Priority Areas of Industrial Investment

Four industrial sectors considered as prority areas of development have been identified by the Government of Nigeria because of their linkage effects on the other subsectors and potential catalytic role in the overall growth of the industrial sector. These priority areas, which are most favoured in the administration of government industrial incentives, are as follows:

  1. Agriculture

The main policy here is sufficiency in food production and surplus for use as industrial raw materials for export. The priority areas include:

2. Manufacturing Industries

The priority areas of  industrial investment, which are favoured in the administration of government incentives, are those described here below:

Industries which can either immediately or in a few years time source their raw materials locally e.g. in the agro and agro-allied sub-sectors for which there are abundant natural resources in Nigeria, including food preparations, e.g. fruit drinks, cereal milling, feed mills and vegetable oil processing;

Industries, which support food production programmes through local manufacture of chemicals, equipment and light commercial vehicles in particular, and chemical as well as petrochemical based manufacturing industries in general;

Industries with multiplier effect such as flat sheet mills and machine tools industry including foundries and engineering industries for spare parts production;

Basic industries and petrochemical and liquidified natural gas projects in which the government welcomes foreign partners;

Processing of local agricultural produce and minerals into industrial raw materials as manufactured intermediate goods required by existing industries in Nigeria;

Investment in research institutes particularly in the area of adaptive research and commercialisation of local inventions;

There are nine (9) priority sub-systems that possess the ability to stimulate the laying of a favourable industrial base and provide a catalyst to industrialization in Nigeria. This pilot sub - systems are: -

- Foundry and forges:

- Metal fabrication:

- Pharmaceutical:

- Food processing:

- Leather and leather products;

- Textiles and wearing apparels

- Non-metallic building materials - bricks, ceramics and glass.

The Government of Nigeria welcomes investors' participation not only in these but also in the following project areas: -

- Gemstone cutting and polishing;

- Gold processing;

- Mineral beneficiation plants for gypsum talc, kaolin, marble, dolomite, and barite;

- Mini-sugar production plants;

- cement production;

- Lead and zinc;

- Refractory bricks;

- processing of salt from sea water;

- Sodium tripolphosphate production;

- Small medium scale plant for sheet metal production;

- Long fibre pulp/Kraft paper production;

- Bottled mineral water;

- Mining of industrial minerals;

- Telecommunications.

3. MINING AND MINERAL EXTRACTION (NON-OIL)

There are tremendous opportunities in this sector also, and government has invested heavily in the generation of vitaY information on minerals, outstanding among these are coal, gypsum, barytes, kaolin and talc. Nigeria has one of the best quality coal deposits in the world with the lowest sulphur content. The names, location, quantity and possible industrial exploitation of some solid mineral are as follows:

Barytes: 41,000 and 70,000 tonnes of which are found in Benue and Plateau State respectively, are used as inert volume and weight filler in drilling mud, rubber, glass, paper etc. or as extender in the plant industry, and as chemicals in the manufacture of glass, heavy printing paper and plastics;

Coal: 82.2 Million tonnes, 189 million tonnes and 32 million tonnes of which are found in Enugu, Benue and Plateau States, respectively. It is used as fuel and in industrial production of tar, gas and non-edible oils

Diatomite: 200,000 tonnes of which are found in Bomo State; is used in making insect control powder, bond for furnace brick walls and mineral fillers and filters;

Lignite: 71 million tonnes of which are found in Delta State; is used in industrial production of tar, gas, oils and (nitrate) fertiliser:

Columbite: 14,223 tonnes of which are found in Plateau State; is used in forming alloys that are useful in nuclear, aerospace and gas turbine engineering;

Iron Ore: 30.48 million tonnes, 182.5 million tonnes and 45.72 million tonnes of which are found in Agbaja in Plateau State, Okene in Kogi State and Enugu State, respectively;

is used for making steel, transformer and motor cars, ferrous sulphate from waster liqueur of the steel picking process or by the direct reaction, metals for electrical shielding, electro-magnetic devices, electric bells, electric fan cage, equipment rack, instrument body, engineering works, hydrated salt, iron oxide pigments, various salts of iron and ferrites and chemicals; Tin: 10,546 tonnes of which are found in Plateau State ; is employed in plating, production of tin oxide used in paint, paper and ink industries, production of tin oxide resistors, electric lead wires.

