WELCOME TO NIGERIA
At the Nigerian Investment Summit
London, 24 September, 2001
I am delighted to be here today to address this August gathering on the occasion of a very important forum, the first ever “Nigeria Investment Summit” being hosted by the Honorary Presidential Advisory Council on Investment in Nigeria holding here in London. You will no doubt recall that my administration realizing the importance of reviving an already battered economy decided to set up an advisory council, the membership of which comprises of superior selection of key finance, policy and industry figures from all corners of the globe.
The administration decided to set up this Council to advise and support it government in its mission to attract Foreign Direct Investment (FDI) and portfolio investment into Nigeria’s Industries and infrastructures to build on the already booming energy sector. I therefore, wish to heartily congratulate the Honorary Presidential Council on Investment in Nigeria on the initiative taken to not only organize this forum but also to bring together the key players in the private sector through whose interaction, I believe would metamorphose into meaningful investment initiatives.
I have been advised that the key areas to be examined during this two days forum which will cover issues focussing on “how to create an enabling environment to accelerate investment in Nigeria”. No doubt the key speakers that have been invited to educate this forum on these two subjects areas would do justice to the topics.
We are all no doubt aware that my administration since its inception had been making frantic efforts worldwide to enhance its bilateral and multi-lateral relations with various foreign countries as well as seeking for avenues to promote mutual benefit of countries concerned. I am convinced that our nascent democracy could be fully nurtured in the context of a vibrant economy and establishing a firm foundation on which future generation can build. Good governance is sine-qua-non to attracting meaningful investment into an economy. I therefore wish to reassure this audience that Nigeria, having pulled itself out of the many years of bad governance, is now re-focussing its stance on developing a virile, self reliance and self sustaining economy.
Nigeria an overview
By way of reminding this August gathering and without over emphasis, permit me to give you a treatise on the Nigeria economy. This no doubt would enable participants from various parts of the world who are here today to appreciate our development process.
Nigeria is situated along the West coast of Africa and is endowed with abundant human and natural resources. It has a land mass of 923,768 square kilometres four times the size of Great Britain and a population of 110 million people. It is bordered to the north by the Republic of Niger and Tchad; it shares borders to the West with the Republic of Benin while the Republic of Cameroon shares the eastern borders right to the shores of the Atlantic ocean which forms the southern limits of the Nigerian territory. The about 80 kilometres of coastline confers on the country the potentials of a maritime power. Nigeria attained Independence on 1st October, 1960 and now under civilian rule with democratically elected President who was inaugurated on 29 May, 1999. Nigeria has diverse ethnic groups but the prominent ones are Hausa, Ibos and Yorubas. Prior to Independence in 1960, Nigeria’s economy was mainly agrarian and most of the manufactured consumer goods were imported. Government however immediately after Independence opted for a local resource based industrialized strategy as part of its economic development programmes.
As you are no doubt aware, industrial development in any country provides the brightest hope for generating sustained growth, employment, improved savings and investments and indeed economic development. Therefore like other emerging countries, Nigeria looks forward to industrialized strategy as part of its economic development programme. The industrial sector was expected as in the case of other developed countries and emerging economies to provide the engine of growth.
Whilst the agricultural sector provided the means of livelihood for the majority of the population and dominated the export base, the capacity to produce basic consumer goods based on the abundant natural resources was considered essential for sustaining a growth level of the economy and for improving the material condition of the people.
The Federal Government of Nigeria’s four development plans covering the industry, chemicals, paper, petrochemicals, cement, automotive and steel. Also the need for diversification in the industrial sector was recognized in order to copy with a large and expanding domestic market accentuated by rising income from oil revenue. Private sector initiatives were directed to small and medium scale enterprises (SMEs) whilst Government devoted its efforts on large capital intensive and strategic projects.
The Federal and State’s industrialization strategy included huge investments in Government owned enterprises and joint ventures including projects which private enterprises were either unable or unwilling o undertake on its own account. By early 1980's publicly owned enterprises accounted for some 60% of industrial production and 30 to 35 percent of GDP. The Federal Government’s industrial Investment during the plan period went to iron and steel, petrochemicals and refinery projects. However most remained heavily dependent on foreign resources for major inputs such as raw materials, technology, spare parts and components.
