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Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993

(Millions of U.S. dollars)

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Income, Production and Employment:

Real GDP (1984 prices)
Real GDP Growth (pct.) 3
GDP (at current prices)
By Sector: (1984 prices)

Agriculture
Energy/Water
Manufacturing
Construction
Rents
Financial Services
Other Services

Government Health/Education
Net Exports of Goods & Services
Real Per Capita GDP ($US) 3
Labor Force (millions)

Unemployment Rate (pct.)4
Money and Prices:

Money Supply (M2)
Base Interest Rate (pct.)
Personal Savings Rate (pct.)
Retail Inflation (pct.)
Wholesale Inflation (pct.)
Consumer Price Index
Exchange Rate (USD/

Naira):
Official (annual average)
Parallel

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0.06
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Key Economic Indicators—Continued

(Millions of U.S. dollars unless otherwise noted)

1992

1993

1994 2

Balance of Payments and Trade:
Total Exports (FOB) 5

11,886 9,923 N/A Exports to U.S.

5,074 5,301 3,970 Total Imports (CIF)5

7,204 6,665 N/A Imports from U.S.

1,001

891

524 Aid from U.S.

17
23

N/A Aid from Other Countries

N/A N/A N/A External Public Debt

27,500 28,700 N/A Debt Service Payments

2,700 1,600 N/A Gold and Foreign Exch. Reserves

799
806

N/A Trade Balance 3

4,682 3,258 N/A Trade Balance with U.S.

4,073 4,410 3,446 NIA-Not available 1 All dollar figures are based on official exchange rates and in some places reflect exchange rate Nuctuations and not internationally recognized development assessmenta. 2 1994 figures are estimates based on January-June data.

'In constant 1984 Naira, GDP grew 3.6 and 2.9 percent in 1992 and 1993, while GDP per capita in current dollars was $349 and $398 for those years.

*CBN figure; Embassy estimates 28 percent unemployment. Merchandise trade. 1. General Policy Framework

Nigeria is Africa's most populous nation and the United States' filh largest oil supplier. It offers investors a low-cost labor pool, abundant natural resources, and the second largest market in sub-Saharan Africa. Nigeria's crucial petroleum sector provides the government with over 95 percent of all foreign exchange earnings and about 75 percent of budgetary revenue. Agriculture, which accounts for nearly 40 percent of GDP and employs about two-thirds of the labor force, is dominated by small-scale subsistence farming.

After a period of relative fiscal austerity in the late 1980's, the Nigerian government has run budget deficits exceeding seven percent of GDP since 1990. Proposals to reduce the deficit include reducing large government fuel price subsidies (the offi. cial price of gasoline was equivalent to about 55 U.S. cents per gallon in October 1994), shelving a number of government projects which are of doubtful economic value, and reducing leakages from government income due to corruption.

Over the last several years, monetary policy has been driven by the need to accommodate the government's budget deficit and a desire to reduce the inflationary impact of the budget deficit on the economy. Deficits at the federal level have been financed primarily by borrowing from the Central Bank of Nigeria (CBN), which held 83 percent of the government's domestic debt at the end of 1992. Since the Central Bank monetizes much of the deficit, budgetary shortfalls have a direct impact on the money supply and on price levels, which have risen rapidly in recent years.

In conjunction with his 1994 budget announcement, head of state General Sani Abacha announced the abandonment of most 1986 Structural Adjustment Program reforms, and instituted tight government control over key economic variables. The new measures include: fixing the value of the naira at 21.99 per dollar; instituting strict and comprehensive foreign exchange and import controls; eliminating the legal parallel foreign exchange market; and setting caps on interest rates chargeable on loans and deposits/savings accounts.

