2019 INVESTMENT POLICY AND REGULATORY REVIEW Nigeria © 2020 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. 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Photo Credits: Shutterstock.com TABLE OF CONTENTS ACKNOWLEDGEMENTS 2 GLOSSARY 3 1. INTRODUCTION 5 2. OVERVIEW OF INVESTMENT POLICY FRAMEWORK 7 A. Domestic Legal Instruments Regulating Foreign Investment 7 B. International Legal Instruments Regulating Foreign Investment 8 C. Key Institutions for Investment Promotion 10 D. Foreign Investment Promotion Strategy 12 3. INVESTMENT ENTRY AND ESTABLISHMENT 13 4. INVESTMENT PROTECTION 17 5. INVESTMENT INCENTIVES 19 6. INVESTMENT LINKAGES 20 7. OUTWARD FOREIGN DIRECT INVESTMENT 21 8. RESPONSIBLE INVESTMENT 21 9. RECENT POLICIES ON NEW TECHNOLOGIES 22 10. CITY SPECIFIC REVIEW—LAGOS 23 11. COMPETITION LAW & POLICY 24 A. Merger Control 24 B. Leniency Program 26 ENDNOTES 27 LIST OF REFERENCE MATERIALS 29 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA |1 ACKNOWLEDGEMENTS A team led by Priyanka Kher and Peter Kusek The report benefited from the comments of prepared this report. The team core members were these World Bank Group colleagues: Shubham Maximilian Philip Eltgen and Azza Raslan. The Chaudhuri, Hiroshi Tsubota, Feyi Boroffice, team would like to thank Caroline Freund (Global Emilija Timmis, Yago Arranda Larrey, Ramprakash Director, Trade, Investment and Competitiveness), Sethuramasubbu, Tanja K. Goodwin, Sara Nyman, Christine Zhenwei Qiang (Practice Manager, Mariana Iootty De Paiva Dias, Guilherme De Aguiar Investment Climate), Ivan Nimac (Global Lead, Falco, Emma Verghese and Abhishek Saurav. The Investment Policy and Promotion), Georgiana Pop team would like to thank Nick Younes for editing, (Global Lead, Competition Policy) and Graciela and Aichin Jones and Amy Quach for providing Miralles Murciego (Senior Economist, Competition design, layout, and production services. Policy) for their guidance. The report was prepared under the Analyzing Legal research for the preparation of this report Barriers to Investment Competitiveness Project, was carried out by the international law firm Baker supported with funding from the Prosperity Fund McKenzie. of the United Kingdom. | 2 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA GLOSSARY AfCFTA African Continental Free Trade Agreement CAM Companies and Allied Matters Act CBN Central Bank of Nigeria CSR Corporate Social Responsibility DTAA Double Taxation Avoidance Agreements ERG Economic Recovery and Growth Plan FCCPA Federal Competition and Consumer Protection Act FDI Foreign Direct Investment FEMMP Foreign Exchange (Monitoring and Miscellaneous) Provisions Act FEC Federal Executive Council FET Fair and Equitable Treatment FIE Foreign-invested Enterprise FIL Foreign Investment Law FMDQ Financial Market Dealers Quotation GATS General Agreement on Trade in Services IDITRA Industrial Development Income Tax Relief Act IIA International Investment Agreement IMF International Monetary Fund IPR Intellectual Property Rights IPRR Investment Policy and Regulatory Review ISDS Investor-State Dispute Settlement MFN Most-Favored-Nation ₦ Naira (currency) NCDMB Nigerian Content Development and Monitoring Board NEPZA Nigeria Export Processing Zones Authority NIPC Nigerian Investment Promotion Commission NOGICD Nigerian Oil and Gas Industry Content Development Act NOTAP National Office for Technology Acquisition and Promotion NT National Treatment OFDI Outward Foreign Direct Investment 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA |3 OSIC One-Stop Investment Centre PEBEC Presidential Enabling Business Environment Council PPIR Prudential Principles Implementation Reports PUR Permanent Until Reviewed SCM Agreement on Subsidies and Countervailing Measures SOE State-owned Enterprise STI Science, Technology and Innovation TIP Treaty with Investment Provision TRIMs Agreement on Trade-Related Investment Measures TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights UNCTAD United Nations Conference on Trade and Development WTO World Trade Organization | 4 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA 1. INTRODUCTION This Investment Policy and Regulatory Review on a review of currently applicable policies, laws (IPRR) presents information on the legal and and regulations. In some cases, consultations with regulatory frameworks governing foreign direct regulators were conducted to collect up to date investment (FDI) and competition that affect information. businesses and foreign investors in Nigeria. Since legal and regulatory frameworks are constantly The research was guided by a standardized evolving, a cut-off date was set for the research. questionnaire, covering a limited set of This country review therefore covers information topics, including foreign investment entry, available as of May 31, 2019, unless otherwise establishment, protection and select competition indicated in the review. IPRRs are available for related aspects. The questionnaire focused on the following middle-income countries (MICs): de jure frameworks as generally applicable to a Brazil, China, India, Indonesia, Malaysia, Mexico, foreign investor, not located in any specialized Nigeria, Thailand, Turkey, and Vietnam. or preferential regime (such as special economic zones). It primarily focused on national, economy- The research for preparing this IPRR was wide (rather than sector-specific) laws and undertaken by the international law firm Baker regulations. For the purpose of the research, it McKenzie, under the supervision of the World was assumed that the foreign investor is a private Bank Group. The research was primarily based multinational company with no equity interest or Figure 1. Overview of topics covered in IPRR Merger control Leniency ■ Key institutions for investment policy/rule ■ Remedies to limit ■ Extent of immunity on making, implemention and FDI promotion anticompetitive fines and damages ■ Key legal instruments effects of merger ■ Ease of admin ■ Transparency/consultation in laws and Main Policy & ■ Ease of admin in leniency regulations Legal Instruments procedures application and Institutions ■ Prohibited and Restricted Select Investment Entry Sectors ■ Equity ceiling Competition and ■ Minimum investment Policy Aspects Establishment requirement ■ FDI approval IPRR ■ R&D, local sourcing, ■ Schemes to increase Questionnaire employment, quantitative, local sourcing and geographic, export build capacity of local Other Areas suppliers (Linkages, OFDI, ■ Restrictions on OFDI Investment Responsible Protection ■ Measures on technology Investment, New Tech) ■ Expropriation ■ Transfer of currency Investment ■ Dispute Settlement Incentives ■ Fair administrative conduct ■ Source of tax and financial incentives ■ Accessibility of tax and financial incentives 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA |5 management control by the government of its home including the country’s commitments under the country (that is, not state-owned enterprise). World Trade Organization (WTO) and select international investment agreements (IIAs); There are aspects that this IPRR does not cover. It is not a comprehensive review of the entire legal n Sections 3-6 cover the country’s policies and and regulatory framework affecting investment. domestic legal framework concerning different Information presented is not exhaustive, but dimensions of the lifecycle of an investment: illustrative of the main topics and issues covered entry and establishment (Section 3), protection (for example, it does not exhaustively list all (4), incentives (5) and linkages (6); available tax and financial incentives in the country). It does not present recommendations n Sections 3-6 cover the country’s policies and on reform areas. Notably, it does not capture de domestic legal framework concerning different facto implementation of laws and regulations in dimensions of the lifecycle of an investment: the country. Given these limitations, information entry and establishment (Section 3), protection presented in this IPRR should be interpreted and (4), incentives (5) and linkages (6); used, keeping in view the overall country context n Sections 7-9 explore emerging investment policy and realities. Further, it contains information in and regulatory areas—Section 7 considers summary form and is therefore intended for general outward FDI, Section 8 responsible investment, guidance only. It is not intended to be a substitute and Section 9 considers recent policies on new for detailed legal research. technologies; This IPRR is organized as follows: n Section 10 focuses on city-specific investment n Section 2 provides an overview of the country’s policy and regulatory measures in the largest investment policy framework, including the legal commercial center; and instruments regulating foreign investment, key n Section 11 covers select aspects of competition institutions involved in investment promotion, law and policy, specifically merger control and as well as the country’s foreign investment leniency frameworks. promotion strategy; it also delineates the country’s international investment legal framework, | 6 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA 2. OVERVIEW OF INVESTMENT POLICY FRAMEWORK A. Domestic Legal Instruments Acquisition and Promotion Act (NOTAP Act). Regulating Foreign Investment The CAM Act regulates the establishment and operations of business entities by foreign investors Nigeria regulates foreign direct investment (FDI) in Nigeria and establishes the Corporate Affairs through its