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Nigeria is Africa’s largest economy, biggest oil producer and largest population, projected to be the worlds 3rd largest by 2050. The current population of Nigeria is 188,116,800. 48.1 % of the population is urban, with a median age of 18 years. 40% of the population is 25 or under. Lagos state is the 5th largest economy in Africa. Nigeria has large deposits of natural resources such as; iron ore, tin, columbite, coal, niobium, lead, zinc, bauxite and of course oil and gas.
The GDP in Nigeria shrank by 2.1 percent year-on-year in the second quarter of 2016, compared to a 0.36 percent drop in the previous period and worse than market consensus of a 1.5 percent decline. It is the first contraction in 20 years due to a decline in oil prices.
A large number of British companies operate in Nigeria, including household names such as Shell, Diageo, Virgin Atlantic, GSK, Standard Chartered, HSBC, Barclays, PZ Cussons, Cadburys and Unilever. There are also a lot of small and medium sized British companies.
There are many opportunities for companies looking to do business in Nigeria. There are some challenges to be aware of. These include:
The Nigerian economy is facing substantial challenges. While the non-oil sector accounts for 90 % of GDP, the oil sector plays a central role in the economy. Lower oil prices have significantly affected the fiscal and external accounts, decimating government revenues to just 7.8 % of GDP and resulting in the doubling of the general government deficit to about
% of GDP in 2015. Exports dropped around 40 % in 2015, pushing the current account from a surplus of 0.2 % of GDP to a deficit projected at 2.4 % of GDP. With foreign portfolio inflows slowing significantly, reserves fell to $28.3 billion at end 2015.
The fastest growing sectors in Nigeria are:
The UK is one of the largest foreign investors in Nigeria.
Nigeria’s infrastructure spending has significantly increased recently and has one of the most promising pipelines in Africa. The government is looking to use both public and private partnership mechanisms to drive forward their ambitious plans. With a rapidly growing population and expected growth rates of at least 7% over the next two years, the need to develop infrastructure is paramount in the diversification drive. The Nigerian 2016 budget has allocated over $1.5bn for works, power and housing projects and over $700m on transport infrastructure.
The budget will be used to:
Nigeria requires project developers with the experience and knowledge required to develop commercially viable infrastructure projects.
Nigeria has the ninth largest gas reserves in the world and the largest in Africa.
Domestic and industrial consumption of gas in Nigeria is below 20%. Because of this, there is a lot of excess gas that needs to be burnt off for safety reasons (gas flaring). The reason for such a low use of gas is mainly due to poor distribution, storage infrastructure and a flawed pricing system.
The government has allocated $450 million, out of the $1 billion raised in July 2013, for gas infrastructure. It has set aside an additional $8 billion for improvements in the sector.
Opportunities exist for:
Nigeria has over 80 million hectares of arable land and agriculture contributes over 42% of Nigeria’s GDP. The growth potential, in what has been a neglected sector up until now, is enormous and growing.
Recently, the agriculture sector has received attention from local and global investors who have realised the potential of the market. Many state governments have entered into partnerships with private sector companies.
The opportunities for UK companies in this sector include:
With Nigeria’s growing young population, the demand for education services is increasing faster than the government can supply it. The government is keen to ensure that businesses provide corporate training.
Opportunities for UK companies include:
The Nigerian government recently privatised some of the power sector, which has encouraged investment.
The power sector is split into three subsectors:
Nigeria is in need of additional investment in all these subsectors, but there is particular interest in transmission infrastructure. Without improvements, the current network will not be able to cope with the demands of increased generation. The required investment is estimated to be between $2.6 and $5 billion.
Other opportunities include:
There are a number of laws & regulatory bodies that specialise in different areas. The most important are:
Nigerian Content Law in Oil & Gas Industry regulates and coordinates Local content in all Oil and Gas operations in Nigeria.http://www.ncdmb.gov.ng/
National Agency for Food and Drug Administration and Control (NAFDAC): This agency regulates and controls the importation, exportation, manufacturing,
The Federal Environmental Protection Agency (FEPA) is charged with overall responsibility for monitoring, supervising and co-ordinating Environmental Impact Assessment (EIA).
If you want to transfer funds into Nigeria, you will need to obtain a CCI from a Nigerian bank. This provides statutory evidence of an investment into a Nigerian company.
Registration of Patents and trademarks are the responsibility of the Trademark Registry in Abuja. Registration gives you exclusive use of the trademark or patent for seven years, this may then be renewed. Patents expire after twenty years
As a company incorporated in Nigeria, you are required to be registered with the relevant tax authorities for tax purposes.
Companies Income Tax: A tax chargeable on all companies (other than Companies engaged in petroleum operations as defined under the PPTA) registered in Nigeria. The rate is 30% of its taxable income.
Personal Income Tax: A tax payable by all individuals and registered businesses and partnerships except those registered under Part A of Companies and Allied Matters Act 1990. Its rate is between 7% & 24%
Education Tax: A tax chargeable on all companies registered in Nigeria at 2% of chargeable profits as contribution to the Education Tax Fund.
Withholding Tax: It is an advance payment of tax (at between 5% -10%) to which individuals and organizations are entitled to demand a withholding tax credit note.
Value Added Tax: A tax payable by the consumer at 5% of the net value added based on eligible transactions once consumed. All registered businesses are expected to
register and have a VAT registration certificate, and boldly display their VAT registration number on all invoices.
Export of Antiquities: No art treasure may be taken out of the country without written approval from the appropriate Nigerian authorities. This approval must come from the Department of Antiquities, National Museum, Lagos, or Jos. The law prohibiting the export of all forms of antiquity, including all ritual art objects even of contemporary make, is strictly enforced