VZCZCXRO4657
PP RUEHMA RUEHPA
DE RUEHUJA #0107/01 0170639
ZNR UUUUU ZZH
P 170639Z JAN 08 ZDK
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 1858
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 8572
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 10 ABUJA 000107 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EB/IFD/OIA (NHATCHER) 
DEPARTMENT PLEASE PASS TO USTR (LAGAMA) 
 
E.O. 12598: N/A 
TAGS: EINV ETRD EFIN OPIC KTDB USTR NI
SUBJECT: NIGERIA: 2008 INVESTMENT CLIMATE STATEMENT 
 
REF: STATE 158802 
 
ABUJA 00000107  001.4 OF 010 
 
 
¶1.  The following information is Nigeria's 2008 Investment Climate 
Statement. 
 
Overview 
-------- 
 
With an estimated population of 140 million, Nigeria is Africa's 
most populous nation.  It offers investors a low-cost labor pool, 
abundant natural resources, and potentially the largest domestic 
market in sub-Saharan Africa.  Unfortunately, much of that market 
potential is unrealized.  Impediments to investment include 
inadequate infrastructure, corruption, an inefficient system of 
registering property, an inconsistent regulatory environment, 
restrictive trade policies, and slow and ineffective courts and 
dispute resolution mechanisms. 
 
To succeed, investors must understand the Nigerian business 
environment and engage in problem solving with local staff, Nigerian 
partners and officials.  Potential investors must cope with poorly 
maintained infrastructure and arbitrary policy changes.  Security is 
of special concern.  There are repeated cases of hostage taking and 
attacks on oil installations in the oil-rich Niger Delta region. 
Inadequate law enforcement compounds the country's high crime rate, 
and sporadic outbreaks of communal violence continue. 
 
Military rule ended with the inauguration of a civilian 
administration in May 1999. Nigeria conducted its third general 
elections in April 2007 resulting in a civilian to civilian hand 
over of power from former President Olusegun Obasanjo to President 
Umar Musa Yar'adua.  The elections were however, characterized by 
gross irregularities.  A large number of the electoral victories in 
the April general elections are currently being challenged in 
various electoral tribunals in the country, including the 
presidential election results.  The courts have upturned some of the 
results, including some governorship results.  The affected 
governors have appealed the electoral tribunal decisions. 
 
The government of Nigeria (GON) embarked on a reform program in late 
2003 christened the National Economic Empowerment and Development 
Strategy (NEEDS).  The present administration of President Yar'adua 
has assured that the economic reforms will be sustained.  Freedom of 
expression and of the press is observed, and human rights violations 
have been reduced from the time of military rule, although the 
country's human rights record remains poor.  Controls over foreign 
investment have been loosened, and earlier decrees inhibiting 
competition or conferring monopoly powers on public enterprises have 
been repealed or amended.  Despite these actions, policymakers' 
protectionist bent remains evident.  Trade policy is inconsistent, 
and the GON prohibits the importation of many goods, ostensibly to 
foster domestic production. 
 
Openness to Foreign Investment 
 
The Government of Nigeria (GON) continues to solicit for foreign 
investment and has implemented various reforms towards attracting 
foreign investment. 
 
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 new 
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. 
 
Nigerian laws apply equally to domestic and foreign investors. 
These include the Securities and Exchange Act of 1999, the Foreign 
Exchange Act of 1995, the Money Laundering Act of 2003, the Banking 
and Other Financial Institutions Act of 1991, and the National 
Office of Technology Acquisition and Promotion Act of 1979. 
 
Privatization: The Privatization and Commercialization Act of 1999 
established the National Council on Privatization, the policymaking 
body overseeing the privatization of state-owned enterprises, and 
the Bureau of Public Enterprises (BPE), to implement the program. 
The privatization of key sectors, including telecommunications and 
power, 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.  Since 1999, the BPE has raised over $4 billion by 
 
ABUJA 00000107  002.3 OF 010 
 
 
privatizing and concessioning more than 140 enterprises, including 
cement manufacturing firms, banks, hotels, and vehicle assembly 
plants. 
 
