A PAPER PRESENTED BY THE CONSUL-GENERAL OF NIGERIA, ATLANTA,
AMB. GEOFFREY I TENEILABE,
DURING AN INTERACTIVE MEETING OF BUSINESS PEOPLE,
APRIL 5, 2012.
Nigeria, with a population of over 164 million people is the 2nd largest economy in Africa, with a GDP of over $350 billion (US dollar). The country has growing middle and upper classes with sophisticated taste. The economy is among the ten fastest growing in the world with GDP growth rate of over 7.5% for the last five years. Inflation rate is single digit at 9.5%, while the foreign reserve is over $37.5 billion.
2. Nigeria operates the open market economic system within the context of the Vision 2020 Programme and a Transformation Agenda by the Federal Government. The Vision 2020 programme is a futurist plan to transform Nigeria from its current position as the 41th biggest economy in the world to 20th biggest by the year 2020. The expectation is that by 2020, GDP would be $900 bn and income per capita $4000.
3. The Government emphasises good governance, accountability, rule of law and respect for human rights as a deliberate policy. Nigeria practices Economic Diplomacy as its foreign policy objective to achieve its transformational agenda and the Vision 2020.
4. Nigeria also pursues a liberal investment policy to create a conducive climate for foreign investment to strive. Of special note in this regard are target areas such as Agriculture and Agro-Allied industries, power/energy, solid minerals, tourism and hospitality, oil and gas, real estate, manufacturing, infrastructure concession, bond instruments, urban waste, health care, telecommunication, etc.
5. The Government attaches great importance to revamping agricultural production in the country, in order to ensure food security, creation of employment, development of the rural areas and the diversification of the economy. In the 1960’s, Nigeria was a leading producer of several valuable crops, to wit, cotton, palm oil, cocoa, groundnut, rubber, among others, with sizeable world market share but with the emergence of crude oil, the situation has dramatically changed to the extent that today, Nigeria spends about 1.3 trillion naira ($84 billion) in the importation of wheat, rice, fish, and sugar alone.
6. The irony of this is that the country is endowed with fertile land such that out of its total ariable land of 82 million hectares, only 42% or 34 million hectares have been cultivated. In order words, vast opportunity exists in the agricultural sector, besides the strong determination of government to make agriculture a business instead of a subsistence enterprise.
7. To this end, notable focus of the government is on the production of rice and milling, cotton, cassava (of which Nigeria is the highest producer but adds little value to) cocoa, groundnut, palm oil and allied products, sorghum, among others. Government has made elaborate sector-specific programmes in order to revamp production of individual crops for local consumption and export.
8. Incentives in the agricultural sector includes, liberal allocation of land to investors through partnership or under long-term lease by various State Governments, revamping the irrigation system – (42 dams and over 12 River Basin authorities of various water bodies in the country), creating a local market for products such as cassava, rice and other products in order to encourage production, and transferring the responsibility of fertilizer availability to the private sector from the government sector.
9. Others are the distribution of hybrid seedlings, facilitation of export market for agricultural products, co-operate tax rebate, zero percent on imported agric equipment for targeted products, prohibition of the importation of some related products, i.e., cassava flour by March 31st 2012, the political will to drive agricultural production at the highest level of government with the President heading the Agricultural Transformation Council and a more liberal fiscal regime with the availability of 450 billion naira ($2.9 billion) for the agricultural sector.
Power And Energy.
10. The provision of electricity is one of the pivotal agenda of government. The importance of power cannot be over emphasized because it is central to the growth of the national economy and Nigeria’s advancement towards industrialization. On this note, the State and Federal Government had invested heavily in the National Independent Power Plants (NIPP). Government has also made huge investments in the Niger Delta Independent Power Plants and encouraged the establishment of private independent power plants for the generation of electricity.
11. Some States such as Akwa Ibom, Baleysa, Lagos, Rivers, amongst others, have also embarked on the generation of electricity. The aim of these efforts is to increase the electricity generating capacity from its current level of below 4,000 megawatts, (but with an installed capacity of 8,000 megawatts) to 40,000 by 2020. To achieve this end, Government is unbundling the power holding company of Nigeria to 18 different companies to be run as private companies. It also plans to privatize or concession some of the power plants such as Chiroro, Jebba and Kaiji.
12. To attract investment, it is similarly reviewing the electricity tariff regime with a view to making the sector attractive for profit and has embarked on legislation to make possible for companies, in partnership with government, to undertake the transmission and distribution of electricity. It has also worked on placing a new national transmission grid under the Power Road Map launched in 2010.