The new economic policy regime created by these measures has already had far reaching and damaging effects on the Nigerian economy. Not only have these measures discouraged investment in Nigeria, but companies already present find it increasingly difficult to operate profitably, while official statistics show nonoil exports down sharply. 2. Exchange Rate Policy

In the first quarter of 1994, Nigeria changed its foreign exchange regime back to the highly controlled system in force prior to the structural adjustment resorms in the late 1980's. The legal parallel foreign exchange market, which operated through licensed exchange bureaus, was abolished, and the official interbank foreign exchange market (FEM), operated by the Central Bank, became the only authorized source of foreign currency in Nigeria for companies and individuals. At the mid-year budget review, bureaux de change were reauthorised to conduct limited foreign exchange transactions at the official rate plus ten percent. The official exchange rate has been held at 21.99 naira/dollar since April 1993, but the parallel rate had climbed to over 70 naira to the dollar by October 1994.

While there are no restrictions on imports of hard currency into Nigeria, foreigners are obliged to declare such holdings upon arrival, and must maintain records of naira purchases from authorized banks in Nigeria in order to take their remaining foreign currency out of the country. The 1994 regime for allocating hard cur. rency at the IFEM is sharply limiting oficial remittances. Only 250 million dollars was allocated in the 1994 budget to the so called invisibles account (including remittances for services and other nonmerchandise transfers). This amount can largely be absorbed in meeting remittance needs of the international airlines alone. The result has been a de facto clampdown on the repatriation of corporate prosīts. 3. Structural Policies

As stated in the December 1989 circular, “Industrial Policy of Nigeria,” the government maintains a system of tax incentives to foster the development of particular industries, to encourage firms to locate in economically disadvantaged areas, to promote research and development in Nigeria, and to favor the use of domestic labor and raw materials. The Industrial Development (Income Tax Relies) Act of 1971 provides incentives to “pioneer" industries, that is, industries deemed beneficial to Nigeria's economic development. Companies given “pioneer” status may enjoy, a nonrenewable tax holiday of five years, or seven years if the pioneer industry is located in an economically disadvantaged area.

In December 1989 the government liberalized the Nigerian Enterprises Promotion Decree to allow 100 percent foreign equity ownership of Nigerian businesses in certain cases. The rule applies to new investments only and is not retroactive. The government also allowed foreign firms to invest in the 40 lines of business normally reserved for 100 percent Nigerian ownership if they invest a minimum of 20 million naira (about $900,000 at the current official exchange rate). Reserved sectors include: advertising and public relations, commercial transportation, travel services, and most of the wholesale and retail trade. The list of reserved sectors is one factor that has prevented the conclusion of a bilateral investment treaty between Nigeria and the United States. Banking, insurance, petroleum prospecting, and mining continue in almost all cases to require 60 percent Nigerian ownership. 4. Debt Management Policies

Nigeria's foreign debt ballooned from $13 billion in 1981 to $24 billion in 1986, when sharply lower oil revenues and continued high import levels created large balance of payments deficits. By the end of 1993, total external debt (not including arrears) had reached $28.7 billion, more than Nigeria's entire GDP. Debt service duc is projected to be four to five billion dollars annually for the next several years.

In January 1992, in an effort to reduce its external stock of debt, the Nigerian government concluded an agreement with the London Club which gave commercial banks a menu of options from which to choose in reducing Nigeria's commercial debt. The menu included debt buy-backs (at 40 cents on the dollar), new money bonds, and collateralized par bonds. As a result of the agreement, Nigeria was ablc to reduce its external debt by $3.9 billion, but the accumulation of arrears on other debt since that time has brought external debt back to previous levels. Including arrears, official foreign obligations exceeded $30 billion as of October 1994.

During the period 1986 to early 1992, Nigeria reached three standby agreements with the IMF. The most recent agreement was approved in January 1991 and expired in April 1992. Talks with the IMF since then have failed to result in a new agreement.

Nigeria's most recent rescheduling agreement with the Paris Club expired at the same time as its standby agreement with the IMF, and debt repayment obligations have grown significantly. Nigeria's record on debt repayment, meanwhile, has also deteriorated. In 1992, Nigeria made debt service payments of $2.7 billion, against interest and principal payment obligations of $5 billion. Faced with similar obligations in 1993, external debt service payments were only $1.6 billion and the budg. eted debt service payments for 1994 are $1.8 billion. 5. Significant Barriers to U.S. Exports

Nigeria abolished all import licensing requirements and cut its list of banned imports in 1986. As of October 1994, the importation of approximately 20 different items is banned, principally agricultural items and textiles. These bans were ini. tially implemented to restore Nigeria's agricultural sector and to conserve foreign exchange. Although the bans are compromised by widespread smuggling, the re

duced availability of grains has raised prices for both banned commodities and locally produced substitutes.