With the passage of the Power Sector Reform Bill in 2005, a power 
sector regulator, the Nigerian Electricity Regulatory Commission 
(NERC) was created with responsibility for tariff regulation and 
economic and technical regulation of the electricity supply 
industry.  Since its inception, the NERC has issued twenty two 
licenses to independent power producers in the electricity industry. 
 
 
The privatization of Nigeria's Power Holding Company of Nigeria 
(PHCN -- formerly the National Electric Power Authority or NEPA) has 
moved slowly.  Given the complex nature of the sale and the entity's 
poor financial condition, privatization will likely be difficult. 
PHCN is moving slowly to restructure its services into autonomous 
firms encompassing power generation, transmission, distribution, and 
billing. 
 
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.  Four enterprises, including NITEL, 
have licenses.  Globacom won mobile, fixed, and international 
gateway licenses as Nigeria's second national 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 2007 
was 46.23 million and teledensity of 27.42.  This is an improvement 
from the December 2006 figure of 34.01 million lines and teledensity 
of 24.29.  In July 2007, three carriers in the 800MHz spectrum band 
were awarded to Visafone communications in a competitive auction 
process that included three other companies namely GiCell Wireless 
Limited, Multilinks Telecommunication Limited, and TC Africa 
Telecoms Network Limited.  Also in March 2007, four licenses for a 
10MHz lot in the 2GHz spectrum were issued to Alheri Engineering Co. 
Limited, Celtel Nigeria Limited, Globacom Limited, and MTN Nigeria 
Communications Limited. 
 
The NCC commenced the unified licensing regime in May 2006, awarding 
the first batch of unified licenses to four telecommunication 
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. 
 
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 opaque contract bidding procedures 
tend to slow the spread of these technologies. 
 
Conversion and Transfer Policies 
 
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 (W-DAS) which gives banks more 
control of the foreign exchange market, though the Central Bank 
still retains its supervisory role over the market. 
 
Foreign companies and individuals can hold domiciliary accounts in 
banks.  Account holders have unlimited use of their funds, and 
foreign investors are allowed unfettered entry and exit of capital. 
There is a $4,000 quarterly Personal Travel Allowance for foreign 
exchange and a $5,000 quarterly Business Travel Allowance per 
individual. Foreign exchange for travel is usually issued in 
travelers checks by commercial banks while some authorized dealers 
also issue pre-paid cards that can be used on Visa machines 
worldwide.  Persons may obtain less foreign exchange in a single 
transaction and travelers checks from registered bureau de change. 
 
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 making remittances.  Money 
transfers usually take less than two weeks. All transfers are 
required by law to be made through banks, because banks are the only 
licensed foreign exchange agents. 
 
Expropriation and Compensation 
 
The GON has not expropriated or nationalized foreign assets since 
the late 1970s. 
 
Dispute Settlement 
 
ABUJA 00000107  003.3 OF 010 
 
 
 
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.  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. 
 
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.  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.  Even in cases where creditors obtain a 
judgment against defendants, claims often go unpaid. 
 
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 2008, which surveyed 178 
countries including Nigeria, concluded GON efforts have led to 
improvements in the way business is conducted, but was not among the 
top ten reformers, a position it occupied in the last publication. 
Regarding the enforcement of contracts Nigeria was ranked 93 out of 
178 countries surveyed.  Though it was ranked 66 out of 175 
countries surveyed in 2006 it is an improvement compared with the 
2005 survey where it was classified as the eighth slowest country to 
enforce contracts, out of 145 countries surveyed.  In addition, the 
report revealed that contract enforcement required 39 procedures and 
457 days, the cost of which averaged 32 percent of the value of the 
contract.  A substantial an improvement from its 2005 position of 23 
procedures, 730 days, and a cost of 37.2 percent of the value of the 
contract.  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. 
 