Regulatory Framework and incentive Structure
Under the new dispensation and in response to the demands of the Nigerian economy, the civilian government now has at the hub of the wheel of its foreign policy, the provision of a conducive environment to attract foreign investors. It also has an immediate focus on revitalizing all ailing industries to enable them increase their production through better capacity utilization. Government also plans to provide adequate infrastructure including electricity, water and industrial estates and parks. It also plans to achieve the objective of the country’s industrial policy and strive to encourage increased private sector participation in the industrial sector privatizing and commercializing holdings in certain existing enterprises.
Government has also set out a clear set of industrial priorities as contained in the industrial master-plan supported by a package of incentives to encourage and mobilize both foreign and domestic investments in the country. There are still a number of laws and regulations governing the establishment of business in Nigeria. A foreign investor wishing to set up business operation in Nigeria should endeavour to take all steps necessary to obtain local incorporation of the Nigerian branch or subsidiary as a separate entity in Nigeria for that purpose. Until so incorporated, the foreign company may not carry on business in Nigeria or exercise any of the powers of a registered company. The foreign investor may incorporate a Nigerian branch or subsidiary giving power of Attorney to a qualified solicitor in Nigeria for this purpose. The incorporated documents in this instance would disclose that the solicitor is merely acting as an agent of principal whose names should appear in the document. The locally incorporated branch or subsidiary company must then apply to the Nigerian investment promotion Commission (NIPC) for Business Permit and other requisite permits and licenses.
There are a number of incentives put in place to promote the development of enterprises in Nigeria. They include:
a] Pioneer Status: Provides 100% tax holiday for designated pioneer industries considered beneficial to the economy for a period of five years to enable them achieve a reasonable level of profitability.
b] Local Raw Materials Utilization: 30 percent tax concession for five years to industries that attain minimum local raw materials utilization level as follows:
Industrial Sector Minimum Level
Agriculture 80%
Agro-Allied 70%
Engineering 60%
Chemical 60%
Petro-Chemical 70%
c] Labour Intensive Mode of Production: 15 per cent tax concession for five years. The rate is graduated.
d] Local value Added: 10 per cent tax concession for five years. The applies esentially to engineering industries where some finished imported products serve as inputs. The concession is aimed at encouraging local fabrication, rather than the mere assembly of completely knocked down parts.
e] In-Plant training: 2 per cent tax concession for five years of the cost of facilities provided for training.
f] Export-Oriented Industries: 10 per cent concession for five years. This concession will apply to industries that export not less than 60 per cent of their products. The emphasis is on the encouragement at the pre-establishment stage of export-oriented enterprises.
g] Infrastructure: 20 per cent of cost of providing basic infrastructure such as roads, water, electricity where they do not exist is tax deductible once and for all.
h] Investment in Economically Disadvantaged Areas: 100 % tax holiday for 7 years and additionally 5 % depreciating allowance over and above the initial capital depreciation.
i] Research and development (R&D): 120 % per cent tax deductible expenses provided the research and development is carried out in Nigeria; and 140 % for R&D on local raw materials.
j] Abolition of Excise Duty: In order to boost local industries, stimulate trade and reduce cost, Government has decided that all excise duties are abolished with effect from January 1, 1998.
Increased Private Sector Participation and the Effects of Privatisation and Commercialisation on Nigerian Industries
In full recognition that the private sector is the engine of growth of the economy, my Government has continued to facilitate the provision of institutional framework, incentives and guidelines to engender a conducive environment for industrial development. In this respect, the privatisation and commercialisation of state-owned enterprises is being pursued with vigour. As one of the structural reforms in the post SAP era, Nigeria implemented its first privatisation exercise from 1988 to 1993 through the Technical Committee on Privatisation and Commercialisation (TCPC) now Bureau of Public Entreprises (BPE). The Bpe, among other functions, advises the Government on the capital restructuring needs of the entreprises to be privatised or commercialised, undertakes all the activities required for the public issues of the shares of such enterprises. By 1993, the BPE had privatised 88 out of 110 enterprises slated for privatisation and commercialised 19 out of the 34 enterprises earmarked for commercialisation. In that exercise alone, Government divested 1.5 million shares worth N3.7 billion and ceded 280 board seats. This is in addition to savings from Government’s subsidies to these enterprises including import duty waivers, tax exemption, loans and guarantees, grants and subventions etc, which usually run into billions of Naira.