13. Nigeria is known to have no less than 42 different solid minerals of various commercial quantities including Gemstones, Gold, Uranium, Columbite, Coal, Byrites and Bitumen (oil sands), among others, that could be found in many States of the Federation. Encouraging the exploration of these minerals, the government has put in place the Solid Mineral Policy to guide investors.
Oil And Gas
14. For decades, Oil and Gas have remained crucial to the Nigeria national economy, as revenue earner and major export products. Nigeria has an estimated 36.5 billion barrels of oil on reserve and 186 trillion cubic feet of gas. The country has more gas than oil but the problem is that 24% or 1.5 billion cubic feet per day of gas produced is flared, resulting in colossal loss of revenue of about $2.5 bn per year and environmental pollution.
15. However, the government has been making efforts to reverse this unhealthy situation by putting in place the Gas Master Plan for more utilization of gas for power generation, urea fertilizer production, gas for more domestic and industrial usage and uses in the petrochemical industry, etc.
16. There are therefore huge opportunities for investors regarding the establishment of gas infrastructure, liquefaction of gas for export and other usages as enumerated above in partnership with the government as well as the oil and gas producing companies. Also under this, there is a possibility of investors establishing appropriate companies in order to take advantage of the Local Content Act to produce equipment and materials for the oil and gas industry with the establishment of their companies as wholly indigenous Nigerian companies.
17. Similarly, companies can go into the downstream or upstream sectors of the industry to prospect for crude oil after due approval or establish their own refineries to refine crude oil, since of the 750,000 barrels per day of the estimated local consumption of refined products by Nigerians, only a fraction is met, while the greater percentage is imported.
18. Nigeria is undoubtedly deficient in infrastructure required for the socio-economic development of the country. Thus the government has given priority to its development in order to close the infrastructure gap in pursuit of the Transformational Agenda as well as to facilitate the rapid development of the country, with a view to making Nigeria one of the 20 biggest economies by the year 2020.
19. In this regard, investors are encouraged to invest in such areas as roads, railway, communication, airport development, etc, through various forms of arrangements in liaison with the Infrastructure Concession Commission of the Federal Government.
20. Some State governments are also interested in the development of infrastructure through Private/Public Sector partnership arrangements. It is equally interesting that recently, a legislation was put in place to remove the government monopoly of the ownership of railways in order to provide an enabling law for private sector participation in the sector.
21. With a 10 million housing deficit in Nigeria, the real estate market is one of the most robust for private sector participation – an area government is keen on the provision of infrastructure and regulatory framework for the maintenance of standards and safety as well as social housing. The return on investment in this sector is quite encouraging especially where high standard is maintained and facilities are provided. This is not surprising because of the high taste of the Nigerian elite, the rising middle class and the demand for good quality products.
22. It therefore serves the interest of investors who may wish to go into the area to do so in urban areas such as Abuja, Lagos, Port Harcourt, Warri, in terms of the provision of high-end and low cost accommodation for lease as well as for office use.
23. Manufacturing is synonymous with industrialization but in recent times, because of inadequate electricity supply and dumping of imported products there is an apparent de-industralization in Nigeria. However, with the Transformation Agenda of government, several areas of manufacturing have come under focus for revival including the textile industry, leather, rubber processing, tyre manufacturing, beverage and food processing, motorbike manufacturing, pharmaceutical and car assembly.
24. Other areas with great potential for growth and development are building materials, Agro allied industries, milling, vegetable oil production, petrochemical and processing of solid mineral. Ship and boat building, cement production, fertilizer production, wood processing and furniture making etc, are also viable investment options.
25. A $100 million Intervention Fund has already been earmarked for the leather industry, while another handsome sum of money has similarly been set aside for the revival of the textile industry. Investors can take advantage of the conducive investment climate, the huge local and Ecowas market to which Nigeria has access, available raw materials, the rising Middle class income, etc, and go into manufacturing in specific areas of their choices.
Economic Free Zones:
26. Economic Free Zones are areas clearly demarcated within the territorial boundaries of sovereign states for economic activities under specific rules and regulations. In Nigeria, four kinds of export processing zones exist, namely; Special Trade Zone, Free Trade Zone, Export Processing Zone and Special Economic Zone. Currently, 24 of such zones exist, among them, the Calabar Free Trade Zone, the Kano Free Trade Zone, Olokola Free Trade Zone, Lekki Free Zone, Abuja Technical Free Zone, Snake Island Integrated Free Zone, the Oills Logistic Free Zone.
27. Six others border Trade Free Zones are also being proposed. Investors, as private sector operators, could also take advantage of the numerous available advantages stated here below, besides government participation.
