USTR - 1996 National Trade Estimate-Nigeria
Office of the United States Trade Representative

 

1996 National Trade Estimate-Nigeria

In 1995, the U.S. trade deficit with Nigeria was $4.2 billion, or $251 million greater than that in 1994. U.S. merchandise exports to Nigeria were approximately $602 million, up $93 million or 18.3 percent from 1994. Nigeria was the United States' sixtieth largest export market in 1995. The value of U.S. imports from Nigeria in 1995 was $4.8 billion in 1995, about eight percent more than in 1994.

The stock of U.S. foreign direct investment in Nigeria was $402 million in 1994, 26 percent less than it was in 1993. U.S. direct investment in Nigeria is concentrated largely in manufacturing.

IMPORT POLICIES

Nigeria abolished all import licensing requirements and cut its list of banned imports in 1986. However, as of November 1995, the importation of approximately 20 different items is banned, principally agricultural items and textiles. These bans were initially implemented to restore Nigeria's agricultural sector and to conserve foreign exchange, but the bans appear to be compromised by widespread smuggling. .

Nigeria requires that an international inspection service certify the price, quantity and quality before shipment for all private sector imports. All containerized shipments irrespective of value and all goods exported to Nigeria with a cost, insurance, and freight (CIF) value greater than $1,000 are subject to pre– shipment inspection. Any shipment arriving without an import duty report (IDR) will be impounded. Use of letters of credit has been made compulsory for importation of goods valued at more than $1000.

Tariffs and Import Taxes

In 1995, Nigeria announced a new tariff structure which will be operated for the next six years. The revision is aimed at narrowing the ranges of many custom duties, increasing rate coverage in line with WTO provisions, with fewer import prohibitions. The following commodities have been removed from the list of banned commodities and are now subject to duty rates: rice, 100 percent duty; day-old chicks and parent stock, 5 percent; sparkling wines, wine coolers and champagne, 100 percent plus 40 percent excise; fruits and fruit juices, 75 percent; and jute bags, 45 percent.

In addition to rice, exports of the following U.S. products have also been hampered by tariffs: cigarettes, 90 percent plus 40 percent excise; ready-to-eat cereals, 40 percent; cotton, 25 percent; wheat, previously banned and now taxed at 10 percent; and passenger vehicles, from 30 to 100 percent. Meanwhile, a 35 percent across-the-board reduction in import tariffs became effective on July 31, 1995, and is supposed to be implemented by Nigerian Customs, thus temporarily reducing the above-listed duty rates. In reality, customs officials still require payment of the full tariff amount in many cases. Customs duty calculations are now made on the basis of 82 Naira to the dollar, rather than the official rate of 22 Naira to the dollar as used in 1994.

In October 1995, the Nigerian Ports Authority announced reductions in port charges of 60 percent in Lagos and 70 percent at the Delta ports. However, port officials issue debit notes to increase port charges regardless of the IDR's presented. Port clearance procedures are severely hampered by the presence of over 60 government agencies at the ports. Other import restrictions apply to aircraft and ocean-going vessels. Guidelines mandate that all imported aircraft and ocean-going vessels be inspected by a government authorized inspection agent. In addition, performance bonds and off-shore guarantees must be arranged before either down payments or subsequent payments are authorized by the Ministry of Finance.

GOVERNMENT PROCUREMENT

Nigeria generally uses an open tender system for awarding government contracts, and foreign companies incorporated in Nigeria receive national treatment. Approximately five percent of all government procurement contracts are awarded to U.S. companies. As of January 1995, Nigeria became a member of the WTO. Competing for government contracts is made more difficult for foreign firms by the patronage system commonly used and the need to provide "incentive" payments to government officials.

EXPORT SUBSIDIES

In 1976, the Government established the Nigerian Export Promotion Council (NEPC) to encourage development of non–oil exports from Nigeria. The Council administers various incentive programs including a duty drawback program, the Export Development Fund, tax relief and capital assets depreciation allowances, and a foreign currency retention program. The duty drawback or manufacturing in–bond program is designed to allow the duty free importation of raw materials to produce goods for export, contingent on the issuance of a bank guaranteed bond. The performance bond is discharged upon evidence of exportation and repatriation of foreign exchange. Though meant to promote industry and exportation, these schemes have been burdened by inefficient administration, confusion, and corruption, causing great difficulty and in some cases losses to those manufacturers and exporters who opted to use them.