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, fixed 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 
 
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 in 
1999 and renamed the Investment and Securities Act, forbids 
monopolies, insider trading, and unfair practices in securities 
dealings. 
 
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 (when 
applicable) register with the Securities and Exchange Commission. 
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. 
 
The GON maintains many different and overlapping incentive schemes. 
 
ABUJA 00000107  004.3 OF 010 
 
 
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 nonrenewable 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 local raw 
materials 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. 
 
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.  With the Ministry 
of Finance, NOTAP administers 120 percent tax deductions for 
research and development expenses if carried out in Nigeria and 140 
percent deductions for research and development using local raw 
materials. 
 
NOTAP recently 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 technology information to end-users.  The 
office has a mandate to commercialize institutional research and 
development with industry. 
 
Import Policies:  Tariffs provide the GON its (distant) second 
largest source of revenue after oil exports.  Frequent policy 
changes and uneven duty collection make importing difficult and 
expensive and create severe bottlenecks.  Nigeria's dependence on 
imports aggravates the situation.  In October 2005, the GON 
announced that it was implementing the ECOWAS Common Economic Tariff 
(CET) regime, which will place all items in one of five tariff 
bands. 
 
Bans prohibit the import of various goods including meat, fresh 
fruit, cassava, pasta, fruit juice in retail packs, toothpicks, 
soaps and detergents, biscuits, corn, pork products, vegetable oil, 
sorghum, millet, beer and non-alcoholic beverages and sugar 
confectionaries, textiles, plastics, and barite.  In 2006, the GON 
removed some textiles from its list of prohibited imports. The GON 
had announced in late 2004 that it will phase out the bans by 
January 2008 in line with the conclusion of negotiations with its 
West African neighbors under the ECOWAS CET.  Unfortunately, the 
expected CET negotiations are unlikely to conclude by January 2008. 
In fact, the Minister of Finance announced on December 14, 2007 that 
Nigeria had suspended implementation of the CET system it had been 
experimenting with over the past two years.  The Minister attributed 
the suspension to a deadlock between Nigeria and other ECOWAS member 
countries over the Type B exception list as well as the 50 percent 
list.  The exception list, consisting of items whose duty rates are 
at variance with the ECOWAS CET, typically includes basic items like 
steel, petroleum, pharmaceuticals, rice, and tobacco, while the 50 
percent list covers luxury goods.  In December 2007 there were 
reportedly 308 tariff lines on Nigeria's Type B exception list.  As 
of early January 2008, the GON was reviewing its tariffs and bans. 
The President cancelled the ban on import of cement on January 14. 
 
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 earlier been shelved on four 
different occasions since 2002.  Under the destination inspection 
scheme, goods destined for Nigeria's ports would be inspected at the 
point of entry rather than at the point of shipment.  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, 
 
ABUJA 00000107  005.3 OF 010 
 
 
SGS, and Global Scan.  The exclusive contract will expire by 2012, 
if Nigerian Customs 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. 
 
Shippers report that efforts to modernize and professionalize the 
NCS and the NPA have reduced port congestion and clearance times, 
particularly at Lagos' Apapa Port, which handles over 40 percent of 
Nigeria's trade.  This is particularly the case for container 
traffic.  Nevertheless, bribery of customs and port officials 
remains commonplace, and smuggled goods routinely enter Nigeria's 
seaports and cross its land borders.  There are ongoing reforms to 
further reduce the time for clearing goods from the current 2 weeks 
to 48 hours. 
 
Export Incentives: Most export incentives were recently abolished, 
though the government is reviewing reinstating some selected 
incentives. 
 
Although highly underused, the Nigerian Export-Import Bank provides 
commercial bank guarantees and direct lending to facilitate export 
sector growth.  The 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. 
 
Government Procurement:  The GON awards contracts under an 
open-tender system, advertising tenders in Nigerian newspapers and 
opening them to domestic and foreign companies.  Procurement has 
become slightly more transparent, but corruption persists. 
 
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. 
 