investment law, foreign exchange law, Commission (CAC). The NOTAP Act establishes company law, technology transfer law, sector the National Office for Technology Acquisition and specific regulations, as well as international Promotion (NOTAP) responsible for registering agreements (alongside the general legal framework agreements relating to the transfer and acquisition that applies to all businesses). of foreign technology and technical knowledge/ management services into Nigeria. FDI Law and Regulation Sector Specific Laws The primary laws that govern foreign investment in Nigeria are the Nigerian Investment Promotion Foreign investment is also subject to sector-specific Commission Act of 1995 as amended (NIPC laws and regulations that generally apply equally Act) and the Foreign Exchange (Monitoring to both domestic and foreign investors, with a and Miscellaneous Provisions) Act of 1995 as few exceptions where restrictions are placed on amended (FEMMP Act). The NIPC Act regulates foreign ownership. Some of the heavily regulated foreign participation in business enterprises in sectors in Nigeria include financial and banking Nigeria and establishes the Nigerian Investment services, oil & gas, food and pharmaceuticals, Promotion Commission (NIPC). NIPC is responsible insurance, aviation and telecommunications. For for promoting and overseeing the participation of example, the Private Guard Companies Act CAP foreigners in business enterprises in the country and P30 LFN 2004 requires private guard companies to serving as a “one stop shop” to facilitate foreign be wholly owned by Nigerians. investment in the country. The NIPC Act allows foreign investors to undertake any type of business Public Access to Foreign Investment in Nigeria (other than the prohibited businesses Laws and Policies listed in the negative list in Section 32 of the Act, which applies equally to Nigerians and foreigners) Nigerian law mandates that all laws passed and own up to 100% equity in Nigerian subsidiaries, by the Nigerian National Assembly (the subject to the specific requirements of the legislative arm of the government comprising relevant sectors. the Senate and House of Representatives) must be published in the Federal Gazette. The The FEMMP Act governs the inflow and outflow Gazette is publicly accessible on the website of its of foreign capital. Pursuant to the FEMMP Act, portal. This NIGERIALII portal is a project of the a foreign investor may invest in any enterprise or National Judicial Institute to provide free access to securities with foreign currency or capital imported Nigerian law. into Nigeria through an Authorized Dealer (that is, a licensed bank). The Central Bank of Nigeria Consultation with Stakeholders (CBN) is empowered to issue various guidelines and circulars under the FEMMP Act. Neither the National Assembly nor the Government is mandated to undertake public Other laws that impact FDI in the country are or stakeholder consultations before a new bill the Companies and Allied Matters Act (CAM is enacted into law. In practice consultations Act) and the National Office for Technology sometimes take place. The National Assembly 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA |7 conducts public hearings on pending bills as Trade in Services (GATS), Nigeria grants rights part of the multi-pronged process for passing the to services suppliers from other WTO member bills into laws. With respect to regulations issued countries. These include services supplied through by government agencies like the Securities and commercial presence (defined as establishment of Exchange Commission, the agency’s practice is a territorial presence), in other words through FDI. usually to publish “exposure drafts” and receive These rights are granted through commitments public feedback before issuing final binding versions. undertaken in “schedules”. The “schedules” list sectors being opened, the extent of market access B. International Legal Instruments being given in those sectors (for example, whether there are any restrictions on foreign ownership), Regulating Foreign Investment and any limitations on national treatment (whether Nigeria has undertaken legally binding some rights granted to local companies will not international investment commitments under a be granted to foreign companies). Nigeria has variety of international investment agreements made commitments to market access and national (IIAs)—signed at the bilateral, plurilateral treatment in 4 out of 12 services sectors in the and multilateral level. These commitments WTO classification1: (i) Communication services, mainly cover entry and establishment conditions, (ii) Financial services, (iii) Tourism and travel protection, as well as the legality of specific types of related services, and (iv) Transport services. In these incentives (see Table 1.) It is important for Nigeria sectors, Nigeria has made partial commitments on to reflect these commitments in its domestic legal market access for specific services in 8 sub-sectors framework to ensure consistency as well as to and full commitments on national treatment for monitor compliance. specific services in 8 sub-sectors. “Partial” means that although commitments have been made, there Having been a member of the World Trade are still limitations/reservations, which may differ Organization (WTO) since January 1, 1995, in their restrictiveness. For example, they may be Nigeria has commitments under several WTO more restrictive by limiting the equity contribution Agreements. Under the General Agreement on of the foreign investor, or less restrictive by merely Table 1. Nigeria’s International Investment Framework Agreement(s) as basis of commitments Type of Agreement Investment Policy Dimensions Covered WTO GATS Agreements Multilateral Entry and establishment WTO TRIMs Agreement Multilateral Entry and establishment, Incentives WTO SCM Agreement Multilateral Incentives WTO TRIPs Agreement Multilateral Protection Treaties with Investment Provisions Plurilateral or Bilateral May cover entry and establishment, (9 signed, 7 in force) protection, incentives Bilateral Investment Treaties Bilateral May cover entry and establishment, (29 signed, 15 in force) protection, incentives International Centre for Settlement of Multilateral Protection (Dispute settlement) Investment Disputes (ICSID) Convention Convention on the Recognition and Multilateral Protection (Dispute settlement) Enforcement of Foreign Arbitral Awards (New York Convention) IMF Articles of Agreement (Art. VIII, XIV) Multilateral Protection Double Taxation Avoidance Agreements Bilateral Taxation (12 treaties in force) Source: World Bank Analysis | 8 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA requiring foreign service suppliers to become a Nigeria’s BIT with Morocco (2016) includes member of a union chamber. In addition, under several novel provisions focused on sustainable GATS every member is obligated to unconditionally development. In its definition of investment, extend to service suppliers of all other WTO it requires that investments contribute to sustainable members Most-Favored Nation (MFN) Treatment. development. Most notably, it introduces a series of obligations for investors. After establishment, Under the WTO Agreement on Trade Related investors: Investment Measures (TRIMS), Nigeria has committed to not apply certain investment n must apply—alongside the host state—the measures that restrict or distort trade (local precautionary principle; content requirements, trade balancing requirements, foreign exchange restrictions and n must maintain an environmental management export restrictions). These measures are prohibited system and uphold human rights in accordance both when the obligation for the foreign investors with core labor and environmental standards as is mandatory, and when it is tied to obtaining an well as labor and human rights obligations of the advantage (that is, an incentive). Incentives are host state or home state; further regulated by the WTO Agreement on n may never engage or be complicit in corruption Subsidies and Countervailing Measures (SCM), practices; which among others prohibits certain types of export subsidies. Under the WTO Agreement on Trade- n must meet or exceed national and internationally Related Aspects of Intellectual Property Rights accepted standards of corporate governance . (TRIPs), foreign investors’ intellectual property rights are protected. In case of a violation of any of n are expected to operate through high levels of its WTO commitments, Nigeria may be sued under socially responsible practices and apply the the WTO dispute settlement mechanism. ILO Tripartite Declaration on Multinational Investments and Social Policy. Nigeria has further entered into obligations through international investment agreements In July 2019, Nigeria signed the African (IIAs) — 15 Bilateral Investment Treaties Continental Free Trade Agreement (AfCFTA). (BITs) and seven Treaties with Investment The Agreement has been signed by 54 African Provisions (TIPs) are currently in force. The Union member states and is in force in 27 member latter category is composed of treaties that include states as of early August 2019. It aims to establish obligations commonly found in BITs (for example, a single market for goods and services, facilitated a free trade agreement with an investment chapter). by movement of persons in order to deepen the Table 2. provides an overview of select agreements: economic integration of the African continent. Nigeria’s