Incentives available at the export processing zones are:
i) Complete tax holiday from all Federal, State and Local
government taxes, rates, customs duties and levies;
ii) One-stop approvals for all permits, operating licenses and
iii) duty-free introduction of capital goods, consumer goods, machinery, equipment and furniture; and;
iv) Permission to sell 100% of manufactured, assembled or imported goods into the domestic Nigerian market;
v) 100% foreign ownership of investments;
vi) 100% repatriation of capital, profits and dividends;
vii) Waiver of all import and export licenses;
viii) Waiver on all expatriate quotas for companies operation in the zones;
ix) Prohibition of strikes and lockouts; and
x) Rent free land at construction stage within the zone.
28. Nigerian tourism sector remains prestine and largely unexplored. Nigeria is rich in culture and arts with principalities and ancient nation states spread across the over 250 ethnic groups.
29. Besides the sun, sands and beaches along the Atlantic coast in places such as Badagry, Lekki, Calabar, Port Harcourt, there are also other areas of tourism attractions, namely, the Yankari Game Reserve Obudu cattle ranch, National war museum, ancient Kano dying pits, the River Niger-Benue confluence, the Teracota of Kaduna state, Arugugu fishing festival, Olumo rock, ancient art work of Benin and Ife, etc. There is inadequate tourism infrastructure in the country including hotels, rest houses and resorts.
30. Other areas for attention are infrastructure for the development of specific tourism sites, establishment of tour agencies as tour operators, infrastrucure for safari games reserve and gorilla viewing.
31. In April 2006, Nigeria became the first African country to pay off its $30 billion dollar debt. Nigeria is regarded today as under-borrowed country and now occasionally borrows from the international financial market through the issuance of Bonds at attractive interest rates of between 15.05% to 16.16%. The Bonds are normally over-subscribed but investors could still be interested to check out the Bond options particularly at the London and New York financial Markets.
32. There is also the Diaspora Bond of $2.5bn with its Road Show expected to take place in New York on April 17- 18, 2012.
Generally, besides sectors-specific incentives, general investment incentives include the following:
i) Grant of Pioneer Status (tax holidays for 7 year period);
ii) Tax Relief for R & D (expenses on R & D are
iii) Capital allowances (up to 75% in a year);
iv) In-plant Training (2% tax concession for a period of 5 years);
v) Investment in Infrastructure (20% of expenses is tax deductible);
vi) Investment in Economically Disadvantaged Areas (100% tax holiday for 7 years and 5% capital depreciation allowance);
vii) Labour Intensive Mode of Production (Graduated tax concessions are applicable;
viii) Local Value Added (10% tax concession for 5 years);
ix) Minimum Local Raw Materials Utilization (Tax credit of 20% is granted for 5 years);
x) Export Expansion Grant (EEG);
xi) Manufacturer Exporter – in – Bond Scheme;
xii) One-stop Investment centre.
33. The challenges facing the Nigerian business sector include the following:-
- Inadequate Power;
- Weak access to production inputs especially finance;
iii Expectation of unearned rewards;
iv Multiplicity of Taxes and levies plus red tape;
- Low access to information;
- Low capacity to invest in R&D, ICT & E-commerce;
- Restricted access to credit;
- Infrastructural deficiency and week logistics to support supply chain;
vii. Inadequate export-oriented manufactures and low productive capacity;
- Poor standardization of product (quality, labeling, packaging)
- High production costs;
- Lack of export culture;
34. Beside the above, perhaps the greatest challenge being faced by Nigeria today is the Boko Haram menace. It should however be noted that Boko Haram operation is limited to only a small part of Nigeria not more than six of out of the 36 states and the Federal Capital Territory.
35. However, the act of terrorism is now universal and not limited to Nigeria. Many countries such as the United States, United Kingdom, India, Pakistan, Kenya, Tanzania, Egypt, Russia, just to mention but a few either have the same problem or had at one time experienced same.
36. The 9/11 and other terrorism incidents in the United States do not prevent investments here, neither did the active days of the Irish Republican Army (IRA) in the United Kingdom prevent investment in that part of the world at the time. In the height of militancy in Nigeria’s Niger Delta, oil companies were still making brisk businesses with good profit margin.
37. The Boko Haram issue is a passing phase in the history of Nigeria as a developing country and will be overcome. The security agencies are on top of the situation and government is leaving no stone unturned to ensure the security of lives and property in the country.
38. The United States and other friendly countries and development partners are also in collaboration with the Nigerian government to finding a solution to the Boko Haram menace. The optimism is that it will soon be an issue of the past – an optimism shared by the United States Under Secretary of State for Political Affairs, Wendy Sherman in a Press Interview granted on his recent visit to Nigeria.
Consulate-General of the
Federal Republic of Nigeria
8060 Roswell Road
Atlanta, GA 30350