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 $380,000) are subject to full "due process," as the process 
is called.  It is expected that the public procurement legislation 
would also be passed at the lower tiers of government. 
 
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, 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 
 
In accordance with the NIPC Decree of 1995, the GON supports 
competitive business practices and protects private property. 
 
Protection of Property Rights 
 
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. 
The World Bank's publication, Doing Business 2008, Nigeria was 
ranked 51 of the 178 countries surveyed for registering property, 
requiring 14 procedures and 82 days at a cost of 22.2 percent of the 
property value. In the Doing Business 2007 publication Nigeria was 
ranked as having  the sixth least efficient system for registering 
property of the 175 countries surveyed, requiring 16 procedures and 
80 days, at a cost of 21.2 percent of the property value.  In 2005, 
Nigeria was classified as the least efficient of 145 countries 
surveyed, requiring 21 procedures and 274 days, at a cost of 27.2 
percent of the property value. 
 
Fee simple property rights are rare.  Most property is long-term 
leases with certificates of occupancy acting as title deeds. 
 
ABUJA 00000107  006.3 OF 010 
 
 
Transfers are complex and must usually go through state governor's 
offices.  In the capital; of Abuja, the Federal Capital Territory 
cancelled and began a process of reregistering all property 
allotments, refusing to renew those it deemed not in accordance with 
the city master plan.  Buildings on these properties have frequently 
been demolished, even in the face of court injunctions.  Therefore 
acquiring and maintaining rights to real property are a major 
challenge. 
 
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 Standards Organization of Nigeria is responsible 
for issuing patents, trademarks, and copyrights.  Once conferred, a 
patent conveys an exclusive right 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, based on WIPO standards and U.S. copyright law, makes it a 
crime to export, import, reproduce, exhibit, perform, or sell any 
work without the permission of the copyright owner.  Nigeria's 
copyright statutes also include the National Film and Video Censors 
Board Act and the Nigerian Film Policy Law of 1993. 
 
In 1999 amendments to the Copyright Decree incorporate trade-related 
aspects of intellectual property rights (TRIPS) protection for 
copyrights, except provisions to protect geographical indications 
and undisclosed business information.  Four TRIPS-related bills and 
amendments have been forwarded to the National Assembly.  An 
amendment to the Copyright Act is also expected to be forwarded to 
the National Assembly during the first quarter of 2007.  The bills 
would establish an Intellectual Property Commission, 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. 
 
The GON has signed the WIPO Internet treaties but has yet to ratify 
them.  The NCC claims, however, that it is already implementing the 
terms of the treaties. 
 
Patent and trademark enforcement remains weak, and judicial 
procedures are slow and subject to corruption.  Relevant Nigerian 
institutions suffer from low morale, 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 Nigerian Customs Service has received some 
WIPO-sponsored training, but officers who identify pirated imports 
are not allowed to impound offending materials unless the copyright 
owner has filed a complaint against a particular shipment, which 
happens rarely. 
 
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 results. 
The Nigerian police and the NCC in conjunction with the Economic and 
Financial Crimes Commission have raided compact disc replicating 
plants, enterprises producing and selling pirated software and 
videos, and a number of businesses have 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 broadly familiar with intellectual property rights law. 
 
Transparency of the Regulatory System 
 
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 business. 
 
 
 
ABUJA 00000107  007.3 OF 010 
 
 
Taxation:  In general, Nigeria's tax laws 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 Great Britain, 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 
 
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. 
 Many investors consider the capital market, specifically the 
Nigerian Stock Exchange (NSE), a financing option, given commercial 
banks' high lending rates and short maturities of debt instruments. 
 
 
Trading on the NSE remained buoyant in 2006.  The exchange operates 
nine branches nationwide, and the volume of shares traded and market 
capitalization continues to rise.  The introduction of the 
contributory pension system in late 2005, GON's divestment of equity 
in parastatal companies as well as initial public offerings (IPOs) 
and issuances of additional shares by listed companies have 
contributed to the exchange's growth.  The NSE continues to expand 
its membership and investor pool.  Currently, 210 equities are 
listed on the exchange. 
 