latest IIA (China-Nigeria BIT, 2014), its While the agreement is currently limited to trade in IIA with the largest home country measured by goods and services, countries are in a second phase that country’s share in Nigeria’s total FDI stock negotiating protocols on investment, competition (Netherlands-Nigeria BIT, 1994), as well as an policy and intellectual property rights (IPRs). IIA with expansive regional coverage (ECOWAS According to the African Union Assembly, the draft Supplementary Act on Investment, 2008). The legal text for those protocols should be submitted reviewed IIAs generally contain the main protection by January 2021 for the assembly’s adoption. guarantees, although the BIT between China and It is a member of the Convention on the Nigeria does not provide for full protection and Recognition and Enforcement of Foreign security. The ECOWAS Supplementary Act on Arbitral Awards (New York Convention) and Investment does not include ISDS or State-to-State the International Centre for Settlement of dispute settlement. Instead, it prescribes use of Investment Disputes Convention, facilitating local remedies. the enforcement of arbitral awards. It has to date 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA |9 Table 2. Comparison of Nigeria’s Select IIAs Largest Home Country Latest IIA (date of entry Expansive Regional IIA (% of total FDI stock): into force): China-Nigeria Coverage IIA: ECOWAS Netherlands-Nigeria BIT BIT (2014) Supplementary Act on (1994) Investment (2008) Scope of Application Covers pre-establishment No No No Exclusions from scope No No No Standards of Treatment National Treatment (NT) Post-establishment Post-establishment Post-establishment Most-Favored-Nation Post-establishment Post-establishment Post-establishment Treatment (MFN) Fair and Equitable Yes Yes Yes Treatment (FET) Full Protection & Security Yes No Yes Expropriation Direct and indirect Direct and indirect Direct and indirect expropriation, payment of expropriation, payment of expropriation, payment of compensation compensation compensation Rights to Transfer Funds Yes Yes Yes Prohibition of No No No Performance Requirements Dispute Resolution State-State Dispute Yes Yes No Settlement Investor-State Dispute Yes Yes No Settlement (Arbitration) Source: World Bank Analysis based on IIAs obtained from United Nations Conference on Trade and Development (UNCTAD) Investment Policy Hub been a respondent in two publicly known investor- in place on its date of membership, without the State disputes (Shell Nigeria Ultra Deep Limited need for IMF approval (Nigeria became a member v. Federal Republic of Nigeria, ICSID Case No. on March 30, 1961). However, new exchange ARB/07/18; Interocean Oil Development Company measures are subject to Article VIII and may and Interocean Oil Exploration Company v. Federal only be imposed with IMF approval. According Republic of Nigeria, ICSID Case No. ARB/13/20). to the IMF 2019 Article IV Consultation, Nigeria maintains several exchange restrictions subject Nigeria is an Art. XIV member of the to IMF approval under Art. VIII, for example an International Monetary Fund (IMF), requiring exchange restriction arising from the prohibition it to generally maintain current account to access foreign exchange at the Nigerian foreign convertibility, enabling investors to transfer exchange markets for the payment for imports of certain payments related to their investments. items in 42 categories. Nigeria has not yet accepted Art. VIII of the IMF Articles of Association but avails itself of the Nigeria is also party to 12 Double Taxation transitional arrangements of Article XIV. It is Avoidance Agreements (DTAAs) that are in thereby permitted to maintain and adapt to changing force. This influences its ability to tax foreign circumstances those exchange measures that were investors and investments. | 10 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA C. Key Institutions for Investment The NIPC is also tasked with regulatory functions, Promotion such as administering the Pioneer Status Incentives Framework and dealing with investment Nigeria has a centralized national-level investment registration. promotion agency charged with investment promotion functions for all economic sectors. In The NIPC co-ordinates a One-Stop Investment addition, at the sub-national level, some states have Centre (OSIC) that brings together relevant set up agencies tasked with promoting FDI. government agencies to one location to provide fast-tracked services to investors. The OSIC services include granting of business entry approvals, National Level Institutions licenses and authorizations as well as providing The Nigerian Investment Promotion general information on investment climate, legal Commission (NIPC) is an agency of the federal and regulatory framework and sector-specific government, established to encourage, promote information. It also provides facilitation and follow- and coordinate investments in Nigeria. The up services on behalf of investors in all government NIPC is a body corporate, charged with the agencies and ministries. The government agencies responsibility of, among other things, coordinating currently participating in the OSIC include the and monitoring all investment promotion activities Department of Petroleum Resources, the Federal as well as enhancing investment opportunities for Capital Territory Administration, Federal Inland Nigerian and non-Nigerian investors. Revenue service, Nigeria Export Promotion Council, Nigeria Immigration Service, National The NIPC’s main functions are to: Agency for Food and Drug Administration, and n Coordinate and monitor all investment promotion Nigerian Copyright Commission. activities to which the NIPC Act applies; The National Office for Technology Acquisition n Initiate and support measures to enhance the and Promotion (NOTAP), an agency under the investment climate in Nigeria for Nigerian and Ministry of Science and Technology, regulates non-Nigerian investors; the transfer of foreign technology and technical expertise to Nigerian companies. Pursuant to the n Promote investments in and outside Nigeria NOTAP Act, all agreements involving the licensing through effective promotional means; of intellectual property or services provided by a non-resident company are to be registered with the n Collect, collate, analyze and disseminate NOTAP prior to the outflow of royalty payments in information about investment opportunities foreign currency. NOTAP’s functions include: and sources of investment capital, and on request, advise on the availability, choice or n Encouragement of a more efficient process suitability of partners in joint venture projects; for the identification and selection of foreign technology n Identify specific projects and invite interested investors for participation in those projects; n Development of the negotiating skills of Nigerians with a view to ensuring the acquisition Maintain n liaison between investors and of the best contractual terms and conditions in Ministries, government departments and the transfer of foreign technology agreements. agencies, institutional leaders and other authorities concerned with investments; n Provision of a more efficient process for the adaptation of imported technology. n Provide and disseminate up-to-date information on incentives available to investors; and n Registration of all foreign technology transfer agreements having effect in Nigeria. n Assist incoming and existing investors by providing support services. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 11 n Monitoring on a continuous basis of the Sub-National Investment Promotion implementation of any contract or agreement Agencies registered pursuant to the Act setting up the Office. Some states within the Federation have set up n Commercialization of R&D Results and investment promotion agencies or units to assist Inventions. foreign investors who seek to invest within their states (at least 15 investment promotion agencies n Promotion of locally generated technologies. operate at the sub-national level). For instance, n Promotion and encouragement of the Akwa Ibom has established the Akwa Ibom development of creative and inventive skills Investment and Industrial Promotion Council. among Nigerian Scientists, Researchers, Lagos has established the Office of Overseas Affairs Inventors and Innovators. and Investment to promote foreign and domestic investment in Lagos. In July 2016, President Muhammadu Buhari established the Presidential Enabling Business Environment Council (PEBEC), an D. Foreign Investment Promotion intergovernmental and inter-ministerial agency Strategy charged with the responsibility to remove The Nigerian government does not have a bureaucratic constraints of doing business in specific foreign investment promotion strategy. Nigeria. The PEBEC works with the government However, the country’s targeted investment and ministries and agencies to implement the ease of growth strategy can be inferred from the Economic doing business reforms in Nigeria. The Enabling Recovery and Growth Plan 2017-2020 (ERG Business Environment Secretariat is the operational Plan) issued by the Ministry of Budget & National team of PEBEC. The PEBEC is chaired by the Vice Planning in February 2017. The ERG Plan is a President and comprises of 10 federal ministers, the developmental initiative focused on restoring Head of Civil Service of the Federation, Governor growth, investing in people and building a globally of the Central Bank of