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Agriculture

From Rediscover Nigeria desk

  AGRICULTURE   The wealth of a nation is partially measured by its ability to guarantee its citizenry food security.In…

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Manufacturing

From Rediscover Nigeria's Desk

Manufacturing in Nigeria concentrates mainly on the production of consumer goods. With a population estimated today at over 156 million…

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Nigeria! Overview

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Tourism in Nigeria has huge potentials to be a major foreign exchange earner. The Obasanjo administration has created awareness among…

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Nigeria's Resources

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Nigeria's total verified external debts as at December 2010 was US$4.578 billion as against US$3.947 billion in 2009. Total scrutinized…

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Rediscover Nigeria Nigeria!Overview Transformation Agenda

Tranformation Agenda

Agriculture which used to be the mainstay of the economy has not of late made the expected contribution.  Non oil exports still contribute less than 10% of earnings.  The exchange rate of the naira (Nigeria's currency) to the U.S.$ has hovered between N149 and N154 in the years 2009-August 2011.  Inflation rate is between 13.9% (December, 2009) and 11.8% (Dec.2010).

Nigeria's external debt grew from US$3.947 billion in 2009 to US$4.578 in 2010 (an increase of 15.21%).  The total internal and external scrutinized public debt was US$35.093 billion as at December 2010 compared with US$25.817 billion as at 2009. This increase is as result of draw downs on approved international credits and new Federal Government bonds.

President Goodluck Jonathan conscious of these performance indicators has instituted a Transformation Agenda to help change the unfavourable economic indices by putting in place a new economic framework that will cut down on the cost of governance, re-engineer the economic sector and promote alternative sources of foreign exchange earnings.  This is in addition to massive infrastructural development and deliberate policy instruments to fast track development and create jobs.

MAIN FOCUS

The vision 20:2020 envisages that Nigeria will be one of the 20 top economies of the world by the year 2020.  To drive achievement, a medium term economic framework (2011-2015) has been presented to the National Assembly.  This framework projects an average G.D.P growth rate of 11.7% per annum.  The tide of unemployment which rose from 11.9% in 2006 to 14.7% in 2007 and 21.1% in 2010 is obviously worrisome to government and development partners.

The key drivers of this transformation will be the Oil and Gas sector, Agriculture, Solid Minerals, ICT, Telecommunications, Tourism, Manufacturing, Construction and Retail Trade.  The turn around plan of Nigeria's economy is to be a joint partnership between the public sector which envisages a contribution of 60% or N24.45 trillion (Approx. US$160 billion) while the private sector will synergise 40% or N16.30 trillion (Approx. US$108 billion) totaling N40.75trillion.  The focus of this planned expenditure between 2011 and 2015 will be on the following:-

  • Improving agriculture, food security and export earnings from a sector that was once the back bone of the economy.  Nigeria currently expends more than US$4 billion annually importing food which can be produced locally.
  • Enhance the use of appropriate technologies and bring value addition to the Agro-business.
  • Improve capacity utilization in the manufacturing sector in Nigeria, help to substitute imports of goods, improve the efficiency and competitiveness of the manufacturing sector and help to increase local content linkages.
  • Through the deregulation of the Oil and Gas industry, private sector investment will be promoted in the upstream and down stream sector and significantly scale down gas flaring.  In addition, local content development will be promoted.
  • Invest a total of N1,896 trillion within the period in the development of Power infrastructures and ensure private sector participation through a viable commercial framework which includes tariff adjustments.  This will hopefully bring about stable power supply.
  • Heavy investment totaling over N2.137 trillion specifically in the transport sector which includes the Railways, Roads/Bridges, Ports, Aviation and another N2.023 trillion in other physical infrastructures including Inland Waterways dredging and River Ports. This will significantly open up the economy, lead to cheaper goods and services and make Nigeria's products more competitive in the International market.
  • The Niger Delta is to benefit more than N335.05 billion in development projects to stabilize the region and ensure sustainable socio-economic development.
  • Through ICT, a deliberate attempt will be made to build a knowledge based economy. Public Private Partnerships (PPP) and the creation of an enabling environment through infrastructural development will drive a boom in the ICT sector.  Nigeria has an array of talents in software manufacture and an enormous opening is being created to drive the economy through ICT.  It will help to bring transparency, greater accountability and a broadening of the opportunities in the sector.

TACKLING CONSTRAINTS

  • A major inhibition to the transformation agenda is Human Capital.  This has been effectively addressed as an area of priority policy.  All children of school age have been targeted for enrollment whatever the income profile of sponsors may be.  This goes with the provision of infrastructure and teacher training to reduce teacher/pupil ratio.
  • Public expenditure will be reduced to commensurate ratios to guarantee sustainable investments in identified areas.  Since 1999, recurrent expenditure of government has consistently over shadowed capital expenditure.