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 10 years aimed at 
restructuring its domestic debt portfolio from short-term to medium 
and long-term instruments.  State governments have also availed 
themselves of opportunities on the Nigerian capital market.  About 
five state governments issued bonds to finance development projects. 
 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. 
 
Banking System:  As of December 2007, twenty-four commercial banks 
were operating in Nigeria.  In 2007, Standard Bank of South Africa, 
through its Nigerian subsidiary, Stanbic Bank, acquired majority 
interest in IBTC Chartered Bank.  This led to the merger of both 
Stanbic Bank and IBTC Chartered Bank. 
 
Health of the Banking System:  A recent assessment of the banking 
sector by the Central Bank of Nigeria revealed that as at end-June 
2007, six banks were rated sound, sixteen were satisfactory, and 
three banks were rated marginal. 
 
Political Violence 
 
Social unrest, religious and ethnic strife, and crime affect many 
parts of Nigeria.  In the oil-rich Niger Delta region, decades of 
official neglect, persistent poverty, as well as dislocations and 
environmental damage caused by energy projects, have aggravated 
socioeconomic unrest.  Sabotage and vandalism of pipelines and other 
installations and kidnapping of Nigerian and expatriate oil workers 
are regular occurrences.  Many of these criminal activities are 
designed to extort cash from foreign operators. 
 
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 have implemented their own socioeconomic 
development programs to assist local communities, but many 
communities consider the company programs inadequate. 
 
In February 2006, riots in response to the Danish cartoon 
publication took place in the north-eastern city of Maiduguri with 
reprisal attacks in the south-eastern city of Onitsha.  The violence 
led to the death of over thirty people.  Vigilante groups in various 
parts of the country have exacerbated violence. 
 
ABUJA 00000107  008.4 OF 010 
 
 
 
Corruption 
 
Domestic and foreign observers recognize corruption as a serious 
obstacle to economic growth and poverty reduction.  Nigeria was 
eighteenth in Transparency International's 2007 Corruption 
Perceptions Index, an improvement from its fifth position in the 
2006 Corruption Perceptions Index. 
 
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 
gratification, 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 new legislation, few people have been indicted, and corruption 
remains endemic. 
 
The Economic and Financial Crimes Commission (EFCC) was established 
to prosecute individuals involved in financial crimes and other acts 
of economic sabotage.  The EFCC has been successful in obtaining 
some high profile convictions such as the prosecution of the former 
governor of Bayelsa State, the former Inspector General of Police, 
and it is presently pursuing a case against six former governors in 
the law courts.  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, which seeks to ensure audits of Nigeria's oil accounts. 
Nigeria is a signatory to the UN Anticorruption Convention, but has 
yet to ratify it. 
 
Bilateral Investment Agreements 
 
Investment Agreements:  While a Trade and Investment Framework 
Agreement (TIFA) has been signed with the United States, a bilateral 
investment treaty (BIT) is not in place.  The President of Nigeria, 
however, has recently expressed interest in negotiating a BIT with 
the U.S.  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, Netherlands and Romania. 
 
OPIC and Other Investment Insurance Programs 
 
The U.S. Overseas Private Investment Corporation offers all its 
products to U.S. investors in Nigeria. 
 
Labor 
 
Over the past decade, Nigeria's skilled labor pool has declined as 
vocational and university educational standards have plummeted, 
mainly because of poor funding.  Given the low employment capacity 
of Nigeria's formal sector, over half of all Nigerians work in the 
informal sector and agriculture.  In the formal sector, companies 
involved in businesses such as banking and insurance possess an 
adequately skilled workforce (often trained abroad, in private 
institutions, or at the better-funded universities).  In the 
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 in some sectors, 
especially in the country's profitable oil and gas industries, are 
strained. 
 