Nigeria, representatives competitive economy. The Plan outlines initiatives from Lagos & Kano State governments, the such as ramping up oil production, privatizing National Assembly, and prominent members from selected public enterprises/assets, and revamping the private sector. The Council generally meets local refineries to reduce petroleum product imports. monthly and holds special meetings on need basis. Other initiatives include environmental restoration It reviews investment bottlenecks and areas of projects. As part of this Plan, oil revenues would reforms and hosts a platform where individuals can be used to develop and diversify the economy. lodge their complaints and provide feedback on This Plan also places importance on emerging their experiences with respect to doing business in sectors such as the entertainment and creative Nigeria with the relevant government agencies. The industries, and recognizes the need to leverage platform is available online here. Science, Technology and Innovation (STI) to build a knowledge-based economy in Nigeria. | 12 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA 3. INVESTMENT ENTRY AND ESTABLISHMENT Market Entry and Sectoral Limitations the general position is that 100% foreign equity is permitted in a sector or sub-sector. Nigeria strictly prohibits domestic and foreign investment in a few business activities on a “negative list” in the NIPC Act (Prohibited Prohibited and Restricted Sectors Sectors). Further, while the NIPC Act does not Table 3. lists the Prohibited and Restricted Sectors expressly restrict foreign participation through based on the negative list in the NIPC Act and equity caps or other limitations in any business certain sector specific regulations. activities, certain sector specific regulations issued by the relevant ministry or government agencies A foreign investor is not generally required may prescribe prohibitions or restrictions on FDI to form a joint venture in order to establish (Restricted Sectors). For example, the Private Guard a business in Nigeria, but certain Restricted Companies Act, which regulates and provides for Sectors (such as oil and gas or advertising) the licensing of private guard companies, prohibits mandate a threshold percentage of Nigerian non-Nigerians from pursuing the private guard participation. In such sectors a foreign investor business in Nigeria. It requires private guard must by default form a joint venture with a local companies to be wholly owned by Nigerians. partner in order to meet the Nigerian participation Apart from the Prohibited and Restricted Sectors, requirements. Similarly, mergers and acquisitions Table 3. List of Major Prohibited and Restricted Sectors under the NIPC Act Prohibited Sectors Scope Weapons Production of arms, ammunition, and so forth Narcotics Production of and dealing in narcotic drugs and psychotropic substances Military and Para-military Production of military and para-military wears and accoutrement, including wears of the police, customs, immigration and prison services Others Notified by FEC Any other items as the Federal Executive Council may determine Private Guard Companies Foreign participation prohibited Domestic Coastal Carriage Transport Carriage of cargo and passengers within the coastal territorial inland waters — ships and vessels must be wholly owned and operated by Nigerians, unless waived by relevant ministry Legal Services Foreign participation prohibited Restricted Sectors Restrictions on Foreign Equity Oil & Gas In awards of oil blocks, licenses and works, preference given to Nigerian operators and companies with at least 51% interest held by Nigerians Engineering consulting Engineering consulting firm — up to 45% foreign equity permitted Advertising Nigerian advertising company — up to 25% foreign equity permitted Domestic Coastal Carriage Services Shipping company — up to 40% foreign equity permitted (in case 100% local ownership requirement is waived by relevant ministry) Broadcasting Broadcasting license and operating broadcasting business — up to 49% foreign equity Source: Analysis by Baker McKenzie based on country’s laws and regulations Note: The table provides information on the 32 specific sectors identified for the purpose of this research. The list of sectors is therefore not exhaustive.2 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 13 by foreign investors are not restricted in Nigeria. the executive order, procuring authorities However, in the Restricted Sectors any local are required to give preference to Nigerian participation requirements for shareholding must companies and firms in awarding contracts, be complied with. in line with the Public Procurement Act, 2007. The executive order prohibits the Ministry of Restrictions on Non-Equity Contract Interior from giving visas to foreign workers Based Investments whose skills are readily available in Nigeria. The order also directs ministries, department and Foreign investors face special restrictions in agencies to engage indigenous professionals in certain contract-based investments: the planning, design and execution of national security projects. Consideration is given to a n Technology Transfer: The NOTAP Act foreign professional where it has been certified provides that all technology transfer agreements by the appropriate authority that such expertise between Nigerian companies and foreign is unavailable in Nigeria. In such an instance, partners are required to be registered with the the authority will give preference to foreign NOTAP. Technology transfer agreement under companies with a demonstrable and verifiable the NOTAP Act include agreements for: plan for indigenous development. n Use of trademarks and rights to use of Forms of Establishment patented inventions; Foreign investors can generally hold any type n Supply of technical expertise in the form of of shares in a Nigerian incorporated company the preparation of plans, diagrams, operating (for example, ordinary shares and preferred manuals or any form of technical assistance shares). Apart from the Restricted Sectors, there is of any description; no statutory prohibition against the establishment n Supply of basic or detailed engineering; of a wholly foreign-owned subsidiary, subject to obtaining the necessary regulatory approvals to n Supply of machinery and plant; and carry on business activities in Nigeria. Further, no special restrictions apply on the legal forms of n Provision of operating staff or managerial companies that foreign investors can establish or assistance and the training of personnel. invest in. A foreign investor can carry on business The NOTAP will refuse to register an agreement in Nigeria as a limited liability company (public or where, among other things, the technology to be private), unlimited company or a company limited transferred is freely available in Nigeria, there is an by guarantee, provided it is registered as a company obligation to acquire equipment or tools exclusively through the Corporate Affairs Commission. from the foreign partner, or if the contract is for a period exceeding ten years. The registration of Minimum Investment Requirements technology agreements is a requirement for the While there is no overarching minimum payment of foreign currency fees by the local investment requirement for private foreign- company, utilizing foreign exchange procured from owned companies, foreign investors are required official banking channels. Therefore, a Nigerian to meet a threshold to obtain an expatriate company will not have access to official banking quota allowing them to employ expatriates. The channels through which to pay the foreign investor minimum share capital requirement to obtain an for any form of franchising services offered without expatriate quota is ₦ 10,000,000 for one expatriate obtaining the registration from the NOTAP. slot and about ₦20,000,000 for four expatriate n Government Procurement: In February 2018, slots. The higher the number of slots, the higher are the President signed a Presidential Executive the thresholds for investment. In some regulated Order 5 for “planning and execution of projects, sectors such as insurance and banking, the minimum promotion of Nigerian content in contracts and requirement may be higher. science, engineering and technology”. Under | 14 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA Quantitative Limits industry to submit a Nigerian content plan to the NCDMB before carrying out any project. The plan There are no mandatory quantitative limits on the must demonstrate and ensure, among other things, number of foreign service providers, enterprises or that: market players that can operate in a given sector. n First consideration is given to services provided Restrictions on Expatriate Appointments from Nigeria and goods manufactured in Nigeria; and Foreigners can only be employed to fill approved expatriate quota positions in a company n Nigerians are given first consideration for duly registered in Nigeria. In order to employ training and employment. expatriates, a registered company must apply to the Ministry of Interior for the grant of expatriate quota Similarly, pursuant to the Private Guards Act, all in Nigeria. The Ministry of Interior has the absolute directors of private guard companies must be discretion to disapprove a quota position if it is of Nigerians. the opinion that the expertise exists in Nigeria. The Lengthy procedures for obtaining work permits Ministry of Interior will consider the availability may be a