 

4. EXPORT MANUFACTURE

In recent studies by the Federal Ministry of Industry, activities identified in respect of export market potential include:

(a) Agricultural produce processing, food and beverages:

(b) Textiles: yam / textiles, apparel, leather and products of leather including footwear of rubber and plastics):

(c) Wood: furniture;

(d) Paper: paper products;

(e) Iron and steel, non-ferrous metals;

Fabricated metal products, and Consumer durable. It is recommended that industries in Nigeria should specialise in these sectors in which it is found that Nigeria has comparative advantage relative to the operation of such industries in other countries.

 

5. PRIVATISATION POLICY

The Federal and State governments had in the past endeavoured to play an active catalytic role in the economy by initiating and acting as sizeable stakeholders in a number of core industries.

The 1997 Budget announced that all laws that inhibit competition in certain sectors of the Nigerian economy would be repealed. Accordingly, with effect from 1998, private sector investors are now free to join or compete with government owned utility corporations. The Public Enterprises Privatisation and Commercialisation Act, authorises the partial privatisation of government enterprises in the following sectors:

Telecommunications;

Electricity (generation and distribution):

Petroleum refining;

Coal and bitumen production (mining, processing and export);

Tourism generation (tour and travels and hospitality).

Within the context of the liberalisation policy, both foreigners and nationals are free to

participate and invest in the privatisation of the public enterprises.

In this regard, the Federal Government constituted the National Council on Privatisation

under the chairmanship of the Vice President of the Federal Republic of Nigeria to

oversee the privatisation programme being implemented by the Bureau of Public

Enterprises (BPE). The exercise is expected to be accomplished in three phases as follows:

Phase 1: This Phase, which has already been concluded, had on its bill commercial and Merchant Banks and Cement plants that are already quoted on the Nigerian stock exchange.

Phase II: Billed on Phase II are Hotels and Motor Vehicle plants (present Phase)

Phase 111: Included in this phase are NEPA, NITEL, NAFC'ON, Nigeria Airways, and Petroleum Refineries.

1. PRINCIPAL LAWS ON FOREIGN INVESTMENTS

The principal laws regulating foreign investments are, the Nigerian Investment Promotion Commission Act No. 16 of 1995 and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act No. 17 of 1995.

 

2. DEREGULATION OF EQUITY STRUCTURE IN NIGERIA ENTERPRISES

Effectively, the Nigerian Investment Promotion Commission (NIPC) Act No. 16 of 1995 has abolished any restrictions, in respect of the limits of foreign shareholding, in Nigeria registered/domiciled enterprises.

The only enterprises, which are still exempted from free and unrestrained foreign participation, are those involved in:

- Production of arms and ammunition;

- Production of and dealing in narcotic drugs and psychotropic substances;

- Manufacture of military/ paramilitary wears and accoutrements.

3. THE NIGERIAN INVESTMENT PROMOTION COMMISSION ACT NO. 16. 1995 (NIPC Act).

This Act established the Nigerian Investment Promotion Commission (NIPC) as the successor to Industrial Development Coordination Committee (IDCC)

3.1. Functions and Powers

The Nigerian Investment Promotion Commission (NIPC) is an Agency of the Federal Government with perpetual succession and a common seal which is specially established, among other things, to:

(a) co-ordinate, monitor, encourage and provide necessary assistance and guidance for the establishment and operation of enterprises in Nigeria ;

(b) initiate and support measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors;

(c) promote investments in and outside Nigeria through effective promotional means;

(d) collect, collate, analyze and disseminate information about investment opportunities and sources of investment capital and advise on request, the availability, chance or suitability of partners in joint-venture projects;

(e) register and keep records of all enterprises to which the NIPC Act legislation applies;

(f) identify specific projects and invite interested investors for participation in those projects;

(g) initiate, organise and participate in promotional activities such as exhibitions, conferences and seminars for the stimulation of investments;

(h) maintain liaison between investors and Ministries, government departments and agencies, institutional lenders and other authorities concerned with investments;

(i) provide and disseminate up-to-date information on incentives available to investors;

(j) assist incoming and existing investors by providing support services;

(k) evaluate the impact of the Commission on investment in Nigeria and recommend appropriate remedies and additional incentives;

(1) advise the Federal Government on policy matters, including fiscal measures designed to promote the industrialisation of Nigeria or the general development of the economy;

and

(m) perform such other functions as are supplementary or incidental to the attainment of the objectives of NIPC Act.

