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OVERVIEW OF THE NIGERIAN BUSINESS AND INVESTMENT CLIMATE, OPPORTUNITIES AND INCENTIVES A PAPER PRESENTED AT THE NIGERIA – THAILAND BUSINESS FORUM, BANGKOK, THAILAND BY ENGR. MUSTAFA BELLO, FNSE EXECUTIVE SECRETARY/CEO, NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC) 20TH MARCH, 2012 1 3. 4. 5. 6. 7. 8. The Nigerian Investment Climate: -Efforts of Government -NIPC’s Strategic Role Investment Opportunities Incentives Steps for Doing Business in Nigeria NIPC At A Glance 2 3 NIGERIA: PROFILE OFFICIAL NAME LOCATION - Federal Republic of Nigeria - West Africa, Africa GOVERNMENT - Democratic since 1999 LAND AREA - 923,768sqkm POPULATION - 167.0million (2011 Est.) OFFICIAL LANGUAGE - English CAPITAL CITY - Abuja CURRENCY – Naira (N) INTERN. TIME ZONE - GMT+ 1 4 NIGERIA’S ECONOMY 6th largest population in the world – over 167 million people 4th largest population under the age of 20 10th world largest reserves of oil and gas 36.2 billion barrels of oil 1.84 trillion Cubic Feet of natural gas 4th largest equity market in the MSCI Frontier Market index Largest outside of the Gulf Cooperation Council (GCC) 5th fastest growing economy in 2010 -2011 after China, Taiwan, Singapore & Qatar (Citi Investment Research & Analysis Economists) 1st among the N-11 leading ‘global growth generators’ (3G) over the next 40 years Home to a stable of large, well capitalised banks and emerging world’s largest cement companies 5 NIGERIA’S ECONOMY…CONT’D The Nigerian economy recorded an overall growth of 7.40 percent in 2011. Growth in 2011 mainly driven by the following: - Increased Crude Oil Output - Wholesale & Retail Trade - Crop Production - Banking sector reforms - Telecommunications - Real Estate & Business Services. The GDP is expected to improve in 2012 as government invests heavily on infrastructural development. In 2010, Citi Investment Research and Analysis (CIRA) rated Nigeria’s economy as one of the world’s topmost ‘global growth generator’ (3G) of the next 40 years. Sources: National Bureau of Statistics (NBS) & CIRA 6 THE NIGERIAN INVESTMENT CLIMATE: EFFORTS OF GOVERNMENT IN IMPROVING THE INVESTMENT CLIMATE THROUGH. . . Macroeconomic stability: Fiscal responsibility and Independent Central Bank. Oil & Gas Sector Reforms: -On-going deregulation (Petroleum Industry Bill) -Restoration of normalcy to Niger Delta region -Passage of the Local Content Act Power Sector Reforms: -launching of the Power Sector Road Map, & on-going privatization. Sanctity of contracts: -Due Process (Bureau of Public Procurement) -Nigerian Extractive Industries Transparency Initiative (NEITI) Institutional Reforms: -Public Service Reforms -Constitutional amendment -Electoral Reforms -Rule of Law & Good Governance -Freedom of Information Act The Anti-Corruption Act: -Establishment of Independent Corrupt Practices Commission (ICPC) Fight against Financial and Economic Crimes: -Establishment of Economic and Financial Crimes Commission (EFCC) to deal with Advance Fee Fraud, and related issues. -Setting up of Security and Investment Tribunal, to handle securities and exchange cases. 7 THE NIGERIAN INVESTMENT CLIMATE . . . CONT’D EFFORTS OF GOVERNMENT . . . Cont’d Infrastructure Development: -Establishment of Infrastructure Concession & Regulatory Commission (ICRC -Massive work currently going on new and existing projects in Aviation, Rail, Road and Waterways Revolution in Telecommunication, Education, etc. Banking Sector Reforms: -Recapitalization of Commercial Banks & Insurance Institutions -Micro-finance policy trust / conversion of Community Banks Transformation Agenda (Good governance, Infrastructure, Human Capital): -Vision 20:2020: Nigeria to be among 20 largest economies by 2020 8 TRANSFORMATION AGENDA: FOCUS AREAS GOOD GOVERNANCE Security of lives and property, Law and order, Anti-Corruption, Public Service Reforms, Enabling Environment INFRASTRUCTURE Power/Energy; Roads, Rails, Water for irrigation and for industries and ICT revolution HUMAN CAPITAL DEVELOPMENT Education, Healthcare Delivery, Skills Acquisition, Capacity building, Achieving the MDGS OUTCOMES •JOBS, JOBS, JOBS •POVERTY ALLEVIATION •BETTER RESOURCE MANAGEMENT •ELIMINATION OF CORRUPTION •SUSTAINED ECONOMIC DEVELOPMENT 9 THE NIGERIAN INVESTMENT CLIMATE. . . CONT’D NIPC’S STRATEGIC ROLE: Analyze current policies, resources, etc: Systematic feedback from investors: Close working relationship and regular interaction with the Organized Private Sector (MAN, NACCIMA, NASME) during Business Forums, NCI, etc Interactive sessions with targeted business communities and Foreign Embassies in Nigeria Secretariat for Honourary International Investor Council (HIIC) External reports: (e.g. UN World Investment Report, FIAS, UNIDO, UNCTAD) Analyze Compiled Reports, to elicit information on the trends of global investment and trade . Benchmarking with competitors: Compile and analyze policies/laws/regulations: Identify policy thrust, clauses/sections, & areas of competencies to be adopted into our national environment. Identify countries that are doing better than Nigeria, study their successes and adopt their strategies. 