The Nigerian Economy: Outlook And Opportunities For Private - - PowerPoint PPT Presentation

Dr Jumoke Oduwole

The Nigerian Economy:

Outlook And Opportunities For Private Investors

• 1. Nigeria’s Economic

Outlook

03

Africa’s largest economy over the last seven years

• At $392.26bn in 2018, Nigerian economy larger than South Africa’s by $29bn

Largest Market - a projected market size of 402m people and the world’s 3rd largest population by 2050 20 years of uninterrupted democracy spanning peaceful handover of 5 Presidents Nigeria’s per capital income of $2028.2 is 84% higher than the continent’s average of $1,720 Competitive labour cost – current monthly minimum wage at $83 compared $233 for South Africa or $124 for Egypt Size of France and Italy combined. Well placed geographically and blessed with diverse natural resources

Nigeria named one of the 10 most improved economies in the World Bank Doing Business report released on October 24, 2019

Current facts about the Nigerian economy

04

In 2018, the Nigerian economy grew by 21.1bn – larger than the combined GDP of Comoros, Djibouti, Eritrea and Mozambique and The Gambia. In 2018 alone, more than USD25bn in diaspora remittances in 2018, 7 times larger than total official development assistance Nigeria’s total trade more than quadrupled from $22bn in 1999 to $99bn in 2015 Nigeria accounts for approximately 60% of the trade among ECOWAS countries Signatory to the AfCFTA and bullish on the promise of greater access to African markets Curtailed Boko Haram terrorists. Regained control of 17 Local Government Areas previously under their control

Current facts about the Nigerian economy (Cont’d)

Pillar 3: Building a competitive economy Pillar 2: Investing in

• ur people

Pillar 1: Restoring growth Enablers: Improving governance and security Delivery: Implementation and financing

05

Broad Policy Objectives

• Double manufacturing’s share of GDP
• Maintain a competitive exchange rate
• Reduce inflation from 18.6% to 9.9%
• Increase tax/GDP ratio from 6% to 15%
• Improve budget preparation and execution

process

• FDI target of $10bn
• Creation of 15 million new jobs
• Average annual GDP growth of 4.62%
• Top 100 on the ease of doing business ranking by

2020

• Rebalance domestic/foreign debt from 84:16 to

60:40

Nigeria set great economic aspirations in the Economic Recovery and Growth Plan (ERGP 2017-2020) which has three broad pillars:

• 2. Known Investor

Challenges

07

Biggest draws: natural resources, high growth rates and large domestic markets… Nigeria has 4 of the 5 key factors investors look for in its favour

Africa’s Investment Attractiveness

…yet concerns about business environment persist 53.2% 23.5% 14.4% 7.7% 1.2% 30.5% 36.6% 24.0% 8.2% 0.6% 24.6% 36.2% 26.8% 9.9% 2.5% 27.5% 32.1% 28.0% 10.7% 1.8% 22.1% 35.1% 27.0% 12.5% 3.3% 8.9% 18.5% 37.1% 34.3% 1.2%

Source: Nigerian Investment Promotion Commission (NIPC) November 2019

Africa’s Perceived Barriers To Investment…

08

Business environment is most important barrier… … incentives are least important barrier

Source: Nigerian Investment Promotion Commission (NIPC) November 2019

• 3. Investment Opportunities

Nigeria offers investment opportunities in both high growth & underpenetrated markets across major sectors. Key examples:

10

1.

• 82% of the land size is arable;
• 40% of arable land is cultivated
• Population is expected to reach 400 million by 2050;

Oil/Gas

2.

• Current Daily Production of 1.8 Million Per Barrel;
• Local refining capacity represent 24% of crude oil

production (1.85 million barrel/day);

3.

Power Generation

• Installed Daily Capacity of 12,522 Megawatt;
• Current Operating Capacity 3,879 Megawatt;
• Over 40% have limited to no access to Power.

4.

• Over 20 Million Housing Deficit vis-à-vis a Growing

Population of over 195 Million People; Real Estate Agriculture

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Education

5.

• Children under age of 15 years make up about 40.9% of the current

population of 195 Million;

• Over 10.5 Million children under the age of 15 years are undereducated;
• Approximately 20.1% in education accessibility rate;

HealthCare

6.

• Health insurance penetration rate is estimated

at 5.1% of the current population;

7.