In consolidating the gains of the first privatisation exercise, Government had put in place, the National Council on Privatisation (NCP) and empowered it to implement the second exercise in conjunction with the BPE. Government’s strategy is to concede its major share in affected enterprises to core investors that have innovative technology, requisite management skills and capital. As at year 2000, the NCP had fully privatised four cement companies, three oil marketing firms, and three banks, and made proceeds totalling about N19 billion. The second phase of the current exercise covers 39 enterprises including local sugar companies, pulp paper mills, vehicle assembly plants, NITEL and NEPA.
Improvement of the Regulatory Environment
An effective and reliable regulatory environment is another prerequisite for a vibrant market oriented economy. Certain aspects of regulatory role of Government are being discharged by the Central Bank of Nigeria (CBN) for the banking sub-sector, the Securities and Exchange Commission (SEC) for the capital market, the National Insurance Commission (NAICOM) for the insurance sub-sector, the Nigerian Communications Commission (NCC) for the communications sector, while other ministries and Agencies perform quasi regulatory functions. Similarly, private sector operators including manufacturing firms are being guided by te provisions of the Companies abd Allied Matters Act of 1990. Other regulatory bodies are being put in place to remove the seemingly monopoly tendencies of public enterprise which their enabling laws encourage. In this regard, Government is currently reviewing the laws establishing enterprises like NEPA and NITEL to make such enterprises available for private sector privatisation.
Government has removed all the legislations that hitherto had inhibited investment flows, with the sole objective of boosting domestic and foreign investment in Nigeria. In this connection, the Nigerian Enterprises Promotions Decree 1989, and the Exchange Control Act 1962 were repealed, and in their place, the Nigerian Investment Promotion Commission Act 16 of 1995 and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 17 of 1995 were promulgated. These Acts permit foreign investors to own varying percentage of investment in enterprises up to 100% and guarantee easier and timely repatriation of dividends and capital.
Port reforms are being carried out with a view to sanitizing our international trade operations as well as improve turnaround at the ports. The number of Agencies at the ports has been drastically reduced while facilities are being upgraded and modernised. Beside the services being rendered by the appointed Pre-shipment inspection Agencies on Imports, 100% physical inspection is being carried out on cargoes to further ensure compliance with duty payment by importers and to make locally produced products competitive. To further attract foreign investment in Nigeria and to ensure their protection, Government continues to enter into bilateral Investment Promotion and Protection Agreements (IPPA) with interested countries. Such agreements have been signed with the Netherlands, France, the United Kingdom, the Democratic Peoples’ Republic of Korea (North Korea), Turkey, China and the Republic of Korea (South Korea), Romania, Bulgaria, Egypt, South Africa, Italy and Switzerland. At the level of joint Commissions, Government has participated in various sessions with the representatives of South Africa, Trinidad and Tobago, Brazil and Cuba.
Furthermore, Nigeria’s return to Democracy since May, 1999, has renewed investor’s confidence in the economy. Thus, all arms and tiers of Government have used the opportunity to evolve and implement investment friendly programmes to stimulate and sustain investments and thereby the benefits of democratic governance to the people.
Nigeria’s Foreign Trade
Nigeria has trade relations with several overseas countries and in return for various exports of agricultural commodities, it imports machinery and equipment for its home industries. In majority of cases, these come in form of complete turn-key projects which permit some transfer of know-how from the foreign countries. Also this approach has encouraged foreign participation in various internal projects. Nigeria has also enjoyed some foreign direct investment. In fact, Britain is Nigeria’s second largest trading partner next to te United States of America. Nigeria also exports to foreign countries products like cocoa, rubber, palm produce and imports sugar, 90% of its needs being met through imports from Brazil and the EEC countries. Other exports from Nigeria are fish, cashew nuts, pineapples, cotton and gum arabic. Nigeria imports a great deal of cereals, food items, alcohols, tobacco, and vegetable oil. Britain sells to Nigeria, industrial machinery and equipment for its manufacturing industries. On the economic front, Nigeria and South Africa are two prominent countries in the sub-Saharan Africa that constitute formidable axis around which the development of the sub-region hinges.