restriction. Upon obtaining an expatriate of Nigerians to staff these positions and where it is quota, work permits known as Combined Expatriate of the opinion that Nigerians are capable of filling Residence Permit and Alien Card can be applied for such positions, the Ministry will not approve the and issued to expatriate employees for the specific expatriate quota positions and the foreign investor designations under the approved quota. The will have to hire local staff for those positions. If Immigration Act does not specifically provide for granted, an expatriate quota position is valid for the time within which a residence work permit is two years. granted. In practice, a work permit is usually issued A specific quota, the Permanent Until Reviewed within two to three months. (PUR) Quota, may be obtained where the company registered in Nigeria intends to employ Local Sourcing and R&D Requirements only one expatriate for the position of a CEO or Although there are no general laws in Nigeria country manager. The PUR Quota is obtained that require foreign investors to use locally from the Ministry of Interior, and has the advantage produced materials or contractors in order to that, as the name suggests, it is usually granted for establish a business in Nigeria, certain sector- a longer period than the regular expatriate quota. specific legislations impose Nigerian content Sector-specific laws may impose specific requirements. For example, in the oil and gas conditions. The Nigerian Oil and Gas Industry sector, exclusive consideration is given to Nigerian Content Development Act (NOGICD Act) requires indigenous service companies with respect to the all operators and companies in the oil and gas award of contracts. First consideration is also industry to employ only Nigerians in junior and given to Nigerian operators and indigenous service intermediate cadres, and it only permits 5% of the companies in the award of oil blocks, licenses and management positions to be retained for foreigners. works in the sector. These positions must be approved by the Nigerian Further, tax incentives are granted to companies Content Development and Monitoring Board that utilize local raw materials. For instance, (NCDMB). The NCDMB has the sole discretion of a tax concession of up to five years is granted to approving the maximum number of management industries that attain the following minimum local positions of a company. Prior to hiring a foreigner, raw materials utilizations: the company must prove that no qualified Nigerian was found within and outside Nigeria for the n Agro-Allied — 70% use of local materials management positions. The NOGICD Act also requires operators in the Nigerian oil and gas n Agro — 80% use of local materials 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 15 n Engineering—65% use of local materials n Evidence of payment of registration fee of ₦15,000 (approximately US$42.00). n Chemical—60% use of local materials n Business Permit Registration: A business For certain items, import restrictions are used to permit is required if a company is fully owned by encourage local sourcing. For example, import foreign investors or in a Nigerian registered joint restrictions apply to vegetable oils, bagged cement venture. Such a permit authorizes a company with or textile floor coverings. foreign equity participation to carry on business Foreign investors are not required to invest in local in Nigeria. The registration typically takes two to R&D in order to establish a business in Nigeria, three months to complete. Registration with the but tax incentives may be used to encourage NIPC is one of the prerequisites for obtaining a investments into R&D. Up to 120% of expenses on business permit from the Ministry of the Interior. R&D are tax deductible by businesses that carry out There is no time stipulated within which a R&D activities in Nigeria. registration approval is granted. The documents required for business permit registration include: Foreign Investment Approval n Evidence of payment of processing and Foreign investors do not require any FDI registration fee; approval from a regulatory body, but foreign n Incorporation documents of the company, that investors are required to obtain the following permits and licenses prior to commencement of is, Memorandum and Article of Company; business operations in Nigeria: Form CAC 1.1. (Application for Registration of Company); n NIPC Registration: Every business enterprise n A copy of the Company’s feasibility report; with foreign participation is required to register with the NIPC before commencing n A copy of the Company’s current Tax business in Nigeria. Upon registration, the NIPC Clearance Certificate; issues a certificate of business registration to the company. The process can take 1-2 weeks via n A copy of the lease agreement for Company’s the One Stop Investment Center. The documents premises; required to register with the NIPC include: n The Company’s Bank reference letter. n Completed NIPC Form; If foreign investment involves the importation of n Incorporation documents of the company, that foreign technology, the approval of NOTAP would is, Memorandum and Article of Company; be required which can take 3-6 months. Form CAC 1.1. (Application for Registration of Company); Specific regulatory approvals may be required in certain commercial sectors, such as a n Letter of Authority from Company (where a communications license, banking license or third party is undertaking the registration); petroleum permits. | 16 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA 4. INVESTMENT PROTECTION Protection Against Expropriation Nigeria is further a party to 15 bilateral investment treaties that are in force and which offer explicit Investments in Nigeria are protected against protection against direct and indirect measures expropriation under the Nigerian Constitution having an effect equivalent to expropriation or as well as under a number of laws and bilateral nationalization (see further Section 2.B.—Nigeria’s investment treaties. Nigeria’s Constitution International Legal Instruments). provides equal rights and treatment to foreigners and nationals alike and confers on its citizens (including locally incorporated Nigerian legal Restrictions on Inflow and Outflow entities, notwithstanding foreign participation) the of Funds right to acquire and own moveable and immovable Few restrictions or approval requirements apply property in Nigeria. It prohibits the government to the inflow of funds to Nigeria or repatriation from compulsorily acquiring or taking into of proceeds from Nigeria (net of applicable taxes possession any property or interest in such property and subject to other standard compliances). The in any part of Nigeria, except in a manner and for NIPC Act expressly states that a foreign investor purposes prescribed by a law that provides for the shall be “guaranteed unconditional transferability” prompt payment of compensation and gives to any of funds through an authorized dealer bank in person claiming compensation a right of access to freely convertible currency of dividends, profits, the courts or tribunals to determine the amount of interest payments against foreign loans and compensation. remittance of proceeds from sale or liquidation, net of applicable taxes. As such, foreign investors can The Nigerian Investment Promotion freely transfer abroad their investment proceeds Commission Act expressly grants protection to through authorized dealer banks in Nigeria. Foreign a business enterprise against nationalization investors are however required to obtain certificates or expropriation by any government of the of capital importation within 24 hours of the inflow Federation. The Act further states that no person as evidence of the inflow. The certificates are issued who owns the capital of any enterprise shall be by the authorized dealer banks (that is, licensed compelled by law to surrender their interest in the banks) through which the inflow was received. The capital to any other person. The Act prohibits the certificate of capital importation also facilitates federal government from acquiring an enterprise repatriation of the funds from the equity investment unless the acquisition is in the national interest or or loan through an Authorized Dealer in freely for a public purpose and under a law which makes convertible currency. Foreign investors are granted provision for (i) the payment of fair and adequate access to the official foreign exchange market for compensation and (ii) a right of access to the courts the conversion and repatriation of the funds where for the determination of the investor’s interest or the initial inflow is evidenced by a certificate of right and the amount of compensation to which capital importation. the investor is entitled. It further requires timely payment without undue delay and authorization Restrictions are placed on the remittance of for its repatriation in convertible currency. The act technical fees as stipulated by the NOTAP. The covers direct, but not indirect expropriation. technical fees are usually based on the percentage of turnover and range between 0-5% of net sales The Land Use Act requires compensation to be paid depending on the complexity of the technology. to land owners whose titles have been revoked for Agreements involving high technology such as overriding public interest. petrochemicals, space, biotechnology, complex 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 17 engineering, and so on usually