The NEPC also administers the Export Expansion Program, a fund which provides grants to exporters of manufactured and semi– manufactured products. Grants are awarded on the basis of the value of goods exported, and the only requirement for participation is that the export proceeds be repatriated to Nigeria. Though the grant amounts are small, ranging from two to five percent of total export value, they appear to be export subsidies as designated by the WTO and may be in violation of WTO rules.

LACK OF INTELLECTUAL PROPERTY PROTECTION

Nigeria is a signatory to the Universal Copyright Convention (UCC), the Berne Convention, and the Paris Convention (Lisbon text) as well as a member of the World Intellectual Property Organization (WIPO), and is thereby a party to most of the major international agreements on intellectual property rights. Cases involving infringement of non-Nigerian copyrights have been successfully prosecuted in Nigeria, but enforcement of existing laws remains weak, particularly in the patent and trademark areas.

Despite active participation in international conventions and the apparent interest of the government in intellectual property rights issues, little has been done to stop the widespread production and sale of pirated tapes, videos, computer software and books in Nigeria.

The Patents and Design Decree of 1970 governs the registration of patents, and the Nigerian Standard Organization is responsible for issuing patents, trademarks and copyrights. Once conferred, a patent gives the patentee the exclusive right to make, import, sell, or use the products or apply the process. The Trade Marks Act of 1965 governs the registration of trademarks. Registering a trademark gives its holder the exclusive right to use the registered mark for a particular good or class of goods.

Nigeria's TV market, once reserved for official channels, was recently deregulated, resulting in the formation of five private TV stations, 24 satellite redistribution companies, and a number of pirate TV and cable stations.

Nigeria's anti-piracy legislation is inadequate. Recent statutes include the Copyright Act of 1988 (amended in 1992), the National Film and Video Censors Board Act of 1993, which reinforces the enforcement measures of the Copyright Act; and the Nigerian Film Policy Law of 1993, which encourages development of the Nigerian film industry. The government's recent legislative activity seems designed to attract foreign investment and to protect the local industry, which produces over 100 films annually. These laws provide for police raids, civil and criminal enforcement actions, modest fines, and up to two years' imprisonment for recidivists. Nigeria is a signatory to the Berne and UCC Conventions and foreign works are protected.

Current problems in Nigeria stem largely from the government's 1981 nationalization of the film industry (including distribution), although this policy has been officially abandoned. MPA member companies have not been paid the contractual compensation promised by the Nigerian government and they have been unable to repatriate assets held locally at the time of nationalization. Further, the government places restrictions upon the remittance of royalties, including earnings of foreign films. As a result of these adverse trading conditions, in recent years there has been no trade possible between MPA member companies and Nigeria. Estimated accumulated losses to MPA member companies total $25 million.

Local Nigerian companies, including film-makers, have reportedly formed the Proteus Entertainment Agency to protect the music, video and other copyright industries. There are reports of recent efforts to enforce Nigeria's copyrights laws.

The Copyright Decree of 1988, based on WIPO standards and U.S. copyright law, currently makes counterfeiting, exporting, importing, reproducing, exhibiting, performing, or selling any work without the permission of the copyright owner a criminal offense. Progress, however, in enforcing the 1988 law has been slow.

The expense and length of time necessary to pursue a copyright infringement case to its conclusion are detriments to the prosecution of such cases.

In the past, few companies have bothered to secure trademark or patent protections in Nigeria because it is generally considered ineffective. As a result, Nigeria is Africa's largest market for pirated recordings from third countries. Losses from poor intellectual property rights protection are substantial, although the exact cost is difficult to estimate. The majority of the sound recordings sold in Nigeria are pirated copies and the entire video industry is based on the sale and rental of pirated tapes. Satellite signal piracy is also common. Violation of patents on pharmaceuticals is also becoming a major problem.

