruption in Africa, the
State Parties amongst others, agreed to mandate all Public Officials to declare their assets at the time of assumption into office, adopt measures
to combat and prevent corruption and other related offences within Private sectors adopt legislative measures to create, maintain and strengthen internal accounting, auditing and reporting systems for transparency of the Sectors within the State Parties.
Another recent regulatory development is the Companies and Allied Matters Act 2020 (“CAMA”), which empowers the Corporate Affairs Commission to keep a register of beneficial owners of shell companies in an effort to increase transparency and reduce opportunities for corruption and money laundering. This law is intended to target the use of complicated shell companies to obscure ownership by those committing corruption or money laundering offenses. However, this Act only covers limited liability companies, which by law must be registered with the Commission, limiting its potential impact.
On April 19, 2021, Babajide Sanwo-Olu, Governor of Lagos signed the Public Complaints andAnti-Corruption Commission Bill into law, creating an independent agency to investigate the misappropriation of state funds by state government officials and registered contractors. The agency is
intended to complement the EFCC, targeting economic crime at the state rather than federal level. Then agency will be empowered to trace, seize and confiscate funds generated through corruption and other financial crimes. If successful, this Commission may serve as a model for other states and allow for the harmonisation of the fight against corruption across Nigeria. The state and city of Lagos are particularly important jurisdictions in Nigeria’s fight against corruption. Numerous multinational corporations maintain operations in the city, including Microsoft, Nokia, and Nestlé. Importantly, it is a hub for several international oil companies.
The Proceeds of Crime (Recovery and Management)
Agency Bill 2020
On 12th May 2022, President Buhari signed into law The Proceeds of Crime (Recovery and Management) Agency Act 2022 (“PCRMA Actl” or “Act”), which aims to improve the government’s ability to pursue the proceeds of crime by bolstering the toolkit of civil and criminal orders available to prosecutors. The stated purpose for the Act is to crack down on money laundering and the transfer of illicit funds through the country’s financial institutions.The Act, would
be enforced by a yet-to-be-created Proceeds of Crime (Recovery and Management) Agency (“PCRMA”), which would collaborate with anti-corruption and other law enforcement agencies to seize, freeze, and confiscate the proceeds of crime and increase transparency and accountability over the management of recovered assets. Presently, all asset recovery is managed by the Federal Ministry of Justice. The PCRMA Act also seeks to tighten the enforcement of anti-corruption laws through criminal penalties, civil forfeiture, and regulation.
The Act is not without its detractors. The EFCC and the Independent Corrupt Practices Commission have complained that the Act will dilute their authority, with others arguing that it will enhance bureaucratic duplication and exists merely to bolster President Buhari’s political reputation. Even those who embrace the law acknowledge that it will not be sufficient to win Nigeria’s fight against corruption, noting that the country’s Whistleblowing Policy has yet to be codified into law and that Nigeria has not yet come into alignment with the United Nations’ Convention against Corruption
International Enforcement Actions
Domestic actors are not alone in seeking to crack down on private-sector corruption in Nigeria. A former trader for Glencore, the Swiss multinational commodity trading and mining company, confessed to paying millions in bribes to Nigerian officials and intermediaries and agreed to cooperate in a
U.S. Department of Justice investigation into his former employer. Glencore had previously relied on intermediaries, which often act as conduits for bribes. The trader’s confession highlighted the widespread and institutionalized nature of the corrupt payments, which were frequently made to the
benefit of state-owned oil company officials.
In 2017, the United States Department of Justice’s kleptocracy team seized $145 million in assets, including homes in New York and California that it alleged had been purchased for Nigeria’s oil minister using embezzled funds provided by Glencore in exchange for crude oil cargoes.
In response to the allegations under the Foreign Corrupt Practices Act, Glencore has promised widespread reforms, including the elimination of intermediaries from its business model and reducing operations in high-risk countries.
NIGERIA’S OIL INDUSTRY
Nigeria’s economy is heavily reliant on oil production: Oil represents 90 percent of total exports and two-thirds of government revenue. Although the COVID-19 crisis drastically decreased global demand for oil, the lingering Russia-Ukraine war and the attendant sanctions on Russia
has increased global demand for oil.
In June 2022 , national production was put at 1.238 million barrels per day, with an estimated 200,000 barrels of crude
oil lost every day to theft and vandalism.
Nigeria’s economy is currently strained by a fuel subsidy regime occasioned by non functioning local refineries and high cost of imported fuel. As of early 2021, Nigeria has an unemployment rate of 27.1 percent, 43 percent of its population living in extreme poverty (less than $2 per day), and 41 million children out of school. At least two out of every three households saw their wealth decrease in 2020.
By 2022, Nigeria is expected to have 20 million more
citizens enter extreme poverty, raising the total to around
There has been ongoing divestments from onshore acreages by International Oil Companies ostensibly as a result of a deliberate global policy of de emphasing on fossil fuels exploration. However, these assets are being acquired by indigenous companies and a marginal fields
award around was completed in June 2022.
Nigeria’s oil wells continued producing throughout 2021 but has struggled in 2022 to meet its production quota on account of low rig counts and thefts/vandalism.
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