attract a higher Dispute Settlement Mechanisms percentage of technical fees. A foreign investor in Nigeria can generally avail The FEMMP Act empowers the banking itself of dispute settlement through domestic regulator Central Bank of Nigeria (CBN) to courts, or domestic or international arbitration. issue guidelines to regulate transactions in and Foreign investors have access to arbitration within operation of the Nigerian Foreign Exchange the framework of any bilateral or multilateral Market. In July 2018, the CBN released a Foreign agreement on investment protection to which the Exchange Manual that sets out the documentary Federal Government of Nigeria and the country of requirements for a foreign investor to have access which the investor is a national are parties. Disputes to the Foreign Exchange Market and to enable may also be submitted to arbitration in accordance the authorized dealer banks to repatriate earnings, with any national or international mechanism for dividends, profits and loan payments and so forth the settlement of investment disputes as agreed by outside Nigeria. Generally, there are no restrictions the parties. Foreign investors will have access to once these documentary requirements are met. domestic arbitration where the parties to the dispute agree to submit to domestic arbitration. The circumstances under which outbound transfers may be restricted are limited to There is no formal institutional mechanism set standard compliances and set out in some up to address issues between foreign investors of the bilateral agreements entered into by and the state prior to escalation into formal legal Nigeria. This is in contrast to the unconditional disputes. The NIPC Act states that efforts shall transferability which is guaranteed in the NIPC Act. be made through mutual discussions to amicably For instance, the Agreement between Canada and settle disputes arising between investors and any Nigeria states that a party may prevent a transfer in Government of the Federation. certain circumstances including: There is no national administrative law in Nigeria n Bankruptcy, insolvency or the protection of the that would require that a fair process be followed, rights of a creditor; but the Constitution gives the right to a fair hearing within a reasonable time by a court or other tribunal n Criminal or penal offence; established by law in the determination of civil n Ensuring compliance with an order or judgment rights and obligations (including questions or in judicial or administrative proceedings. determinations by or against any government or authority). Foreign investors are affected by other macroeconomic policies, beyond the scope of this review, such as exchange rate policies which maintain multiple exchange rates for different purposes. | 18 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA 5. INVESTMENT INCENTIVES Nigeria provides a framework of tax incentives n The interest payable on any foreign loan granted to boost investments in the country’s strategic on or after April 1, 1978 is exempted from tax. sectors and designated regions pursuant to incentives legislation (such as Companies n Importers of materials used in the manufacture Income Tax Act Cap C21 1977). These incentives of exported goods are able to claim repayment of are made available to both domestic and foreign import duties earlier paid on the materials, after investors. The NIPC Act empowers the NIPC goods are exported. to negotiate — in consultation with the relevant n Investments in economically disadvantaged government agencies — special incentives for areas attract 100% tax breaks for 7 years. strategic or major investments. A variety of tax incentives are offered based on the nature, location, A compendium of investment incentives in and sector of investment, such as: Nigeria is available on the official website of the NIPC. This Compendium is the product of a n The Pioneer Status Incentive Policy exempts collaboration between the Nigerian Investment qualified companies (investing in pioneer Promotion Commission and the Federal Inland industries such as cocoa processing, textile, Revenue Service. It is updated periodically, as more apparel, agriculture, mining, manufacturing and incentives are introduced. There is no centralized so on) from profits and dividend tax holidays for registry of the firms or state-owned enterprises 3-5 years. There are over 69 designated types of (SOEs) receiving incentives. pioneer industries. Apart from NIPC, other agencies are also n A company engaged in R&D activities for empowered to grant incentives. For example, commercialization is allowed 20% investment the Industrial Development Income Tax Relief Act tax credit on their qualifying expenditure. (IDITRA) grants specific powers to the President n A company engaged wholly in the fabrication of of Nigeria to declare as pioneer industries/products. spare parts and equipment for local consumption With overlapping mandates, it is key to ensure that or export is allowed 25% investment tax credit government agencies are aligned on the country’s on its qualifying capital expenditure. overall investment policy objectives. n A company that purchases a locally manufactured Eligibility Criteria and Approval Process plant, machinery or equipment for use in its The granting of incentives to foreign investors business is allowed 15% investment tax credit is contingent upon satisfying certain criteria. If on the fixed asset bought for use. the incentive is provided in a law, the eligibility n Where a company incurs capital expenditure on criteria is often laid out in the same law. The the provisions of facilities such as electricity, approval process for receiving incentives is not water, tarred road or telephone for the purpose automatic. Applicants are required to apply to the of a trade or business which is located at least 20 relevant regulatory agency with the relevant details kilometers away from such facilities provided by proving they are eligible for the desired incentive. the government, it is eligible for a tax allowance. Generally, the approval process is not stated in a law or regulation granting incentives. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 19 6. 10. INVESTMENT LINKAGES For the purpose of this section, research was The NIPC has partnered with the National Office focused on availability of incentive schemes for Technology Acquisition and Promotion to increase local sourcing, technology transfer in order to enhance technology transfer in and measures to improve information exchange Nigeria through FDI. The Technology Transfer between foreign investors and domestic Gap Initiative is being championed by the Federal suppliers. There are specific investment schemes Ministry of Science and Technology, which aims in place to encourage foreign investors to increase at promoting technology transfer by offering better local sourcing. For example, importers of materials incentives for FDI in Nigeria. used in the manufacture of exported goods are able to claim repayment of import duties earlier Further, business enterprises with more than paid in respect of the materials, after the goods 5 employees or with a turnover of at least ₦50 are exported. Similarly, tax relief is granted to million are required to contribute 1% of their companies that utilize local raw materials. As noted total annual payroll to the Industrial Training above, a tax concession of up to five years is granted Fund. The Fund is responsible for promoting the to industries that attain the following minimum acquisition of relevant skills in industry. local raw materials utilizations: n Agro-Allied — 70% n Agro — 80% n Engineering — 65% n Chemical — 60% | 20 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA 7. OUTWARD FOREIGN DIRECT INVESTMENT For this section, research was focused on on outward investment. Nigeria does not place whether there are any legal instruments any special restrictions on outward foreign direct specifically covering outward investment and if investment and there is no omnibus legislation on there are, whether they impose any restrictions OFDI in Nigeria. 8. RESPONSIBLE INVESTMENT For this section, research was focused on whether Criminal Provisions) Act, and the Federal Solid there are any measures within the country’s and Hazardous Waste Management Regulations. investment legislation that are specifically According to the Environmental Impact Assessment targeted to ensure responsible investment. Act, proposed projects from the private and public There are responsible investment measures in other sectors must identify the expected environmental laws and regulations of the country, but Nigeria’s impact and planned efforts to mitigate any damage foreign investment law and policy do not include an caused by them. National laws and regulations explicit reference. For example, the main pieces of regarding the preservation of the environment, legislation regulating environmental matters are the protection of the public health and compliance National Environmental Standards and Regulations of products with national/international standards Enforcement Agency Act, the Environmental apply to foreign investments in the same way they Impact Assessment Act, the Harmful Waste (Special are applied to domestic investments. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 21 9. RECENT POLICIES ON NEW TECHNOLOGIES This section considers Nigeria’s recent policy Protection Regulation. The objectives of this measures on new technologies (that may affect Regulation are to: i) safeguard the rights of both domestic and foreign investors). Globally, natural persons to data privacy; ii) foster safe policy measures on new technologies tend to focus conduct of transactions involving the exchange on the enabling (sectoral) regulatory framework, of personal data; iii) prevent manipulation as well as on incentives, digital standards, and of personal data and iv) ensure that Nigerian clusters. At the same time, countries have taken businesses remain competitive in international measures that highlight their changing approaches trade, through the safeguards afforded by a to national security. Other emerging policies that, just and equitable legal regulatory framework though not directly related to investment but on data protection, in line with international which nevertheless impact investments, are data best practices. localization requirements as well as rules and regulations concerning the treatment and use of Data localization digital data. Several pieces of legislation make provision for Nigeria has passed specific laws and regulations maintaining certain types of data locally, for that may affect the development of new example: technologies: n The Nigeria Data Protection Regulation makes n In May 2015, the Cybercrimes (Prohibition, extensive provision for compliance measures Prevention etc.) Act was enacted. It criminalizes required before data are permitted to be the abuse and misuse of data for fraudulent transferred to a foreign third party. It does not purposes. mandate data localization. n In July 2019 Nigeria’s National Information n The Registration of Telephone Subscribers Technology Development Agency enacted the Regulations of 2011 provides that no subscriber Nigeria Data Protection Regulation 2019 to information shall be transferred outside the regulate the processing, storage and transfer Federal Republic of Nigeria without the prior of data of Nigerian citizens within and beyond written consent of the Nigerian Communications the shores of Nigeria. Many concepts of Commission. the Regulation mirror the EU General Data | 22 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA 10. CITY SPECIFIC REVIEW—LAGOS Lagos is the largest city in Nigeria and is In order to encourage foreign investment in considered the commercial capital of the the city, the State Government has established country. It is a major hub of economic activity in additional incentives for foreign investors. One West Africa and is a key destination for foreign such incentive is the creation of the Lekki Free Trade investment. It is also home to the corporate head Zone. The state Government obtained approval offices of the Nigerian Stock Exchange and the from the Nigeria Export Processing Zones Authority Financial Market Dealers Quotation (FMDQ) over- (NEPZA) to establish a free trade zone in the state. the-counter Securities Exchange. Reportedly, 60% Investments in the free trade zone are exempt from of industrial investments into Nigeria go to Lagos taxes, levies and rates as well as custom duties in and about 90% of business enterprises registered in respect of equipment or raw materials imported Nigeria are headquartered in Lagos. into the zone. Investors are permitted up to 100% foreign participation in business enterprises and, Regulatory review and oversight of foreign in line with national foreign investment laws, are investment is usually undertaken at the national guaranteed the unconditional transferability and level. Further, exchange controls, immigration, repatriation of their investments. In order to operate incorporation and regulation of corporate entities in the free trade zone, there is a minimum foreign are all matters contained in the exclusive legislative investment amount of US$500,000. list, in respect of which the National Assembly has exclusive jurisdiction at the federal level. There As such, Lagos State’s investment incentives do are no city or State specific laws governing the not generally conflict with national policies and inflow, protection and transferability of investment legislation but rather provide additional incentives that present additional impediments for foreign for investors to situate their investments in the State. investment in Lagos. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 23 11. COMPETITION LAW & POLICY For the purpose of this section, research was focused threshold where a merger should be notified before on merger control and leniency frameworks in its implementation if in the financial year preceding the country. the proposed merger: The primary law governing competition n the combined annual turnover of the acquiring in Nigeria is the Federal Competition and and target undertakings in, into or from Nigeria Consumer Protection Act 2018 (FCCPA) enacted equals or exceeds ₦ 1,000,000,000 (one billion in December 2018 and subsequently signed Naira); or into law by President Muhammadu Buhari in January 2019. n the annual turnover of the target undertaking equals or exceeds ₦500,000,000 (five hundred The Federal Competition and Consumer Protection million Naira). Commission (the Commission), established through the FCCPA, is the main body in-charge of The FCCPA does not require mandatory notification implementing competition law and policy in the for “small” mergers (that is those that fall below country. these thresholds) where it will, in the opinion of the Commission, substantially prevent or lessen competition. In this case, the Commission may A. Merger Control require parties to a small merger to notify it of Nigeria’s merger control regime is governed by the merger within six months after the small the FCCPA, and the Commission is vested with merger being implemented. In November 2019, responsibility for regulating merger transactions the Commission adopted Guidelines on Simplified in Nigeria. Under the FCCPA, a merger occurs Process for Foreign-To-Foreign Mergers with when one or more undertakings directly or Nigerian Component. Under the guidelines, the indirectly acquire or establish direct or indirect FCCP has adopted an expedited procedure for control over the whole or part of the business of such mergers where it applies a simplified another undertaking by the purchase or lease of the procedure for review and issues its decision within shares, an interest or assets of the other undertaking 15 business days. in question; an amalgamation or other combination Given that the FCCPA was enacted in 2019, many of with the other undertaking in question; or a joint the provisions covered below were not yet adopted venture. The FCCPA also defines the meaning of at the time of writing. However, the Commission is control and lists situations where an undertaking in the process of drafting further merger regulations will not be deemed to have control. and guidelines which are likely to address some Proposed large mergers (that is, mergers with of these areas. These are likely to be adopted value above the threshold stipulated by the during 2020. Commission) cannot be implemented unless they have first been notified to and approved by Pre-notification Meetings the Commission. As such, any investor (including The FCCPA does not expressly provide for foreign investors without presence in Nigeria) are pre-notification meetings, but the Commission required are required to file a merger notification can exercise discretion to make regulations or when their acquisition of the shareholding in a policies on the assessment of mergers as stated firm falls within the threshold of a large merger. in Section 163 (2) (d) of the FCCPA. In July 2019, the Commission adopted merger | 24 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA Fast Track Procedure and Information Section 101 of the FCCPA allows the Commission, Requests in making a determination with respect to a merger notification, to hear any person, other There are no fast track procedures for mergers than parties to the merger, who are able to in Nigeria. The Commission is yet to make any assist in making a determination or the merger regulations regarding fast track procedures. notification. Interested third parties may therefore There is no limitation preventing the submission have opportunities to participate in the merger of multiple information requests to merging procedure in order to defend their interests when parties during the merger review period. Section these are affected by the proposed transaction. 