LEGAL SYSTEM

The NIPC Act

Nigeria has a well-developed legal system that is partially inherited from its colonial past, with English law forming the basis. This is combined with traditional customary laws in some cases, and Islamic or Sharia law in the realm of marriage and secession.

However, the primary legislation governing investments in Nigeria is the NIPC Act No. 16 of 1995. With other supportive laws and policies, NIPC Act jointly ensures a sustainable conducive business environment in Nigeria.

 

Highlights of the NIPC Act

  • Creates the legal foundation for a very liberal and open investment framework. It is a cross-sectoral legislation that aims to encourage inflow of foreign investments in all sectors of the economy.
  • Permits foreigners to invest and participate in the operation of any Nigerian enterprise without any restriction
  • Permits 100 percent foreign ownership of firms. However, in the oil and gas sector, investment stays limited to joint ventures or production-sharing agreements.
  • Allows repatriation of profits/dividends to home country in any convertible currency

Other Legislations

Foreign Exchange Monitoring and Miscellaneous Provision Act

  • Complementary to the NIPC Act as it eased restrictions in foreign exchange dealings and creates an autonomous Foreign Exchange Market
  • Repealed the Exchange Control Act No. 16 of 1962 that imposed significant restrictions on exchange transactions
  • Enables funds transfer without prior approval
  • Opened up the Nigerian capital market to foreign portfolio investment. Any foreign exchange purchased from the Market may be repatriated from Nigeria without hindrance
  • Foreigners are thus allowed to invest in, acquire, dispose of, create or transfer any interest in securities and other money market instrument in foreign or local currency

 

Companies and Allied Matters Act

  • Requires prospective investors in Nigeria to register with the Corporate Affairs Commission, under various forms of companies: public or private liability company, etc.
  • The provisions of the Companies and Allied Matters Act govern the establishment of all enterprises in Nigeria. The Corporate Affairs Commission that executes the Act continuously initiates reforms to address the inefficiency in the system, especially the registration process through the implementation of an electronic registration system; reduce cost; and eliminate requirement for a qualified solicitor to act as an agent to fulfill all registration formalities for SMEs.

 

Incorporation/Registration

  • Prospective investors in Nigeria must register with the Corporate Affairs Commission, under various forms of companies: enterprise, public or private liability company etc.
  • Any enterprise in which there is foreign equity participation is required by law to register with NIPC after incorporation to benefit from investment incentives and other facilitation services.
  • Prospective investors in Nigeria must register with the Federal Inland Revenue Service for tax-related services.

 

Operating Licenses/Permits

The table below shows the various sector licenses/permits and their issuing bodies:

SectorMinistry/Department/Agency
Finance (Banking)Central Bank of Nigeria
Solid MineralsMinistry of Mines and Steel Development
Power Generation and DistributionNigerian Electricity Regulatory Commission
Information and Communication Technology·   Nigeria Information Technology Development Agency
·   Nigerian Communication Commission (NCC)
Food and PharmaceuticalsNational Agency for Food and Drug Administration and Control
ManufacturingStandard Organization of Nigeria
Oil and GasDepartment of Petroleum Resources

 

Investment Protection/Guarantee

The NIPC Act:

  • Provides investment guarantees to prospecting investors,
  • Protects investors from unlawful expropriation, and gives a guarantee of free transfer of funds. In the event of a dispute arising between a foreign investor and the government, the Act also opens access to international arbitration forums,
  • Grants judicial determination of the amount of compensation to which the investor is entitled to in accordance with international standards,
  • Sets out basic principles of a non-discriminatory access to both foreign and domestic investors, although it does not explicitly embody the principle of National Treatment.

The NIPC Act also contains a dispute settlement clause that governs disputes arising between government and investors (domestic & foreign). By virtue of Article 26 of the Act, investors have the right to resort to conciliation and arbitration to settle any investment disputes against Nigerian authorities.

The Federal Ministry of Justice has renewed efforts to ratify Bilateral International Trade with partner countries so as to give those treaties full legal rights. This provision will add an extra layer of protection for foreign investors and reduce the perceived political risk of investing in Nigeria.