Telecommunication & ICT

• Internet Penetration rate estimated at 47.4%;
• Mobile penetration rate estimated at >80%;

Nigeria offers investment opportunities in both high growth & underpenetrated markets across major sectors. Key examples:

▪ New US$9 million equity fund from the African Development Bank for small and medium sizes agribusinesses ▪ Machines and equipment enjoy a 0% duty ▪ Capital allowance of up to 50% for plants and equipment

Incentives

▪ Nigeria is the most populous country in Africa and a fast-growing population will increase domestic consumption ▪ A young and growing population provides a large pool of labour ▪ Favourable climate, fertile land and water resources ideal for export-

• riented production

▪ 84 million hectares of arable land, of which only 40% has been cultivated

Opportunities

12

Investment opportunities in the Agricultural industry

▪ Abundant and reliable rainfall in over two thirds of the territory ▪ The agricultural sector plays a key role as Nigeria’s key growth driver ▪ The sector is the second largest contributor to GDP (21% in 2015) and provides employment for over 70% of the population ▪ Nigeria has some of the richest natural resources for agriculture production in the world

Overview

13

Example - Isa Gerawa's Soybean Processing Factory in Kano is processing Nigerian raw soybeans into finished vegetable oil.

• 1,200-tonnes-per day

solvent extraction plant in Kano

• $50m investment – N18bn
• Created no fewer than

5000 jobs for the citizens

Isa Gerawa's Soybean Processing Factory In Kano

14

Nigerian manufacturing industry offers several attractive investment opportunities

Agro-allied And Agro Processing ▪ Food Processing (Beverages, Packaged Foods, etc) ▪ Sugar Production ▪ Palm Oil Processing ▪ Leather and Leather Products ▪ Rubber Products (Tyre) ▪ Cocoa Processing Metals and Solid Minerals Product ▪ Cement Production ▪ Automobile Assembly ▪ Basic Metal/Steel ▪ Aluminum ▪ Chemicals Oil & Gas Related Industries ▪ Petrochemical ▪ Fertilizer ▪ Methanol ▪ Refineries ▪ Plastics Construction and Light Manufacturing ▪ Housing ▪ Cotton, Textile and Garment ▪ Electronics ▪ ICT Equipment

15

Example - The Turkish diaper maker Hayat’s Factory in Agbara, Ogun State

• $100m investment in diaper production
• Annual production capacity - 1.3bn units of diaper and 13,000 tons of tissue
• Employs 3000 Nigerians

The Turkish Diaper Maker Hayat’s Factory In Agbara, Ogun State

16

Nigerian ICT sector offers attractive investment opportunities

Nigeria ICT sector – strong fundamentals

✓ ✓ ICT sector accounts for

13.8%of Nigeria’s GDP in 2018

✓ ✓ The sector has more

than doubled in size

• ver the past 7 years.

✓ ✓ 58% of the adult population have access to financial institutions and have mobile phones

13.8%

5 8%

✓ ✓ There are over 163

millionmobile phone subscribers ✓ ✓ 60% are active mobile internet subscribers

60%

✓ ✓ 26 millionNigerians are on Facebook

Nigeria’s Services sector contributes 53% to the country’s GDP and has been the highest contributor to economy, withan annual growth rate of 5.8% between 2010-2015. Competitive labour compared to other regions. The digital economy is projected to generate $88 billion and create three million new jobs over the next tenyears.

✓ ✓ There are about 23 activetechnology

hubs across the country.

58%

Nigeria ICT sector examples

17

FinTech E-commerce CleanTech HealthTech Media & AdTech EdTech AgriTech Logistics

18

Fintech impact examples

• One of the most valuable African FinTech businesses with operations in 20 African countries
• One of Nigeria’s unicorns – valued at over $1bn, Visa International recently announced a $200m

investment

• Processing over 500 million transactions per month as at May 2019
• Drives financial inclusion across Nigeria with over 270,000 access points as of 2018
• Nigeria’s largest distribution network for financial services in Nigeria
• 23000 merchants
• Over 14m unique users and 530 direct employees.
• Over 10,000 indirect employment through 23,000 agents
• Nigeria’s first open living lab and pre-incubation space where work to catalyze creative

social tech ventures take place

• Founded 5 years ago
• Acquired Kenya’s iHub for an undisclosed amount in September 2019
• Invested over USD500,000 in social tech ventures. Operations in Kigali, Rwanda