Year                                  1999                          2003                           2011

Recurrent expenditure      47.5%                       80.29%                       eficit.

Capital Expenditure          19.71%                     38.37%                        N/A

The transformation agenda focuses on addressing this anomaly.  Limits of 6% of G.D.P has been set for recurrent expenses as against the current 8.5% while capital expenses is to raise from 4% to 6.5% of G.D.P and significantly thereafter.  A comprehensive review of the Joint Venture (J.V) contracts and production sharing agreements with oil companies is in the pipeline.

SOVEREIGN WEALTH FUND

The negative experience of Nigeria owing to the boom – burst circle as a result of its mono-cultural economy has made it imperative to have a system of saving funds for the future generation and controlling profligacy in government.  The transformation agenda fully recognizes this necessity and the Federal Government has worked with the National Assembly to pass into law the SOVEREIGN WEALTH FUND.  Though it is still being contested by many component units (State Governments), it is an internationally acknowledged framework for greater portfolio management, prudent fiscal management, responsible asset management, inter-generational transfers and ensuring manageable liquidity.  Investments are also to be made on behalf of the nation while Nigeria survives on the interest or dividends it generates.

In the immediate past, the Excess Crude Account (ECA) existed but not backed by law, it was an immediate fall back fund for all tiers of government anytime income from oil dwindled.  The Sovereign Wealth fund in Nigeria therefore targets savings from the sale of privatized enterprises, official foreign currency operators, and receipts from commodity exports, surpluses of balance of payments and some receipts from higher prices in the sale of Crude oil.

Drawing from the benefits such funds have brought to some countries with such existing framework, the transformation agenda targets the control of excess funds in government circles leading to some white elephant projects which more often than not are abandoned mid-way.

Some countries with Sovereign Wealth Fund are:-

Norway - US$ 512 billion

Libya - US$ 70 billion

China - US$ 826 billion

Algeria - US$ 56.7 billion

U.A.E - US$ 627 billion

Iran - US$ 23.0 billion

Venezuela - US$ 0.8 billion

Source: National Bureau of Statistics (NBS)

JOB CREATION

The sum total of the transformation agenda is the capacity to reduce the rate of unemployment by delivering five (5) million new jobs annually between

2011 and 2014.  The anticipated boom in the construction industry, investment in new refineries and petrochemicals, the passage of the Petroleum Industry Bill, new investments in Agriculture and Food Processing and particularly in the transport sub-sector will create massive employment opportunities in Nigeria.

A GLIMPSE OF THE FUTURE

As an emerging market, the future of Nigeria looks very bright as general re-structuring and deregulation opens the market to competition and greater efficiency. The country still has the greatest opportunities in Africa.   Inspite of some of the challenges, the prospects for Returns on Investment (ROI) appear to be about the highest anywhere in the world.  The great potentials of Nigeria in Solid Minerals exploration and exploitation have not been scratched.  Agriculture is still at a subsistence level; Tourism is a very open field because of Nigeria's great cultural diversity, the beauty of its landscape and undiscovered flora and fauna species.

The barriers to investment are being dismantled and laws protecting investments are being enacted.

DOING BUSINESS IN NIGERIA

Every nation has standard procedures for setting up business enterprises.  In Nigeria, the Corporate Affairs Commission (C.A.C) which is guided by the Companies and Allied Matters Act (1990) undertakes the procedure for all registration.

CORPORATE AFFAIRS COMMISSION

There are various categories of businesses to be registered but generally the categories are:-

  • Private Limited Liability Company
  • Public Limited Liability (Plc)
  • Unlimited Liability Company
  • Company Limited by Guarantee
  • Foreign Company (a subsidiary or branch of a foreign company)
  • Partnership or/Firm
  • Sole Partnership
  • Incorporated Trustees (usually religious, charitable or philanthrophic, cultural)
  • Representative office in special rates.

It is generally the rule that a non-Nigerian can participate in any enterprise in Nigeria but any foreign company willing to do business in Nigeria should first be registered under the CAC Act 1990 to be duly recognized by the law.

The following steps are recommended for fast and easy approval of registration of businesses

  • There is usually the conduct of name search for availability at the Corporate Affairs Commission.  It is advisable that the services of a qualified solicitor in Nigeria be sought to reduce costs and time associated with all pre-qualifications for registration.
  • A set of Incorporation forms should thereafter be purchased after the named desired to be used to carry on business in Nigeria is cleared.  The prospective investor may prepare the Memorandum and Articles of Association for the company using the solicitor's service.
  • The initial documents are then submitted to the Federal Inland Revenue Service for payment of stamp duties and stamping.
  • After due verification, a Certificate of Incorporation is thereafter handed over to the investor with Certified True Copies of all relevant documents.
  • Investors have an Eighteen (18) months grace period before paying for annual returns on the company.
  • Processes relating to Pioneer Status, exemptions, concessions and incentives are fully covered in the section of this publication which deals with the Nigeria Investment Promotion Commission (NIPC).