3.2. Provisions Relating to Investments Notable amongst the provisions relating to investments are the following:

- A non-Nigerian may invest and participate in the operation of any enterprise in Nigeria;

- An enterprise, in which foreign participation is permitted, shall after its incorporation or registration, be registered with the NIPC;

- A foreign enterprise may buy the shares of any Nigerian enterprise in any convertible foreign currency.

A foreign investor in an approved enterprise is guaranteed unconditional transferability of funds through an authorised dealer, in freely convertible currency be it:

(a) dividends or profit (net of taxes) attributable to the investment;

(b) payments in respect of loan servicing where a foreign loan has been obtained; and

1. the remittance of proceeds (net of all taxes) and other obligations in the event of sale or liquidation of the enterprise or any interest attributable to the investment.

2. total repatriation of capital should the investor choose to relocate elsewhere.

 

3.3 Priority Areas of Investment

The NIPC issues guidelines and procedures, which specify priority areas of investment and prescribes incentives and benefits, which are in conformity with Government policy.

3.4 Incentives for Special Investment

For the purpose of promoting identified strategic or major investment, the NIPC may, in consultation with appropriate Government agencies, negotiate specific incentive packages for the promotion of investment.

4. INVESTMENT PROTECTION ASSURANCE

4.1 The NIPC Act provides that:

(a) No enterprise shall be nationalised or expropriated by any Government of the Federation, and

(b) No person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other persons.

4.2

1. There will be no acquisition of an enterprise by the Federal Government unless the acquisition is in the national interest or for a public purpose under a law which makes provision for:

(a) payment of fair and adequate compensation, and

(b) a right of access to the courts for the determination of the investor's interest of right and the amount of compensation to which he is entitled.

4.3. Compensation shall be paid without undue delay, and authorisation given for its repatriation in convertible currency where applicable.

4.4. Apart from the investment guarantee assurances of the NIPC Act countries are welcome to execute and enter into bilateral Investment Promotion and Protection Agreements (IPPA) with the Nigerian government.

5 CHECKLIST OF STEPS FOR ESTABLISHING NEW COMPANIES IN NIGERIA WITH FOREIGN SHAREHOLDING

Stage A

1. Establish partners/shareholders and their respective percentage shareholdings in the proposed company.

2. Establish name, initial authorised share capital and main objects of proposed company.

3. EXCEPT in instances where the proposed company will be 100% owned by nonresident shareholders - Prepare Joint-Venture Agreement between prospective shareholders. The Joint-Venture may specify; inter-alia, mode of subscription by parties, manner of Board Composition, mutually protective quorum for meetings, specific actions which would necessitate share-holders approval by special or other resolutions.

4. Prepare Memorandum and Articles of Association, incorporating the spirit and intents of the Joint-Venture Agreement.

5. Foreign Shareholder may grant a power of attorney to its Solicitors in Nigeria, enabling them to act as its Agents in executing incorporation and other statutory documents pending the registration with NIPC (i.e. formal legal status for foreign branch/subsidiary operations).

6. Conduct a search as to the availability of the proposed company name and, if available, reserve the name with the CAC.

7. Effect payment of stamp duties, CAC filing fees and process and conclude registration of the company as a legal entity.

Stage B

Prepare Deeds of Sub-Lease/Assignment, as may be appropriate, to reflect firm commitment on the part of the newly registered company, to acquire business premises for its proposed operations.

Stage C

1. Prepare and submit simultaneous applications to the NIPC (on the prescribed NIPC Application Form) for the following: -

- Registration and Expatriate Quota;

- Pioneer Status and other incentives (where applicable)

2. The application to the NIPC should be accompanied with the following documents:

Original and duplicate Copy of the duly completed NIPC Form;

Original Copy of the treasury receipt for the purchase of NIPC Form;

A Copy of the Certificate of Incorporation of the applicant company;

A Copy of the Tax Clearance Certificate of the applicant company;

A Copy of the Memorandum and Articles of Association;

A Copy of treasury receipt as evidence of payment of stamp duties on the authorised share capital of the company as at date of application;

A Copy of the Joint-Venture Agreement -UNLESS 100% foreign ownership is envisaged;

A Copy of Feasibility Report and Project Implementation Programme of a company for its proposed business. It is advisable that quotations, letters of intent and other such documentation relating to industrial plant and machinery to be acquired by the company, be forwarded either as annexes or separately. In order to discourage the dissipation of administrative energy on speculative applications, the NIPC favours the applicant who has demonstrated positive intention to commence business as and when approvals are granted. Hence, the requests for evidence of acquisition of business premises and evidence of acquisition of the plant and machinery to be utilised in the company's business;

