The Investment Climate Statement Chapter of the CCG is provided by the State Department.
The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
Nigeria’s economy – Africa’s largest – experienced a recession in 2020, largely due to the COVID-19 pandemic and depressed global oil prices. The economy exited recession in the fourth quarter, but gross domestic product contracted 1.9% in 2020. The IMF forecasted a return to low-to-moderate growth rates in 2021 and 2022, which appears to have proven correct. President Muhammadu Buhari’s administration has prioritized diversification of Nigeria’s economy beyond oil and gas, with the stated goals of building a competitive manufacturing sector, expanding agricultural output, and capitalizing on Nigeria’s technological and innovative advantages. With the largest population in Africa, Nigeria is an attractive consumer market for investors and traders, offering abundant natural resources and a low-cost labor pool.
The government has stated its intention to implement reforms to help improve the business environment, including by facilitating faster business start-up by allowing electronic stamping of registration documents and making it easier to obtain construction permits, register property, obtain credit, and pay taxes. Reforms undertaken since 2017 have helped improve Nigeria’s ranking on the World Bank’s annual Doing Business rankings to 131 out of 190. Foreign direct investment (FDI) inflows have nevertheless remained stagnant, with new FDI totaling $1 billion in 2020 as a number of persistent challenges remain.
Corruption is a serious obstacle to Nigeria’s economic growth and is often cited by domestic and foreign investors as a significant barrier to doing business. Nigeria ranked 149 out of 175 countries in Transparency International’s 2020 Corruption Perception Index. Businesses report that corruption by customs and port officials often leads to extended delays in port clearance processes and to other issues importing goods.
Nigeria’s trade regime is protectionist in key areas. High tariffs, restricted forex availability, and prohibitions on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth. The economic downturn in 2020 put pressure on Nigeria’s foreign reserves. Domestic and foreign businesses frequently cite lack of access to foreign currency as a significant impediment to doing business.
Nigeria’s underdeveloped power sector is a bottleneck to broad-based economic development and forces most businesses to generate a significant portion of their own electricity. The World Bank currently ranks Nigeria 169 out of 190 countries for ease of obtaining electricity for business. Reform of Nigeria’s power sector is ongoing, but investor confidence continues to be weakened by tariff and regulatory uncertainty.
Security remains a concern to investors in Nigeria due to violent crime, kidnappings for ransom, and terrorism in certain parts of the country. The ongoing Boko Haram and Islamic State in West Africa (ISIS-WA) insurgencies have included attacks against civilian and military targets in the northeast of the country. Nigeria has experienced a rise in kidnappings for ransom and attacks on villages by armed gangs in several parts of the country. Militant attacks on oil and gas infrastructure in the Niger Delta region has reduced oil output, but a restored amnesty program and more federal government engagement in the Delta region have stabilized the frequency and number of attacks on pipelines and allowed restoration of oil and gas production.
To access the ICS, visit the U.S. Department of State Investment Climate Statements website.