102 (1) FCCPA provides that any undertaking making a merger notification shall furnish to the Substantive Assessment Commission such documents and information as The FCCPA adopts a tiered merger test similar may be required in the consideration of the merger to that of South Africa Competition Act, where or proposed merger to enable the Commission to public interest is also taken into consideration exercise their functions under the Act. when assessing mergers. When considering a The FCCPA prescribes a time frame of 20 merger the Commission is required to determine business days for small mergers and 60 business whether or not the merger is likely to substantially days for large mergers within which it must prevent or lessen competition based on a set of either approve or disapprove the merger factors prescribed under the FCCPA. If it appears notification. The Commission may however that the merger is likely to substantially prevent or extend the timeframe for its response subject to lessen competition, it determines (i) whether or not the stipulation of the Act. It is unclear whether an the merger is likely to result in any technological information request stops the clock. efficiency or other pro-competitive gain which will be greater than or off-set the effect of any prevention or lessening of competition, while allowing Remedies consumer a fair share of the resulting benefit, or The FCCPA does not clearly provide an avenue is likely to result from the merger and would not for merging parties to propose commitments to likely be obtained if the merger is prevented, and limit anticompetitive effects of mergers. Further, (ii) whether the merger can or cannot be justified the FCCPA does not expressly empower the on substantial public interest. In that regard, it Commission to approve a merger with structural is required to consider the effects that proposed or behavioural remedies. However, the FCCPA mergers will have on: empowers the Commission to approve mergers n A particular industrial sector or region; subject to conditions. It is up to the Commission to determine the necessary conditions. n Employment; File Access and Third Party Intervention n The ability of national industries to compete in international markets; and The FCCPA does not expressly provide for parties to have access to the merger file to dispute n The ability of small and medium scale enterprises a refusal. Section 95 (8) (a) (iii) and Section 97 to become competitive. (1) (b) (iii) of the FCCPA merely mandate the Commission to issue written reasons if it prohibits Since the enactment of the FCCPA and the a merger but does not give parties to the merger establishment of the Commission in Nigeria has a right of defence. It is also not clear on whether been recent, the Commission has not yet imposed the Commission is mandated to sufficiently protect any conditions or published any notifications in the confidential information presented to it by respect of mergers. merging parties. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 25 Penalties and Appeals in at least two national newspapers. Although the Commission may issue written notices stating the Where the parties to a large merger proceed to reason for its decision, such notices are usually not implement the merger without the approval of the included in the published report. Commission, they will be liable upon conviction to a fine not exceeding 10% of turnover of the The FCCPA prescribes a timeframe of undertaking in the business year preceding the 20 business days for small mergers and 60 date of the offence, or to such other percentage business days for large mergers, within which as the court may determine having regard to the the Commission must respond to the merger circumstances of the case. The merging parties notification. The Commission may however extend may be fined for not adhering to any condition the timeframe for its response. For small mergers, imposed by the Commission. it may extend the timeframe for a single period not exceeding 40 business days, and for large mergers Per the FCCPA, the decisions of the Commission it may extend the period to 120 business days. can be appealed before the Competition and An extension notice must be sent to all parties to Consumer Protection Tribunal. Any award, order the merger. or ruling reached by the Tribunal must be registered with the Federal High Court for the purpose of enforcement. The decision can be appealed at the B. Leniency Program Court of Appeal upon giving notice in writing to There is no regulation on a leniency offering to the Secretary to the Tribunal within 30 days after reduce sanctions for conspirators who report the date on which the ruling, award or judgment their own cartel activities or those of their co- was given. conspirators to law enforcement authorities. The FCCPA does not expressly provide for a leniency Publicity and Deadlines for Merger program, but the Commission is vested with the Decisions authority to create guidelines and regulations on leniency programs. The Commission is yet The FCCPA provides for the publication of to establish any guideline or regulation for mergers. The decisions of small mergers are such programs. published in the Federal Government Gazette while the decisions of large mergers are published | 26 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA ENDNOTES 1 The WTO services sectoral classification list Services are categorized into 12 sectors: (W/120) is a comprehensive list of services 1. Business services sectors and sub-sectors covered under the GATS. It was compiled by the WTO in July 1991 and 2. Communication services its purpose was to facilitate the Uruguay Round 3. Construction and related engineering services negotiations, ensuring cross-country comparability 4. Distribution services and consistency of the commitments undertaken. The 160 sub-sectors are defined as aggregate of the 5. Educational services more detailed categories contained in the United 6. Environmental services Nations provisional Central Product Classification 7. Financial services (CPC). The list can be accessed under the following link: http://www.wto.org/english/tratop_e/serv_e/ 8. Health related and social services mtn_gns_w_120_e.doc. 9. Tourism and travel related services 10. Recreational, cultural and sporting services 11. Transport services 12. Other services not included elsewhere 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 27 2 For the purpose of this research, 32 sectors have been identified. This is not an exhaustive list of all sectors of the economy. Primary: Services: 1. Agriculture, Hunting, Forestry, and Fishing 18. Electricity, Gas, and Water 2. Mining, Quarrying, and Petroleum 19. Alternative Energy 20. Construction Manufacturing: 21. Wholesale and Retail Trade 3. Agroprocessing, Food Products, and Beverages 22. Hotels and Restaurants 4. Textiles, Apparel, and Leather 23. Other Travel and Tourism-related Services 5. Chemicals and Chemical Products 24. Logistics, Transport, and Storage 6. Rubber 25. Telecommunications 7. Plastic Products 26. Computer and Software Services 8. Pharmaceuticals, Biotechnology, and Medical Devices 27. Financial Services including Insurance 9. Metals and metal products 28. Real Estate 10. Non-metal mineral products 29. Business Services 11. Wood and wood products (other than Furniture) 30. Professional, Scientific and Technical Services (Engineering, Architecture, and 12. Furniture so on) 13. Paper and paper products 31. Health Services 14. Printing and publishing 32. Media and Entertainment 15. Automobiles, Other Motor Vehicles, and Transport Equipment 16. Information Technology and Telecommunications Equipment 17. Machinery and Electrical and Electronic Equipment and Components | 28 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA LIST OF REFERENCE MATERIALS Primary Sources 19. General Agreement on Trade in Services (GATS) 1. Companies and Allied Matters Act CAP C20 20. Agreement on Trade-Related Aspects of LFN 2004 Intellectual Property Rights (TRIPs) 2. Investment and Securities Act 2007 21. Agreement on Trade-Related Investment Measures (TRIMS) 3. Nigerian Investment Promotion Commission Act CAP N117 LFN, 2004 22. Agreement on Subsidies and Countervailing Measures (SCM) 4. Constitution of the Federal Republic of Nigeria 1999 (As amended) 23. Convention on the Recognition and Enforcement of Foreign Arbitral Awards 5. Foreign Exchange (Monitoring and (New York Convention) Miscellaneous Provisions) Act CAP F34 LFN 2004 24. International Centre for Settlement of Investment Disputes (ICSID) Convention) 6. Nigerian Immigration Act 2015 25. Articles of Agreement of the International 7. National Office for Technology Acquisition Monetary Fund and Promotion Act CAP. N62 LFN 2004 26. Netherlands-Nigeria BIT 1994 8. Federal Competition and Consumer Protection Act (FCCP Act) 2019 27. China-Nigeria BIT 2014 9. Private Guard Companies Act CAP P30 28. ECOWAS Supplementary Act on Investment LFN 2004 2008 10. Land Use Act 1978 Secondary Sources 11. Acquisition of Land by Aliens Law 1971 29. The Foreign Exchange Manual 12. Acts Authentication Act 1962 30. The Nigerian Content Development and 13. Nigerian oil and Gas Industry Content Monitoring Board (NCDMB) Guidelines Development Act 2010 31. Essentials of Corporate Law Practice in 14. National Broadcasting Commission Act Cap Nigeria, by Nelson C.S Ogbuanya N11 LFN 2004 32. UNCTAD Investment Policy Hub 15. Nigerian Communications Act Licensing (https://investmentpolicy.unctad.org/ Regulations 2013 international-investment-agreements) 16. Companies Income Tax Act Cap C21 1977 33. I-TIP Services database (https://i-tip.wto.org/services/default.aspx) 17. Export (Incentives and Miscellaneous Provision) Act Cap E19 34. Double Taxation Avoidance Agreements (http://taxsummaries.pwc.com/ID/Nigeria- 18. Revised Guidelines for the Registration Individual-Foreign-tax-relief-and-tax-treaties) and Monitoring of Technology Transfer Agreements in Nigeria 2019 INVESTMENT POLICY AND REGULATORY REVIEW – NIGERIA | 29 This Investment Policy and Regulatory Review presents information on the legal and regulatory frameworks governing foreign direct investment and competition that affect businesses and foreign investors. Since legal and regulatory frameworks are constantly evolving, a cut-off date was set for the research. This country review therefore covers information available as of May 31, 2019, unless otherwise indicated in the review. IPRRs are available for the following middle-income countries: Brazil, China, India, Indonesia, Malaysia, Mexico, Nigeria, Thailand, Turkey, and Vietnam.