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.  Since the establishment of 
the single trade federation system in 1978, non-management senior 
staff has been prohibited from joining government-recognized trade 
unions.  Although the Trade Union Congress and the Congress of Free 
Trade Unions are regarded as influential labor federations, the two 
senior staff associations are denied seats on Nigeria's National 
Labor Advisory Council (NLAC).  A bill to amend the law is working 
its way through the National Assembly. 
 
Nigeria's single central labor federation, the Nigeria Labour 
Congress (NLC), comprises twenty-nine industrial unions.  According 
to figures provided by the NLC, total union membership at the end of 
2002 was about 4 million.  Less than 10 percent of the total work 
force is unionized, and except for a few workers engaged in 
commercial food processing, those in the agricultural sector, which 
 
ABUJA 00000107  009.2 OF 010 
 
 
employs the bulk of the work force, are not organized. 
 
Collective Bargaining:  Collective bargaining occurred throughout 
the public sector and the organized private sector in 2002 and 2003, 
but public sector employees have become increasingly concerned about 
the GON's commitment to the collective bargaining process in 
resolving conflicts.  According to the NLC, the GON's failure to 
implement agreements threatens to "devalue the enviable record of 
dialogue, consultation, and mutual trust that has characterized the 
relationship between the GON and the NLC since 1999." 
 
Collective bargaining in the petroleum industry is relatively 
efficient compared to other sectors.  Except for a longstanding 
unresolved dispute over the industry's use of contract labor, issues 
pertaining to salaries, benefits, health and safety, and working 
conditions tend generally to be resolved quickly through 
negotiations.  Organized labor's efforts to address broad political 
issues, however, have resulted in industrial actions, such as 
general strikes over fuel prices that continue to affect industry 
productivity. 
 
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).  Although 
the law forbids employers from granting general wage increases to 
workers without prior government approval, the law is not often 
enforced.  Strikes in both the private and public sectors occur 
frequently. 
 
The Nigerian labor minister 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 labor 
minister's referrals. 
 
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 Decree allows the 
apprenticeship of youths as of the age of 13 under specific 
conditions. 
 
Despite this, Nigeria's weak economy has forced many children into 
commercial activities to enhance family income.  The ILO estimates 
that about 12 million children between the ages of 10 and 14 (25 
percent of all Nigerian children) were employed in some capacity in 
2002, often as beggars, hawkers, or domestic servants. 
 
Acceptable Conditions of Work: Nigeria's 1974 Labor Decree provides 
for a 40-hour workweek, 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 Employment 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 laborers 
killed in industrial accidents, but the Labor Ministry has been 
ineffective in identifying violators and has failed to implement ILO 
recommendations to update its inspection program and reporting of 
accidents. 
 
Foreign Trade Zones/Free Trade Zones 
 
To attract export-oriented investment, the GON established the 
Nigerian Export Processing Zone Authority (NEPZA) in 1992.  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. 
 
Of the five export processing zones established under NEPZA, just 
two, 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 
 
ABUJA 00000107  010.2 OF 010 
 
 
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, but has not experienced any activity as yet.  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 Government has encouraged private sector 
participation and partnership with the Federal Government and state 
and local governments under the Free Zones scheme.  This has 
resulted in the establishment of specialized Zones like Lekki and 
Olokola which are not yet operational. 
 
Foreign Direct Investment 
 
According to data from the United Nations World Investment Report of 
2007, in 2006 the stock of foreign direct investment (FDI) in 
Nigeria was estimated at $40.25 billion, which accounted for about 
35 percent of GDP.  Total FDI Inflow was $5.4 billion in 2006 and 
accounted for 75 percent of gross fixed capital formation. The $5.4 
billion FDI inflow is mostly concentrated in the oil industry and 
mostly from China.  This figure represents 80 percent of total FDI 
in West Africa and places Nigeria in second position after Egypt as 
one of the top recipients of FDI in Africa.  Some FDI is channeled 
into telecommunications and manufacturing, but the total remains 
small relative to oil sector investment. 
 
PIASCIK