10 THE NIGERIAN INVESTMENT CLIMATE. . . CONT’D NIPC’S STRATEGIC ROLE: Proffer solutions to the concerns of investors: -The Development of the Sector Specific Incentives Policy: (Incentives Policies that are sector-specific, aimed at eliminating, as much as possible, the need for special privileges and concessions, unless where it becomes extremely necessary). -The After-Care Committee, and Committee on Doing Business & Competitiveness Work with decision makers/opinion leaders: -Interface and collaborate with government agencies at all levels -National Conference on Investment (NCI) Provide effective remedies: -The One Stop Investment Centre (OSIC) -Establishment of Zonal Offices to promote Local Investment and provide Aftercare Services 11 INVESTMENT OPPORTUNITIES Investment Opportunities exist in all sectors of the economy, especially: Power/Energy Oil & Gas (extractive and non-extractive) Agriculture & Agro Allied Waste Management Maritime, Shipping and Ports Solid Minerals Banking & Financial services Tourism / Hospitality Industry Pharmaceuticals and Health services Information & Communication Technology (ICT) Industrial Parks and Clusters as landing platform 12 INCENTIVES NATURAL INCENTIVES: Virile population of over 167 million people. Abundant natural resource endowments Vast arable land – over 70% of Nigerian land area is suitable for agriculture and remains under utilized Trainable, resourceful and cost effective workforce with 60% as youths Strategic location – hub of the West and Central African Markets Relative absence of natural disasters / calamities; i.e. no earthquakes, hurricanes or major floods etc. Highest Return on Investment (RoI) in Africa: -35% - 45% generally, & 70 – 100% in some sectors. 13 INCENTIVES . . . CONT’D STATUTORY INCENTIVES: Pioneer Status – 3- 5 years Tax Holiday Capital Allowances: Research & Development – use of local inputs – 140% Investment in infrastructure 20% of costs Minimum local raw materials utilization – 20% for 5 years Withholding tax on dividends, interest and rent is 10%, Royalties is 15%, while Management & Technical agreement is 10% Very low Value Added Tax (VAT) regime of 5% EXPORT INCENTIVES: Manufacturer Export-in-Bond Scheme Export Development Fund Scheme FREE TRADE ZONES SCHEME No personal income tax 100% repatriation of capital and profit No foreign exchange regulation 100% foreign ownership allowed No pre-shipment inspection of goods No expatriate quota required 14 STEPS FOR DOING BUSINESS IN NIGERIA For establishing a new business in Nigeria the following processes are required: i. Incorporation with Corporate Affairs Commission CAC. ii. Registration with Nigerian Investment Promotion Commission ( NIPC). iii. Acquisition of operating license: For Investment in Banking and Finance, a License with the Central Bank of Nigeria is required. For Investment in Power generation and distribution, a License with Nigerian Energy Regulatory Commission (NERC) is required. 15 STEPS FOR DOING BUSINESS IN NIGERIA . . . CONT’D iii. Acquisition of operating license. . . Cont’d For investment in the Telecommunication, a License with Nigerian Communication Commission (NCC) is required. the For investment in Food and Pharmaceuticals, Registration with National Food and Drug Administration and Control (NAFDAC) is required. For investment in Solid Minerals, a mining License with the Ministry of Mining & Steel Development is required. iv. Acquisition of Operating Premises: YOU ARE IN BUSINESS IN NIGERIA ! 16 NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC) AT A GLANCE Nigerian Investment Promotion Commission (NIPC) is a Federal Government Agency, established by Act of Parliament No. 16 of 1995: to among others, encourage, promote and coordinate investments in the Nigerian economy, and develop investment friendly policies that are globally competitive and ensure the free flow of foreign direct investment (FDI) into all sectors of the economy. 17 NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC). . . CONT’D ONE STOP INVESTMENT CENTRE (OSIC): NIPC coordinates the operations of the One Stop Investment Centre (OSIC) which essentially provides pre-investment services. It also helps to reduce the high cost and delays in doing business by eliminating as much as possible the use of discretion and lack of transparency in granting approvals, licenses, permits, etc. 18 CONCLUSION Thailand and Nigeria have come a long way in trading and we should work together to strengthen the burgeoning economic relationship between both countries. Given the Investment friendly disposition of Nigeria, there is no better time than now for Thai investors to invest in Africa’s most profitable economy. The Nigerian private sector is very vibrant and willing to do good business ever before , with Thai investors. The time has come for a decision to invest in Nigeria. 19 For more information, contact: The Executive Secretary/CEO, Nigerian Investment Promotion Commission Plot 1181 Aguiyi Ironsi Street Maitama, Abuja. Email: [email protected] Telephone Lines: +234 (0)8097701601 +234 (0)92904722 [email protected] [email protected] Or Visit NIPC Website: www.nipc.gov.ng 20