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Country Commercial Guides for FY 2000: Nigeria Report prepared by U.S. Embassy Abuja, released July 1999 Note*

CHAPTER VII: INVESTMENT CLIMATE

GENERAL CLIMATE

Nigeria is Africa's most populous nation and the region's largest supplier of oil to the United States. It offers investors a low cost labor pool, abundant natural resources, and the largest domestic market in Sub-Saharan Africa. On the other hand, inadequate infrastructure, corruption, and inconsistent regulations mean that considerable time, money and managerial effort are needed for a firm to begin operating and earn profits in Nigeria. Nigeria's basic infrastructure is extensive but inadequate for a population of over 100 million. Roads and bridges are crumbling, telephone service is erratic, and there are recurring shortages of fuel, water and electricity. Political uncertainty, social unrest in some areas, widespread unemployment, a stagnant economy depressed by over-reliance on oil, the lack of effective due process, and serious fraud and violent crime problems complicate business in Nigeria.

In 1995, Nigeria took concrete steps to get its economic house in order. Greater fiscal responsibility helped reduce a Naira 81 billion deficit in 1994 to near balance in 1998. An autonomous foreign exchange market was allowed to operate alongside the controlled rate. Foreign investment was liberalized, allowing majority foreign ownership outside the oil sector. In 1996, interest rates were deregulated, prices on the stock market were allowed to fluctuate freely and some import restrictions were liberalized. The Nigerian Investment Promotion Commission (NIPC) was authorized to help facilitate foreign investment in Nigeria, but as of mid-1998, it has not begun full operation. Although it is now possible to remit dividends and to repatriate capital, approval can take up to 18 months from the submission of paperwork. The number of expatriate workers allowed is based on the amount of the company's paid-in capital. For example, Naira 20 million (approximately $235,000) translates into two expatriate employees.

In the government's 1999 budget, steps toward privatization of the petroleum, energy, and telecommunications were promised. However, budget transparency remains elusive, several important price controls remain (such as for gasoline), and the anticipated merger of the dual exchange rates did not occur. Nigeria has recently run high arrears with its petroleum joint venture partners, and the amount of external debt is disputed, with creditors saying Nigeria owes $34 billion, while Nigerian officials claim the figure is only $27 billion.

Business Language: English

POLITICAL VIOLENCE

Sporadic incidents involving violence, hostage-taking, extortion and destruction of property have occurred, largely perpetrated against foreign firms by local communities in the oil-producing areas in Eastern Nigeria. However, incidents of civil strife have decreased from their 1993 and 1994 levels.

LABOR

Nigerian workers, except members of the Armed Forces and employees designated essential by the government, may join trade unions and strike. Essential employees include firefighters, police, employees of the Central Bank, the Security Printers (printers of currency, passports, and government forms), and Customs and Excise staff. Nigeria has signed and ratified the International Labor Organization's (ILO) Convention on Freedom of Association. However, prior (military) rulers have decreed a single central labor body, the Nigerian Labor Congress (NLC) and deregistered other trade unions. Under Nigerian law, any non-agricultural enterprise that employs more than 50 persons must recognize trade unions and pay or deduct dues for union members. In the past, the government has threatened to withdraw the dues checkoff provision and make union dues voluntary if unions pursue strikes. The Abubakar administration accepted an ILO fact-finding mission and took other steps to correct the abuses that led to ILO censure during the Abacha regime.

Collective bargaining is common in many sectors of the economy. Nigerian law protects workers from retaliation by employers for labor activity through an independent arm of the judiciary, the Nigerian Industrial Court. Trade unionists have complained, however, that the judicial system's slow handling of labor cases constitutes a denial of redress. The government retain broad authority over labor matters, and can intervene forcefully in disputes it feels challenge political or economic objectives. In 1996, for example, the Abacha regime banned the University lecturers? Union to force an end to their strike, and in 1994, it dismissed the executive councils of the NLC and the two leading petroleum sector unions. The government replaced the leadership of these unions with government-appointed "sole administrators". The Abubakar administration returned these bodies to direct union control in 1998.