• 4. Business Climate

Reforms

Enabling Business Environment Is Highly Correlated With The Administrations 3 Priorities

4.5 3.8 3.5 2.6

• 42%

Quartile 1 ranked Countries Quartile 2 ranked Countries Quartile 3 ranked Countries Quartile 4 ranked Countries 2 8 36 12

• 94%

Security - Internal conflict index (lowest conflict = 5.0) Anticorruption - Corruption perception score (Countries perceived as least corrupt = 100) Economy – GDP per capita (USD thousand)

64 44 37 26

• 59%

Ease of Doing Business Ranking

SOURCE: World Bank; Institute for Economics & Peace: Global Peace Index 2019; Transparency International – Corruption Perception Index 2018

20

Strong Correlation Between Business & Investment Environment and GDP

Income per capita (log scale), USD per person per year 2019 WB ease of doing business rank 1,000,000 100,00 10,00 1,000 100 200 150 100 50 Nigeria #131 Austria #27 Malawi #109 Albania #82 Chile #59 Singapore #2 New Zealand #1

SOURCE: World Bank; IMF; EBES

21

• National and subnational rankings are

important as MSMEs make up to 90%

• f business in Nigeria
• Offers opportunity to benchmark local

realities with global best practices e.g The business climate conditions in Aba can be compared with that of New York

• The local business environment plays a

vital role in ability of MSMEs to thrive

• A friendly business environment

encourages MSMEs to move from the informal to the formal sector

Enabling Business Environment Secretariat (EBES) January 2019

Building a Competitive Economy: The Nigerian Story

Competitiveness is the extent to which a country is able to foster an environment in which enterprises can generate long- term value.

Nigeria set great economic aspirations in the “Economic Recoveryand Growth Plan (ERGP 2017-2020)” which has three broad objectives Pillar 3: Building a competitive economy I Pillar 2: nvesting in our people Pillar 1: Restoring growth Enablers: Improving governance and security Delivery: Implementation and financing

22

Building a Competitive Economy

.

Hard Infrastructure EoDB Reforms

• 1. Reduction in cost and time
• 2. Improving transparency and efficiency
• 3. Focus on people, processes and

infrastructure

23

The PEBEC Model Is Designed To Achieve Much Needed Political Buy-in Across All Arms And Levels Of Government

• Chair – His Excellency, Vice President Yemi

Osinbajo SAN, GCON.

• Members – 13 Cabinet Ministers, Secretary to the

Government of the Federation, Head of Civil Service of the Federation, Central Bank Governor, representatives of the National Assembly, Judiciary as well as State Government representatives and the private sector.

• EBES – the Enabling Business Environment

Secretariat implements the reform agenda of the

• PEBEC. EBES became fully operational in October

2016.

Council Membership PEBEC Operating Model

FEC Council Secretariat Quarterly update Monthly reporting Mandate reforms and resolve bottlenecks Work with MDAs to implement reforms and escalate issues Forms part of National Agenda (ERGP)

PEBEC’s model aligns with global best practice, and includes a strong performance tracking element that ensures MDAs are accountable for reform implementation

Enabling Business Environment Secretariat (EBES) November2019

24

While we are not unaware of the challenges currently being faced by our businesses, on

• ur part, the Government remains relentless

in our goal of removing the obstacles and roadblocks that have long afflicted commercial activity in Nigeria. H.E VP Prof. Osinbajo SAN,GCON March 2016

In July 2016, The Presidential Enabling Business Environment Council Was Established To Oversee Nigeria’s Business Climate Reform Agenda

President Muhammadu Buhari, GCFR Vice President YemiOsinbajo, SAN, GCON

Move Nigeria's ranking to Top100 in the 2020 World Bank Doing Business Index

T

• p

100

REMOVE CRITICALBOTTLENECKS & BUREAUCRATIC CONSTRAINTS to doing business in Nigeria

Enabling Business Environment Secretariat (EBES) November 2019

25

106 114 121 125 137 133 131 147 170 169 169 145 146 131 100

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021f

NIGERIA: World Bank Doing Business Rankings (2006 – 2020)