INVESTMENT BARRIERS

Nigeria, Africa's most populous nation, with 100 million people, offers potential investors a relatively low–cost labor pool, abundant natural resources, and the largest domestic market in Sub–Sahara Africa. However, these advantages must be weighed against Nigeria's inadequate and poorly maintained infrastructure, increasing labor problems, complicated and inconsistent regulatory environment, and the importance of personal ties in doing business. This means that considerably more time, money, and managerial effort than may be customary in other developing countries must be expended in Nigeria to begin operating and earning profits.

In 1995, Nigeria reversed its highly controlled foreign exchange regime instituted in 1994. Under the foreign exchange decree of 1995, the autonomous foreign exchange market was reestablished, allowing private companies to source foreign exchange at the parallel market rate of 85 Naira to the dollar in January 1996. The official exchange rate of 22 Naira to the dollar has been retained for official government transactions. Companies can once again hold domiciliary accounts in private banks, with account holders having "unfettered" use of the funds. Foreign investors may bring capital into the country without prior Finance Ministry approval, may service foreign loans, and remit dividends. Exchange bureaus are functioning, albeit with a limitation of $2500 per transaction.

In 1995, Nigeria promulgated the Nigerian Investment Promotion Commission (NIPC) Decree to replace the Enterprises Promotion Act. This decree liberalizes the foreign investment regime, allowing 100 percent foreign ownership of firms outside the petroleum sector (which is still limited to the existing joint-venture agreement of production-sharing contracts with the Nigerian government). A foreign enterprise may now buy shares of any Nigerian firm except those on the "negative list"; production of firearms, ammunition, narcotics, military and parliamentary uniforms and accouterments. The investment promotion decree provides for the creation of an investment promotion commission which will register companies for foreigners after incorporation under the Companies and Allied Matters Decree of 1990. The decree also abolished the expatriate quota system (except in the oil sector) and prohibits the nationalization or appropriation of a foreign enterprise by the Nigerian government except for such cases determined to be in the national interest. Nigeria has also promulgated a money laundering decree to introduce procedures designed to inhibit this practice, as well as a Decree on advance-fee fraud known as 410 schemes after the so-numbered Nigerian law, to track methods of fraud. The scope of 410 business fraud has brought international notoriety to Nigeria and constitutes a serious disincentive to investors since any international transaction must be thoroughly vetted and confirmed.

As stated in the December 1989 circular, "Industrial Policy of Nigeria," the Nigerian government maintains a system of incentives to foster the development of particular industries, to encourage firms to locate in economically disadvantaged areas, to promote research and development in Nigeria, and to favor the use of domestic labor and raw materials. The Industrial Development (income tax relief) Act of 1971 provides incentives to "pioneer" industries, that is, industries deemed beneficial to Nigeria's economic development. Companies given "pioneer" status may enjoy a non-renewable tax holiday of five years, or seven years if the pioneer industry is located in an economically disadvantaged area.

In an effort to attract foreign investment, the Nigerian Government is developing an export processing zone near the city of Calabar in Eastern Nigeria. When completed, it will allow investors duty–free importation of raw materials and semi–finished products for manufacture and export. As in other parts of the country, however, infrastructure and government bureaucracy have seriously hampered the zone's development. The government now hopes to complete the zone in 1996.

Parastatals

In August 1994, The Nigerian Government dissolved the boards of all federal parastatals, companies, and agencies. In 1995, many were under investigation by special anti–fraud panels and reports of widespread corruption continue to surface. Although in its 1995 budget, Nigeria announced that it planned to make available 10 year leases to foreign and domestic companies for certain parastatals, little or no progress has been made in that area.

Public announcements of Nigeria's intent to commercialize its telecommunications, electric power authority, airports authority, postal company, railway corporation, and the coal corporation, have not yielded results. Conflicting guidelines on licensing and monitoring make entry into any of these areas extremely difficult. The results of past attempts at commercialization have been unsatisfactory. For example, since commercializing its ports authority, it is reported that fees are exorbitant, service very poor, and excessive delays common.

 
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