Additional information on registration procedures, fees, stamp duties and methods of payment can be sourced at www.cac.gov.ng or e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

NIGERIA INVESTMENT PROMOTION COMMISSION (NIPC)

The Nigeria Investment Promotion Commission (NIPC) is a vehicle established by an act of Parliament (No. 16 of 1995) to encourage, promote and coordinate investment into Nigeria.  Through policy recommendations, incentives and other facilitations, the NIPC is the most appropriate government agency for an Investor to get all necessary assistance towards investing in Nigeria.

ONE STOP INVESTMENT CENTRE (OSIC)

The NIPC through OSIC has succeeded in bringing together about twenty six (26) different government agencies to provide services at the OSIC.  These agencies have their relevance at different points of doing business in Nigeria.  To eliminate the headache of investors shuttling from one agency to another, these frontline agencies have been assembled under one roof to provide services.  Among the agencies operating at OSIC are the following:-

AGENCY

SERVICES AT OSIC

Corporate Affairs Commission

Processes for Registration of Businesses

Federal Inland Revenue Service

Tax administration/allied services

The Federal Ministry of Interior

Issues related to expatriate quota

Nigeria Immigration Services

Immigration Issues, visa, work permits

Nigeria Customs Service

Import/Export guidelines, duties,  exemptions, Tariffs, Procedures, Prohibition List etc.

National Office for Technology Acquisition and Promotion

Trade Mark, know how and patent license.  Technical services and assistance and consultancy.

Federal Ministry of Finance

Advise on Fiscal Policy Matters and Information/Classification on Common External Tariff

National Agency for Food and Drug

Administration and Control (NAFDAC)

Kick starting registration process and advisory services/facilitation on Importation or Manufacture of Foods, Drugs, Chemicals, Cosmetics, Vaccines, etc.

Standards Organisation of Nigeria (SON)

Information/technical advise and standards on products imported or manufactured based on Nigeria Industrial Standards (NIS)

Ministry of Mines and Steel Development

Information guideline, Processing application for approval/licences/ facilitation of titles, incentives and support services for investing in the solid minerals solid.

National Bureau of Statistics

Providing reliable statistics and information relevant to the investors area of interest.

Central Bank of Nigeria

Providing information on financial sector regulatory requirements especially as it relates to foreign investment.

Nigeria Export Promotion Council

Provide trade information, registration of exporters, processing Export Expansion Grants (EEG) and technical assistance to investors and exporters.

Nigeria Electricity Regulatory Commission

Facilitation of Issuance of Permits and Licences for captive power generation and for investors interested in participation in generation, transmission and distribution of power for sale.

Department of Petroleum Resources

Processing Licenses/Permits and Provision of advisory services and incentives for investment in the oil and Gas sector

Source:  NIPC

Greater details about all the agencies operating at the One Stop Investment Centre can be obtained from the commission's website: www.nipc.gov.ng or e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it

INCENTIVES FOR INVESTING IN NIGERIA

The Nigeria Investment Promotion Commission (NIPC) as an agency of government has worked to create several incentives for prospective investors in Nigeria.  The incentives vary depending on the area preference of the investor.

Among these incentives are:-

PIONEER STATUS

This is an incentive packaged for industries that are newly established or totally re-engineered to enjoy a tax holiday of a minimum of five (5) years and if located in economically disadvantaged areas (particularly rural areas) up to seven (7) years.  It gives these enterprises a breather such that they can position themselves to be profitable and maximally expand their operations within their resources and focus.

COMPANIES INCOME TAX

Companies Income Tax has generally been reduced to 30% in all cases except for the petroleum sector.

***************************************

CAPITAL ALLOWANCES

S/N

Qualifying Expenditure   Initial allow. %   Annual all.%1 Building Expenditure 510 p.a

2

Industrial Building

15

10

3

Mining

20

0

4

Plant excluding furniture and fittings

20

10

5

Furniture and fittings

15

10

6

Motor Vehicle Expenditure

25

20

7

Plantation equipment expenditure

20

33

8

Housing Estate Expenditure

20

10

9

Ranching and Plantation expenditure

25

15

10

Research and Development expenditure

25

12

11

Public transportation motor vehicle

30

*************************************

Capital allowances enjoyable every year is restricted to 75% of accessible profit for manufacturing and 66% for other categories.  However, agro-allied industries are not affected by this restriction.  If leased assets are used in agro-allied ventures, a full 100% capital allowance claimed will be granted and where agricultural plants and equipment are invested an additional 10% allowance on expenditure is given.