U.S. products are also hampered by high tariffs as follows: sorghum, 100 percent; cigarettes, 200 percent; cotton, 60 percent; wheat, previously banned and now taxed at 10 percent; and passenger vehicles, from 30 to 100 percent. Other import restrictions apply to aircraft and ocean-going vessels. Guidelines mandate that all imported aircraft and ocean-going vessels shall be inspected by a government author- . ized inspection agent. In addition, performance bonds and offshore guarantees must be arranged before down payments or subsequent payments are authorized by the Ministry of Finance.

Nigeria requires that an international inspection service certify the price, quantity and quality before shipment for all private sector imports. All containerized shipments irrespective of value and all goods exported to Nigeria with a cost, insurance, and freight (CIF) value greater than $1,000 are subject to preshipment inspection.

An expatriate quota system is in place, and government approval is required for residency permits for expatriates occupying positions in local companies. The number of expatriate positions approved is dependent on the level of capital investment, with additional expatriate positions considered on a case by case basis. In the past, this system has caused relatively few problems, but in 1994 U.S. firms reported increasing difficulties in securing and renewing the necessary permits.

Nigeria generally uses an open tender system for awarding government contracts, and foreign companies incorporated in Nigeria receive national treatment. Approximately five percent of all government procurement contracts are awarded to U.S. companies. Nigeria is not a signatory to the General Agreement on Tarisss and Trade (GATT) Government Procurement Code. 6. Export Subsidy Policies

In 1976, the government established the Nigerian Export Promotion Council (NEPC) to encourage development of nonoil exports from Nigeria. The council administers various incentive programs including a duty drawback program, the Ex: port Development Fund, tax relief and capital assets depreciation allowances, and a foreign currency retention program. The duty drawback or manufacturing-in-bond program is designed to allow the duty free importation of raw materials to produce goods for export, contingent on the issuance of a bank-guaranteed bond. The performance bond is discharged upon evidence of exportation and repatriation of foreign exchange. Though meant to promote industry and exportation, these schemes have been burdened by inefficient administration, confusion, and corruption, causing difficulty and, in some cases, losses to those manufacturers and exporters who opted to use them.

The NEPC also administers the Export Expansion Program, a fund which provides grants to exporters of manufactured and semi-manufactured products. Grants are awarded on the basis of the value of goods exported, and the only requirement for participation is that the export proceeds be repatriated to Nigeria. Though the grant amounts are small, ranging from two to five percent of total export value, they appear to be subsidies as designated by GATT, and may violate GATT rules. 7. Protection of U.S. Intellectual Property

Nigeria is a signatory to the Universal Copyright Convention (UCC) and the Paris Convention. In 1993, Nigeria became a member of the World Intellectual Property Organization (WIPO). Cases involving infringement of non-Nigerian copyrights have been successfully prosecuted in Nigeria, but enforcement of existing laws remains weak, particularly in the patent and trademark areas. Despite active participation in international conventions and the apparent interest of the government in intellectual property rights issues, little has been done to stop the widespread production and sale of pirated tapes, videos, computer software and books in Nigeria.

The Patents and Design Decree of 1970 governs the registration of patents. Once conferred, a patent gives the patentee the exclusive right to make, import, sell, or use the products or apply the process. The Trade Marks Act of 1965 governs the registration of trademarks. Registering a trademark gives its holder the exclusive right to use the registered mark for a particular good or class of goods. The Copyright Decree of 1988, based on WIPO standards and

U.S. copyright law, currently makes counterfeiting, exporting, importing, reproducing, exhibiting, performing, or selling any work without the permission of the copyright owner a criminal offense. Progress on enforcing the 1988 law has been slow. The expense and length of time necessary to pursue a copyright infringement case to its conclusion are detriments to the prosecution of such cases.