…..the country has returned to a steady recovery path, after over a decade of neglect and internal governance roadblocks

Decline Stabilisation Recovery Projection

Enabling Business Environment Secretariat (EBES) November 2019

26

Reforms Follow An Established Process Of Filtering, Focus And Execution, With MDAs

1 2 3 4 5

are loosely generated by ALL stakeholders, including public servants private sector players across various sectors, members of the civil society, development partners/the international community, and the general public based on global best practice Ideas for reforms or interventions Reforms are implemented by the Ministries, Departments & Agencies, with the technical support from EBES team working closely with the NationalAssembly, the judiciary, and state governments as required

3

Private sector validates the reformsand their impact on the business environment EBES engages various stakeholders to refine the ideas, and presents to PEBEC for approval to drive the agreed reform ideas Completed reforms are tested, launched and communicated to private sector and other key stakeholders

Enabling Business Environment Secretariat (EBES) November2019

27 1

2 4 5

From 2016 to 2019 Nigeria Has Continuously Improved Its Business Environment…

DECEMBER

Inaugural PEBEC Awards Launch NAP 2.0

SAB EC GE EEP TAB TWN GC PT DwCP RP

MARCH 19 2nd PEBEC Awards

April 19

NAP 4.0 March 2019

7 8

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The PEBEC-led Efforts Have Delivered Some Notable Results

Technology State-driven reforms

• FIRS

launched centralized e-payment channels contributing to a 20% reduction in time businesses spent

• n

documentation and payment

• f

taxes.

• Immigration

launched a fully digitized e-visa process guaranteeing visa approvals in 48-hours Process Improvement

• NAFDAC

reengineered registration processes and reduced processing time ~12 months to less than 3 months

• FAAN

improved user experience at airports by eliminating passenger service charge (PSC) stickers and manual check-in bag searches

• CAC

simplified company registration processes resulting in 50% reduction in processing time Legislative reforms

• NASS

passed the Credit Reporting Act 2017 and the Collateral Registry Act 2017 improving access to credit information and use moveable property as collateral

• Lagos

and Kano introduced specialized court divisions to fast-track resolution

• f

small commercial claims to less 60 days

• Lagos

and Kano implemented e-planning platform reducing the cost property registration and

• btaining

construction permit by up to 25% Examples

• f

business environment improvements

• NOT

EXHAUSTIVE

29

We also ensured systems to drive transparency and track progress were created

Transparency and communication lie at the heart of any successful reform initiative. They help build support within and outside MDAs, educate the public, promote adoption and encourage feedback.

30

The EoDB Executive Order 001 (E01) …was signed on May 18, 2017, by the then Acting President, Prof. Yemi Osinbajo SAN GCON.

The REPORTGOV.NG online portal & kiosks

….were launched to encourage our stakeholders to give feedback. The EO1 contained far-reaching initiatives to be implemented by MDAs to improve transparency and efficiency in public service delivery by mandating:

• transparency of MDAs SLAs, requirements and fees
• default approvals where MDAs miss their SLAs
• one government to encourage collaboration among government

agencies

• provisions to improve the entry experience of travelers and visitors
• provisions to improve the effectiveness of port operations

The REPORTGOV.NG portal is crucial in facilitating interactive collaboration and communication between the public, the MDAs and PEBEC. Feedback from the public helps validate the reforms that are working and also escalate failure points for improvement. PEBEC have proactively tracked issues and followed up with stakeholders to confirm resolution of issues. We’ve also done a trend analyses to understand top of mind issues and provide solutions to them.

Enabling Business Environment Secretariat (EBES) November 2019

Source: Enabling Business Environment Secretariat (EBES) November 2019

We have established systems to track progress with well prepared reports

31

Overall, an empirical impact assessment showed that 140 reforms were implemented over the last 3 years

360% reduction in time for filing Corporate Income Taxes from 14 days to 72hrs (+14 places in 2019 DB rankings) N695bn value of over 35,000 financing statements listed on the National Collateral Registry as of October 2018 51% reduction in time to obtain development permit in Lagos from 61 to 30 days 30% reduction in import documentation 200% reduction in average airport clearance time for visitors 26% reduction in cost of registering a business 60% reduction in time to register property in Lagos and Kano 51% reduction in time to get electricity and number of procedures from 9-7

