According to African Development Bank Group, the Nigerian economy has been adversely affected by external shocks caused by the fall in the global price of crude oil. The economic activities in the country have been adversely affected by the inadequate supply of foreign exchange and further aggravated by the foreign exchange restrictions targeted at a list of 41 imports, some of which are inputs for manufacturing and agro-industry. As a way of trying to reverse the declining trend in economic performance, the Central Bank of Nigeria has moved to reduce the cost of borrowing for public and private sectors. The 2016 outlook is for slow economic recovery in response to the various reforms and measures aimed at boosting the economy. Growth rates slowed sharply from 6.2% in 2014 to an estimated 3.0% in 2015 and 1.5% in 2016. IMF has projected the economic growth at 0.8 per cent in 2017 and revised the forecast for 2018 to 2.3 per cent as a result of expected better oil prospects and improved security situation. Inflation increased from 7.8% to an estimated 9.0% in 2015 and the inflation rate was in 18.55% in December 2016. Inflation rate in February 2017 fell to 17.78 percent from 18.72 percent that it was in January 2017. According to a report released by the National Bureau of Statistics (NBS), the February 2017 rate of inflation was 17.78 percent was the lowest in the past 15 months.
Why invest in Nigeria
Potential investors are welcome to Nigeria because of the following reasons;
- Despite the current security situation, the country has a stable political environment. The international business community still sees Nigeria as the central driver of a vast African market;
- The country has enormous resources that include coal, tin, iron ore, oil reserves, agricultural products and leather among others;
- A comprehensive investment incentive package;
- A strong financial sector;
- The population of Nigeria is over 180 million people that provides an effective demand for various products and services;
- The government top priority over recent past has been on investing in infrastructure in order to creative a conducive business environment;
According to The Director-General of National Population Commission, NPC, Ghaji Bello, Nigeria’s population is currently estimated at 182 million, with more than half its people under 30 years of age. The forecast is based on on the population of 140 million recorded in the last census of 2006 using an annual growth rate of 3.5 percent.
According to the CIA World Factbook, 47.8% of total population in 2015 lived in urbanization and the urbanisation rate was estimated at 4.66% annual rate of change for the period from 2010 to 2015.
The highlights of World Bank score of doing business in Nigeria is summarised as follows;
|Topic||World Bank 2017 rank||World Bank 2016 rank||Change|
|Starting a business||138||137||-1|
|Dealing with Construction Permits||174||173||-1|
|Protecting Minority Investors||32||30||-2|
|Trading across the boarders||181||181|
The country is ranked 169 in 2016 in World Bank survey,
Moody’s credit rating for Nigeria was set at B1 with stable outlook in 2016.
Foreign exchange control
The Central Bank of Nigeria (CBN) has been expanding currency controls since June 2015, when it published a list of 40 types of transactions (rice, cement, and many others) that would no longer be eligible to access foreign exchange in the official Nigerian foreign exchange market. These limits on foreign currency use have been expanded to include a ban on the use of Nigerian bank cards for payments or withdrawals overseas. The Nigerian government has added study abroad to a growing list of expenditures for which it will no longer provide foreign exchange from the Central Bank.
Section 26 of the Nigeria Investment Promotion Commission (NIPC) of 1995 provides for the resolution of investment disputes through arbitration .Nigeria is also a signatory to the International Centre for Settlement of Investment Disputes Convention and the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards (also called the “New York Convention”). Nigerian Courts have generally recognized contractual provisions that call for international arbitration. The Arbitration and Conciliation Act of 1988 provides for a unified and straightforward legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation. The Act created internationally-competitive arbitration mechanisms, established proceeding schedules, provided for the application of the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules or any other international arbitration rule acceptable to the parties, and made the New York Convention applicable to contract enforcement, based on reciprocity.
Key development challenges
The National Economic Empowerment and Development Strategy (NEEDS) identified the challenges to development in Nigeria to include the low per capita growth inefficiencies , unsustainable public sector spending; domestic debt; low productivity; poverty; dysfunctional educational system , weak institutions, poor infrastructure, poor energy situation, capacity constraints, weak monitoring framework, weak data management culture, slow development of the private sector , poor public sector performance, import dependency; the corruption of leaders and the lack of entrepreneurial skills.
Nigeria scored 28 points out of 100 on the 2016 Corruption Perceptions Index reported by Transparency International and was ranked 136th out of 176 countries that participated.
Security remains a major challenge in the northeast part of the country caused by Boko Haram insurgency. Security and other measures have been put in place to contain the security threats and improve the living conditions of internally displaced persons estimated at over 2 million.
Unemployment and skilled labour
According to The National Bureau of Statistics (NBS) Nigeria’s unemployment rate stood at 13.9 per cent in the 3rd quarter of 2016. NBS also reported the underemployment rate rose from 19.3 per cent in second quarter to 19.7 per cent in the third quarter. NBS has also revealed its labour productivity figures rose per hour was US$ 3.2 for the period from 2010 to 2014. This is too low when compared with other emerging countries that range from the low of US$ 10.7per hour for Brazil to US$ 28.9 per hour for Turkey. It gets worse when Nigeria is compared to United Kingdom’s $48.5/hour, United States’ $64.1/hour, and Norway’s $86.6/hour. The low value of productivity is mainly due to the lack of quality educational institutions, investment climate, and favourable policy support to businesses.
Attitude to investors
The country has not invested enough in power generation and distribution and the corruption has also prevented investors from developing full confidence in the country. The Nigerian Investment Promotion Commission (NIPC) is charged with promoting, co-ordinating and monitoring all investments in Nigeria.
Restrictions on Foreign investment
There are no limits on foreign control of investments in Nigeria and therefore foreign investors can own and control 100% of the shares in any company. The NIPC Act of 1995 contains a list of areas where both foreign and domestic investors are restricted and these include;
- Production of arms, ammunition;
- Production of and dealing in narcotic drugs and psychotropic substances;
- Production of military and para-military wears and accoutrement, including those of the Police and the Customs, Immigration and Prison Services; and
Intellectual Property (IP) Rights
The Patent and Designs Act of 1990 is the governing Patent law in Nigeria and prescribes if and whose product may be granted the statutory rights. S.344 of this act lays down rules that determine if a product Patented in favour of the inventor. Applications for a patent must be made to the Registrar of Patents and Copyrights.
Investment Climate in Nigeria has been summarized to include the following
International Trade Agreements with Nigeria
Investment Authority of Nigeria
Investment guarantees in Nigeria
Inestment Incentives in Nigeria
Investment opportunities in Nigeria
Development partners of Nigeria
Double taxation agreements involving Nigeria
Nigeria’s Key Exports
Natural Resources of Nigeria
The Nigerian Stock exchange
Nigeria Manufacturers Association