A Copy of Deed(s) of Sub-Lease/Agreement evidencing firm commitment to acquire requisite business premises for the company's operation. By implication, the ultimate NIPC approvals do incorporate approvals of the industrial site locations indicated in the application;

A Copy of training programme or personnel policy of the company, incorporating management succession schedule for qualified Nigerians;

Particulars of names, addresses, nationalities and occupations of the proposed directors of the company;

Job title designations of expatriate quota positions required, and the academic and working experience required for the occupants of such positions. It is pertinent to note that expatriate quota on a "Permanent Until Reviewed" (PUR) status is only accorded to a Managing Director, where the nonresident shareholders own a majority of the company's shares, and the authorised capital of the company is N5 million and above;

Copies of information brochure on foreign shareholder (if available) as testimony of international expertise and credibility of the foreign partner in the proposed line of business.

Having obtained the requisite NIPC approvals, the non-resident shareholder must act with despatch to Import its foreign equity holding in the company. To ensure prompt importation of the foreign equity components, the NIPC may register company but defer approvals for Expatriate Quota and Pioneer Status and other applicable investment incentives, until evidence of capital importation is produced.

2 After obtaining Certificate of Capital Importation from the bank, the NIPC is to be notified of this fact with the supporting documentation, in order for it to resume processing of pending approvals that might have been deferred on such ground.

3 As soon as expatriate quota position are granted and the respective

individuals to fill the quota positions are recruited, the company must embark on steps to obtain work permit and residency status for the expatriate employees and their accompanying spouses and children (if any).

 

5.1 Meaning of' NIPC Registration' and 'EXPATRIATE QUOTA'

NIPC Registration confers permanent authorisation for the local operation of businesses with foreign investments either as branch/subsidiary of a foreign company or otherwise.

Expatriate quota is the official permit to a company; conveying permission for the company to employ individual expatriates to specifically approved job designations, and also specifying the permissible duration of such employment.

The expatriate quota forms the basis of work permits for expatriate individuals employed (whose qualifications must fulfil the criteria established for the particular quota position). Expatriate quota positions are usually granted for 2-3 years subject to renewal, EXCEPT in cases where companies qualify for and are granted "PUR" Quota (i.e. Permanent Until Reviewed) position.

 

5.2 The Current Regulation on the Appointment of Foreign Directors

The promoters of business ventures in Nigeria arc free to appoint directors of their choice, either foreign or Nigerian, and the directors may be resident or non-resident. The application to the NIPC must reflect the names of the proposed Nigerian and foreign directors (with an indication of resident and non-resident directors). The Registration Certificate consequently issued following such application usually reflects the respective names of the proprietors of the company, as well as the directors representing each proprietor or co-proprietor.

Payments of foreign directors' fees are remittable in the samte manner as dividends accruing to the foreign company. However, since such'fees are taxed at source (5% as withholding tax), each foreign director's fees are remittable subject to satisfactory evidence that the taxable amounts on such fees have been paid.

5.3 Pioneer Status (Tax Holiday) Advantages to a Company

The Industrial Development (Income Tax Relief) Act, Cap. 179 Laws of Nigeria, 1990, declares a number of industries as pioneer industries. Thus, any company whose products fall within the categorised industries could be conferred with Pioneer Status.

This designation is not necessarily a reflection that a company was pioneer per se in the industry, as several companies within the same pioneer industry classification could qualify for Pioneer Status. Where the activities of a company include the production of pioneer and non-pioneer products, the tax relief available on conferment of Pioneer Status would be restricted to income derived from pioneer products only. Under the current industrial policy, conferment of Pioneer Status accords a company relief from income tax liability for a period of up to 5 years (tax-holiday status).

The criteria for granting Pioneer Status are related and/or based on the following considerations:

(i) the amount of qualifying capital investment in a company (N5 million and above) must be verifiable by physical inspection and supported by a report of the Industrial Inspectorate Division of the Federal Ministry of Industry before a Pioneer Certificate is granted.

(ii) the socio-economic advantages of a company's activities to the Nigerian economy as set out in its Feasibility Study is also an important consideration.

Without prejudice to these conditions, NIPC is empowered to confer Pioneer Status and other investment incentives, in any other deserving circumstance as the Council of NIPC may approve in accordance with the provision of the Nigerian Investment Promotion Commission Act and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act in 1995.

However in the case of portfolio investment in the capital market, the Securities and Exchange Commission (SEC) regulates the market.