Sectoral Development with Nigeria’s Economy
The Government of the Federal Republic of Nigeria has mapped out an industrial masterplan which had identified key sectors which are necessary for development to give a long term reassurance of a self-reliant and self-sustaining economy. The Sectors identified are as follows: Foundries and Forges, Metal fabrication, Pharmaceuticals, Rubber and plastics, Textile and wearing apparels, Leather and leather products, Cement, Other non-metallic and building materials (including ceramics), Grain milling and flour products, Oil seeds/nuts and vegetable oils, roots and tubers, Sugar and confectionery, Livestock and allied products.
Export processing Zones
Nigeria’s premier Export Processing Zone (EPZ) located in Calabar, is nearing completion. Some companies have shown their presence on the premises located o 300 hectares of land, the EPZ adjoins the modern port of Calabar. The port with such facilities as 800 metres of quay length, 35,000 sq metres of stacking area, with large transit sheds, warehouses and a wide range of cargo handling facilities is ideally suited to service the Calabar EPZ. The proximity of the port affords EPZ operators, significant savings in haulage costs and time.
The Calabar international airport is only some 20 minutes driving time from the Calabar EPZ. The Calabar EPZ will provide investors with one of the most attractive and suitable sites for export manufacture in Africa. The zone provides adequately serviced industrial and administrative facilities at the most competitive rates obtainable for such facilities in Africa, in addition to municipal provision of essential utilities like power and water. Above all, there are other reasons for investing in Nigeria’s Export Processing Zone (EPZ). These include:
► Legislative provision pertaining to taxes, levies, duties, and foreign exchange do not apply within the EPZ;
► Tax holiday;
► Repatriation of foreign capital investment in EPZs at any time with capital appreciation of the investment;
► Unrestricted remittance of profits and dividends earned by foreign investors in EPZs;
► No import or export licenses required;
► Rent free land during construction of factory space;
► 100% foreign ownership of enterprises in EPZs;
► Abundant supply of skilled labour at very competitive rates;
► “One-stop” approvals;
► Sale up to 25% of production permitted in domestic market;
► No quotas on products exported from Nigeria to the European Economic Community and the United States;
► Ideally located to serve European and American markets;
► Made in Nigeria goods are entitled to preferential tariffs in EEC, as Nigeria is a member of the Lome Convention.
I am sure that I must have touched some of the critical questions which might plague the minds of potential investors. There are a number of criteria which people like you often consider in taking a decision on where to invest, which quite interestingly, Nigeria is able to satisfy. These include among others:
► Availability of market;
► Minimum bureaucratic interference;
► Political stability;
► Ease of repatriation of dividends and legitimate earnings;
► Minimum investments risk (Investment protection Agreements)
► Legislation that facilitates business;
► Ability to control their investment;
► Tax considerations;
► Sound fiscal policies in terms of low inflation and stable exchange rates;
► Good infrastructural support;
► Availability of skilled manpower.
However, let me add that Nigeria is now under the good governance of a democratically elected Government which has gone a long way to reassure the international community that their hopes and aspirations are being met. Government continues to fight inflation. Security of life and property is also being assured. There is remarkable improvement in the economy as a consequence of Government’s fiscal and monetary policies. For investors, this should be an encouragement.
Government is also encouraging the development of projects in the non-oil sector. Special incentives have been packaged to attract investors to the gas sector where there are several new challenges and new investment opportunities. Prominence is given to manufacturing, while efforts are not spared to develop the solid mineral resources. There are a lot of British companies and investors already in Nigeria both in the large and medium scale sectors. There is also a vibrant and virile Nigerian-British Chamber of Commerce and Industry made up of all British enterprises presently operating in Nigeria including the areas of food, and commerce. I believe these are concrete evidences that the economy could take more British companies.
Government has continued to wage war against fraudsters who have tried to dent the image of the country. There are public institutions like the Corporate Affairs Commission (CAC) and the Nigerian Investment Promotion Commission through which you could obtain status reports about any company with which you may wish to go into collaboration anytime you are in doubt. These agencies are always at hand to assist you.
Ladies and gentlemen, let me end my keynote address by enjoining you all to take maximum advantage of this forum to interact with Government officials and the delegation from Nigeria and obtain information on investment opportunities which abound in Nigeria. A new dawn has come and you are being reminded that the present administration places high premium on attracting foreign investments. I am therefore, through this forum, extending an invitation to you, to come and invest in Nigeria.
I thank you. God bless you all.