+39

Over 3 years in the WB DBI 360% 60% 51% 51% N695bn 26% 30% 200%

Source: Empirical assessment with percentages tracked was done in 2018 by Financial Derivatives Company Limited

32

Enabling Business Environment Secretariat (EBES) November 2019

Nigeria recorded improvements in 3 out

• f 4 enabling environment
• f the 2018 Global

Competitiveness Report released by the World Economic Forum. Also an independent EoDB survey conducted in 2018 adjudged Nigeria’s reforms as impactful in terms of reduction in time, cost and procedures of doing business

In the same period, we moved up 39 places in the World Bank Doing Business rankings and named twice as one of top 10 most improved economies in the world 32 Nigerian states implemented 43 reforms that led to improvements in their ease of doing business environment led by Kaduna, Enugu, Abia, Lagos and Anambra States

Over the past 3 years, Nigeria has increased its score by over 15.01 basis points and implemented 140 reforms

…..And we have the results to show for it……

33

01 02 03 04

Source: Enabling Business Environment Secretariat (EBES) November 2019

34

Source: Enabling Business Environment Secretariat (EBES) November 2019

Nigeria’s Ranking – Current Status

35

Nigeria’s Doing Business ranking (out of 190 economies) and score (2016 to 2019)

Source: Enabling Business Environment Secretariat (EBES) November 2019

2016

2017 2018 2019 169th (44.63) 145th (51.52) 146th (52.89) 131st (56.90)

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with the National Assembly on the Companies and Allied Matters Bill, which was passed by both chambers of the NationalAssembly

PEBEC continues to drive its mandate of Removing bureaucratic bottlenecks in Nigeria’s Business Environment through extensive Collaboration:

with the Judiciary on the institution of Small Claims Courts, and electronic access to judgments with State Governments across the country on Subnational EoDB Intervention. with Ministries, Departments and Agencies to implement Executive Order 001 on transparency and efficiency in pubic service delivery. with private sector and stakeholders through strategic communication for constructive feedback and through the REPORTGOV web and mobile platforms. with key regulators in health and insurance sectors to institute a Regulatory Reform Project that addresses stakeholders’challenges.

01 02 03 04 05 06 07

AfCFTA implementationreadiness support

1

2 3 4

5

PEBEC

PEBEC PEBEC PEBEC

PEBEC PEBEC

6

PEBEC

7

Enabling Business Environment Secretariat (EBES) November2019

37

Since July 2017, Business climate reforms are also being implemented at sub-national level across all 36 States and the FCT

§ We are cascading the ease

• f

doing business initiatives down to the sub- national level by engaging state governments and collaborating with them to implement reform initiatives that would increasingly make their states more attractive to business. § A Technical Working Group comprising key stakeholders across government and private sector are developing four home-grown indicators, to study and showcase the business climate reforms across Nigeria.

Source: Enabling Business Environment Secretariat (EBES) November 2019

38

12 Source: https://doingbusiness.org/en/reports/subnational-reports.

• Subnational report captures differences in business regulations and

their enforcement across locations in a single country.

• They provide data on the ease of doing business, rank each

location, and recommend reforms to improve performance in each

• f the indicator areas.
• Subnational Doing Business studies have benchmarked 510

locations in 75 economies since 2005.

• Identifies bottlenecks, highlights opportunities for improvements and

presents best practices.

4 DB indicators measured at subnational level

• Starting a business
• Enforcing contracts
• Dealing with construction permits
• Registering a business

The Case for Subnational Reforms

39

The 2018 World Bank Subnational Doing Business Report For Nigeria was released on October 18, 2018. The report covers 4 indicator areas only

21

Source: Doing Business in Nigeria 2018

• World Bank SNDB Team released the 2018 Nigeria

report on October 18, 2018. ▪ 43 reforms were implemented, 32 States and the FCT had improved DTF scores. ▪ 100% participation of States and the FCT in the Right-

• f-Reply exercise

40

Source: Doing Business in Nigeria 2018

29

Highest ranking on different indicators ▪ Starting a business: FCT ▪ Dealing with Construction Permit: Jigawa ▪ Registering Property: Kaduna ▪ Enforcing Contracts: Jigawa

41

29 States implemented 43 reforms in the past four years that have moved the entire country closer to the global good practice frontier

42

Subnational Ease of Doing Business Framework

Framework of the Baseline Subnational Business Environment Survey

Source: Enabling Business Environment Secretariat (EBES) November 2019

43

April 2020

Lituation Ease of Doing Business National Road Show

▪ EBES began a national road show with a kick-off event – Lituation - in Lagos on October 10, 2019. We were also in Imo State (South East) on November 7, 2019 and Kwara State (North Central) on November 12. Next stops this Q4 are Ekiti, Jigawa, Borno and Delta. More roadshows coming up in 2020.