TAX RELIEF FOR R&D

Up to 120% of expenses on Research and Development (R&D) are tax deductible provided such activities are carried out in Nigeria and are directly connected to the business from which the income or profit is derived.  Where it relates to local raw materials, it attracts up to 140%.  If the R&D duration is long term, it will be regarded as capital expenditure and written off against profit.

OTHERS

In-plant training for industrial outfits attracts 2% tax concession, while establishment in a disadvantaged Local Government Area attracts an additional 5% capital depreciation allowance over and above the initial capital depreciation allowance.  This is of course without prejudice to 100% tax holiday for seven (7) years for pioneer status.

Labour Intensive Industries enjoy a graduated scale of tax concession which entitles an industry with more than 1,000 employees to access 15% rebate. 200 or more persons will have 7% rebates.

A 10% tax concession is granted to industries particularly those that encourage local fabrication.

A 20% tax credit for 5 years is allowed for Industries that attain minimum levels of raw materials utilization which are categorised as below:-

Agro-allied                  …………..                  70%

Engineering                 …………..                  60%

Chemicals                    …………..                  60%

Petro-Chemicals          …………..                  70%

Source: NIPC – Investors Guide to Nigeria.

WHY INVEST IN NIGERIA

Besides the array of attractive incentives, Nigeria has over the years demonstrated its central position in the sub-region.

  • Nigeria's population is 156 million with a resilient people who are skilled, trained, re-trainable and entrepreneurial.
  • The key to the entire Economic Community of West African States (ECOWAS) sub region with a population of about 250 million people is Nigeria.
  • The infrastructure may not be as developed as the most advanced nations but it is much better than that of the entire sub-region.  In addition, the current massive effort at rehabilitation of infrastructure i.e. Transport, Power and the Upgrading of ICT, Telecommunications and Roads create opportunities for investors.  Power generation will be raised to 10,000MW by 2012, 13,000MW by 2014 and 15,000MW by 2015.  This is as against 4,000MW as at 2011.
  • In the year 2009, teledensity soared to 53% and went up further to 60% in 2010.  Total teledensity in 2010 stood at 63.11 up from 0.4 in 2000 with more than 87 million active mobile lines.  This is just 10 years after G.S.M phones were introduced into Nigeria.  Foreign Direct Investments in the telecommunications sector alone over the past ten years stands at over US$12 billion.
  • Through continuous improvements in service delivery, cargo through put at the Nigerian Ports has increased from about 40MMT about 10 years ago to 74, 910,284MT in 2010.  Turn around time of vessels has equally declined to 5.9 days. Steps are still being taken to move it down to 72 hours.
  • While global average GP growth rate stands at about 5%, Nigeria's G.D.P rate has averaged abut 8% over the past 10 years.  This may not meet Nigeria's aspiration of a two digit growth rate but ranks well above competing emerging markets.  The Transformation Agenda being vigorously pursued will catapult G.D.P growth rate.
  • Agriculture remains the main stay of the economy and attractive investment incentives have been packaged.  It is also more of a rural business in Nigeria.  Additional incentives are available for location of factories in rural areas.  Food processing for value addition attracts extra concession.  It is therefore an open field for investors.  Nigeria as at date has no notable natural disasters except for seasonal and occasional.
  • Floods/drought.  The abundant dams and underground water make up for seasonal drought.
  • The perceived areas of infrastructural deficit in roads and rail transport create tremendous opportunities for potential partners.  The Federal Government of Nigeria offers concession agreements in Build, Operate and Transfer (BOT), Build, Own and Operate (BOO) schemes.  High speed train services equally fall into this category.
  • Our potentials in the Solid Minerals sector remain unscratched. The Federal Ministry of Solid Minerals has computerized some of its operations to give first class and transparent services in the coverage of mines titles.  The fields are open.
  • Nigeria's recent security challenges particularly in the Niger Delta have been surmounted.  The isolated incidents of security breaches especially in the North Eastern part of Nigeria are being addressed.  It is on record that Nigeria is one of the very few nations that has demonstrated capacity to resolve her own internal crisis.  Through dialogue Nigeria survived a civil war without disintegration.  The nation's political evolution has helped to strengthen its unity.  Democracy and the rule of law are being firmly rooted.
  • Through protection agreements, investments in Nigeria are guaranteed and safe.  Through a thorough judicial system and instituted arbitration disputes can be resolved.

 

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