Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
While Nigeria offers U.S. firms export opportunities in many sectors, it can pose some daunting challenges including the high cost of doing business in Nigeria, the need to duplicate essential infrastructure, the threat of crime and associated need for security countermeasures, corruption, the lack of effective judicial due process, and nontransparent economic decision making, especially in government of Nigeria (GON) procurement. Clearance of goods at ports can be slow, cumbersome, and highly bureaucratic. Reports indicate that corruption and congestion remain major issues at ports. To mitigate these challenges, U.S. companies seeking to do business in Nigeria are encouraged to do so with incorporated companies or otherwise incorporate their subsidiaries locally. U.S. firms should seek competent local partners and experienced commercial lawyers.
One of President Buhari’s stated priorities has been to root out corruption. A recent poll conducted by NOIPolls and LEAP Africa revealed that 85% of adult Nigerians believe that the prevalence of corruption in the country is responsible for the difficulty of doing business in Nigeria. Reasons given for the prevalence of corruption in Nigeria included weak GON institutions and poverty. Well-connected businesspeople gain from anti-competitive practices that reduce market forces. GON has sought to address corruption through the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices and Other Related Offences Commission (ICPC), and the Extractive Industries Transparency Initiative (EITI).
Both the oil and gas and the information and telecommunications sectors have significant local content requirements imposed by the GON.
Under the Nigerian Oil and Gas Industry Content Development Act of 2010, preference must be given to Nigerian goods and services for all projects in the critical oil and gas sector. The local sourcing mandates imposed under the Act apply to physical materials used in construction, telecommunications, financial, and professional services used by the oil and gas industry. In 2013, the National Information Technology Development Agency (NITDA) issued Guidelines for Nigerian Content Development in the ICT sector. Major U.S. ICT companies operating in Nigeria pushed back strongly against several of the measures in those guidelines. American businesses recommended applying a coordinated approach to revising the local content requirements to encourage economic growth. In November 2015, the NITDA informed U.S. ICT companies that it would not require in-country ICT manufacturing but would continue to require capacity building targets.
Foreign Exchange Restrictions
Since 2015 the Central Bank of Nigeria (CBN) has imposed exchange controls on a number of product categories and continues to intervene in the market to keep the official naira rate from depreciating. Though steps have been taken toward harmonization on rates, there continue to be multiple exchange rates obtainable in the market. One of the most daunting challenges for businesses entering the market is the lack of access to foreign exchange, reducing the ability to import necessary inputs and equipment and to service external debt.
Nigeria is not a signatory to the WTO Agreement on Government Procurement. Foreign companies incorporated in Nigeria receive national treatment in government procurement. Government tenders are published in local newspapers, a “tenders” journal is sold at local newspaper outlets.
Although corruption is endemic in Nigeria, the GON expressed a desire to conduct open and competitive bidding processes for government procurement. Reforms have also improved transparency in procurement by the state-owned Nigerian National Petroleum Company (NPPC). Although U.S. companies have won contracts in many sectors, difficulties in receiving payment are not uncommon and can inhibit firms from bidding. Subsidized financing arrangements appear in some cases to be a crucial factor in the award of government procurements. Persistent transparency shortcomings create challenges for a fair bidding process and often lead to allegations of corruption.
Enforcement of intellectual property rights (IPR) remains a problem in Nigeria. Nigeria’s legal and institutional infrastructure for protecting intellectual property rights remains in need of further development and more funding. Laws exist to enforce most but not all IPR violations. In May 2021, Nigeria enacted the 2021 Plant Variety Protection Act, which was designed to incentivize the development of new plant varieties, contribute to sustainable progress in agriculture, horticulture, and forestry. In addition, this year the National Assembly is considering an updated Copyright Bill to address, among other things, online piracy. While these new and proposed laws evince some progress, it will take time and resources for these new laws to be implemented fully.
Violations of Nigerian IPR laws continue to be widespread, due in large part to a culture of inadequate enforcement. That culture stems from corruption and insufficient resources among enforcement agencies, lack of political will and focus on IPR, porous borders, and entrenched trafficking systems that make enforcement difficult and sometimes dangerous. There is also a low level of public awareness of IPR laws, including among rights holders themselves and those who violate those rights. Nigeria’s domestic creative industries are growing fast, including the “Nollywood” film industry. The Nigerian economy has more to lose than ever from inadequate IPR protections, including online digital piracy.
GON is contending with a deadly insurgency in the North-East and oil theft in the South, all while trying to improve infrastructure for Nigerians. The extremist groups, Boko Haram and ISIS-West Africa, have targeted churches, schools, mosques, government installations, educational institutions, and entertainment venues in Adamawa, Bauchi, Borno, Gombe, Kaduna, Kano, Plateau, Taraba, the Federal Capital Territory, and Yobe States. Thousands of Nigerians have been displaced because of violence in the North-East.
Following successes by Nigeria and its neighbors in regaining territory seized by Boko Haram in Nigeria’s North-East, the terrorist group has increased the use of asymmetrical attacks. This includes expanding attacks in Chad and Niger, both of which sent forces to Nigeria earlier in the year to fight Boko Haram. President Buhari has sought to address these issues head on and with assistance from the international community.
A secessionist movement by the Indigenous People of Biafra (IPOB) in the oil-producing southeast is another serious security challenge facing the GON. The security in the region deteriorated rapidly in 2021 when IPOB members increased attacks on police and military personnel. Mid-way through 2021, Nigerian security forces have gradually begun to regain control but the security situation in the southeast remains fragile.
Kidnappings remain a security concern throughout the country. Criminal elements throughout Nigeria orchestrate kidnappings for ransom; extremists, operating predominantly in the North, also have been known to conduct kidnappings. Criminals or militants have abducted foreign nationals, including U.S. citizens, from off-shore and land-based oil facilities, residential compounds, airports, and public roadways. Attacks by pirates off the coast of Nigeria in the Gulf of Guinea have increased substantially in recent years. Armed gangs have boarded both commercial and private vessels to rob travelers.
The U.S. Department of State currently rates Lagos as “critical” for crime, the highest designation possible. People visiting or living in Lagos commonly report armed muggings, assaults, burglaries, and extortion. Carjacking, roadblock robberies, and home invasions occur frequently with victims assaulted or killed. Law enforcement authorities generally respond to crimes slowly, if at all, and provide little investigative support to victims.