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, the need to duplicate essential infrastructure, insecurity, corruption, the lack of effective judicial due process, and nontransparent economic decision-making in government procurement. Clearance of goods at ports can be slow, cumbersome, and highly bureaucratic. Companies indicate that corruption and congestion remain major issues at ports.
To access many opportunities, such as public bidding and participation in sectors with local content requirements, U.S. companies seeking to do business in Nigeria may need to incorporate companies or otherwise establish a presence as local law may require. U.S. firms should seek competent local partners and experienced commercial lawyers.
The continuing influx of Asian, especially Chinese, suppliers and manufacturers into Nigeria constitutes a major competitive challenge to U.S. business in many industry sectors. Some local business leaders voice concerns about the low quality of such products and their high rate of penetration. However, the market continues to be very price-sensitive, making cheaper Asian goods more competitive.
President Buhari’s stated priorities included rooting out corruption. A poll conducted by NOIPolls and LEAP Africa in 2015 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 includes weak government institutions and poverty. Well-connected businesspeople gain from anti-competitive practices that reduce market forces. The Nigerian government 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). However, cases progressing to conviction are rare.
Foreign Exchange Restrictions
Since 2015 the Central Bank of Nigeria (CBN) has imposed exchange controls on several product categories and continues to intervene in the market to keep the official naira rate from depreciating. Though steps have been taken toward harmonization of exchange rates, there continue to be multiple rates 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. Foreign exchange is tightly controlled by the CBN and must be requested by companies. Requests are regularly met with a fraction or none of the requested currency, which forces many companies to look for alternative and more expensive sources from the parallel market.
Both the oil and gas and the information and telecommunications sectors (ICT) have significant local content requirements imposed by the Nigerian government.
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 legislation apply to the physical materials used in construction, telecommunications, financial, and professional services by the oil and gas industry. The Nigerian National Assembly is currently reviewing the act and related enforcement.
In 2013, the National Information Technology Development Agency (NITDA) issued Guidelines for Nigerian Content Development in the ICT sector. The guidelines were met with resistance from foreign technology companies, who continue to advocate for its review. 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.
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 and a tender’s journal is sold at local newspaper outlets.
Although corruption is endemic in Nigeria, the government expresses 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 (NNPC). Although U.S. companies have won contracts in many sectors, difficulties in receiving payment are common and can discourage firms from bidding. Subsidized or concessionary financing arrangements appear in many 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 requires further development and resources. Laws exist to enforce some but not all IPR violations. In May 2021, Nigeria enacted the Plant Variety Protection Act, which was designed to incentivize the development of new plant varieties and contribute to sustainable progress in agriculture, horticulture, and forestry. In 2022, 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 fully implemented.
Violations of Nigerian IPR laws continue to be widespread due in large part to a culture of inadequate enforcement. That 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 dangerous. There is also a low level of public awareness of IPR laws among rights holders and those who violate those rights. Nigeria’s domestic creative industries are growing fast, including its Afrobeats music and the “Nollywood” film industry. The Nigerian economy has more to lose than ever from inadequate IPR protections, including online digital piracy.
The Nigerian government is contending with a deadly insurgency in the North-East, as well as oil theft and violent criminality in the South-East and South-South, all while trying to improve infrastructure for Nigerians. The extremist groups Boko Haram and ISIS-West Africa (ISIS-WA) have targeted churches, schools, mosques, government installations, educational institutions, and entertainment venues in several northern and central states. Hundreds of thousands of Nigerians have been displaced due to this violence.
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 but also been supplanted by ISIS-WA. This includes expanding attacks in Chad and Niger, both of which sent forces to Nigeria to fight Boko Haram. President Buhari has sought to address these issues head on and with assistance from the international community.
Kidnappings remain a security concern throughout the country. Criminal elements throughout Nigeria orchestrate kidnappings for ransom. 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 remain common, but the maritime security authorities have begun to make progress on reversing the trend. Armed gangs have boarded both commercial and private vessels to rob travelers.
People visiting or living in the commercial capital 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.