In the past, few companies have bothered to secure trademark or patent protection in Nigeria because it is generally considered ineffective. Losses from poor intel

lectual property rights protection are substantial, although the exact cost is difficult to estimate. The majority of the sound recordings sold in Nigeria are pirated copies and the entire video industry is based on the sale and rental of pirated tapes. Satellite signal piracy is also common. 8. Worker Rights

a. The Right of Association.-Nigerian workers, except members of the armed forces and employees designated essential by the government, may join trade unions. 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. However, unlike many other countries with Essential Services Acts, utilities, the national airline, public sector enterprises and the post office are not considered essential services, are unionized, and may strike. In May 1993 the government promulgated the Teaching Essential Services Decree, declaring education an essential service and calling for the dismissal of teachers who participate in a strike longer than one week in duration. Attempts to enforce the decree proved unworkable, and it was subsequently withdrawn. Under Nigerian labor law, any nonagricultural enterprise which has more than 50 employees is obliged to recognize trade unions and must pay dues or deduct a checkoff for employees who are members.

The government has decreed a single central labor body, the National Labor Con. gress (NLC), and deregistered other unions. On August 24, 1994 the government dismissed the executives of the NLC, and the two leading petroleum sector unions and appointed "administrators” to run them. It has attempted to prevent withholding dues from oil industry union members' paychecks.

b. The Right to Organize and Bargain Collectively. The labor laws of Nigeria permit the right to organize and the right to bargain collectively between management and trade unions. Collective bargaining is, in fact, common in many sectors of the economy. Nigerian labor law further protects workers against retaliation by employers for labor activity through an independent arm of the judiciary, the Nigerian In. dustrial Court, which handles complaints of antiunion discrimination. The NLC has complained, however, that the judicial system's slow handling of labor cases con. stitutes a denial of redress to those with legitimate complaints. The government retains broad authority over labor matters, and can intervene forcefully in labor dis. putes which it feels contravene its essential political or economic programs.

c. Prohibition of Forced or Compulsory Labor.–Nigeria's 1989 Constitution prohibits forced or compulsory labor, and this prohibition is generally observed. However, on August 24, 1994 the government promulgated the State Security (Detention of Persons Amendment) Decree, number 11. This su persedes an earlier decree which allowed persons to be detained for successive periods of six weeks without charge and now allows for persons to be detained for periods of up to three months without charge. The International Labor Organization (ILO) has noted that with the 1989 Constitution suspended and Decree 11 in effect, Nigeria may not be able to enforce the ILO convention against forced labor in the absence of constitutional guarantees.

d. Minimum Age of Employment of Children.- Nigeria's 1974 Labor Decree prohibits employment of children under 15 years of age in commerce and industry and restricts other child labor to home-based agricultural or domestic work. The law further stipulates that no person under the age of 16 may be required to work for longer than four consecutive hours or permitted to work for more than eight hours in one day: The Labor Decree allows the apprenticeship of youths age 13 to 15 under specific conditions. Apprenticeship exists in a wide range of crafts, trades, and state enterprises. Service of apprentices over the age of 15 is not specifically regulated by the government. Primary education is compulsory in Nigeria though the law is only sporadically enforced, particularly in rural areas where most Nigerians reside.

e. Acceptable Conditions of Work.-Nigeria's 1974 Labor Decree established a 40. hour workweek, prescribed two to four weeks of annual leave, and set a minimum wage. The last government review of the minimum wage, undertaken in 1991, raised the monthly minimum wage from 250 naira ($11.36) to 450 naira ($20.45). Nigerian labor law stipulates that workers are to be paid extra for hours worked over the legal limit. The code also states that workers who work on Sundays and statutory public holidays must be paid a full day's pay in addition to their normal wages. There is no law prohibiting excessive compulsory overtime. A 1974 labor decree contains general health and safety provisions. Employers must compensate in. jured workers and dependent survivors of those killed in industrial accidents.

f. Rights in Sectors with U.S. Investment.-Worker rights in petroleum, chemicals and related products, primary and fabricated metals, machinery, electric and elec

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