Source: Enabling Business Environment Secretariat (EBES) November 2019

Lituation – Lagos State Lituation – Imo State Lituation – kwara State

44

We intend to ensure the impact is sustained

While some progress has been achieved to date, several measures are being put in place to ensure progress is sustainable ▪

Building the capacity of the Agencies to deliver

▪

Strengthening the capabilities of the Agencies for the long-term, to sustain the improvements on an on-going basis

▪

Strong political will and determination by the government to effect changes and improvement

Institutionalization Collaboration

▪

Fostering cooperation between the ministries, Agencies and also across States, National Assembly and Private Sector

▪

Effective coordination between all the relevant agencies to provide a unified view

• f implications and improvements

▪

Proper planning to eliminate the critical binding constraints

▪

Be a “moving-target” to make Nigeria a progressively easier place to do business

▪

Means to constantly measure and monitor the improvements

▪

Effect a hands-on implementation support for the changes and improvements

Continuous Improvement

45

Enabling Business Environment Secretariat (EBES) January 2019

• 5. Favourable Policy

Thrust

47

✓ In September 2019, the CBN directed Deposit Money Banks (DMBs) to maintain a minimum loan deposit ratio (LDR) of 65% by December 31, 2019. This follows a July 2019 directive to DMBs to maintain a 60% LDR ratio. ✓ No restrictions on ownership, 100% repatriation; stable FOREX market, reserve now at $41bn ✓ The return on Treasury Bills is now lower than inflation ✓ The Central Bank of Nigeria (CBN) and the Nigerian Communication Commission (NCC) are now on course to boost financial inclusion to 80% by 2020 as the April 2019 MOU between the regulators comes into full force. This will support online and e-commerce businesses 4846

Right Policy and Regulatory Framework – Monetary Policy

48

✓ Nigeria presented a non-profligate 2020 N10.33trn ($33.87bn) budget for job creation to the National Assembly

• n October 8, 2019

✓ Constitution of an Economic Advisory Council by President Muhammadu Buhari in September 2019 ✓ Deep Offshore and Inland Basin Production Sharing Contract (PSC) Amendment signed into law on November 4, 2019 will increase Nigeria’s share of oil earnings by $1.4bn annually ✓ Renewed effort by the National Assembly to pass the Petroleum Industry Bill ✓ IMF maintains its Nigeria GDP forecast for 2019 despite cutting global GDP forecast

Right Policy and Regulatory Framework – Fiscal Policy

49

Notable Investment Laws

Source: Enabling Busines Environment Secretariat November 2019

Nigerian Investment Promotion Commission (NIPC) Act 16 of 1995

The Deep Offshore Act 2019 was signed into law by President Muhammadu Buhari on November 4, 2019 It is expected to increase Nigeria’s share of oil earnings by $1.4bn annually.

Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Act 2019 Companies and Allied Matters Bill 2019

• Nigeria’s most significant business legislation in thirty years and will empower MSMEs
• It speaks to all matters affecting companies – from incorporation all the way to winding up and insolvency
• The bill makes provisions for e-meetings for private companies, abolition of authorized share capital
• The bill is expected to to be passed by the National Assembly and signed into law by President Muhmmadu Buhari in Q1 2020

Nigerian Investment Promotion Commission (NIPC) Act 16 of 1995 Finance Bill of 2019

• Introduction of a specialized tax framework for Securities Lending Transactions
• Elimination of double taxation risks by exempting dividends
• Introduction of simplified “actual year basis” for computing basis period during commencement and cessation periods

Signed into law by President Muhammadu Buhari in January 2019, the Act ensures that market distortions across all sectors are minimized and rules of fair play are respected in the market place

Federal Competition and Consumer Protection Act 2018

• The new model comes into force in Q1 2020 and will ensure fair balance between investors and host States
• Includes reform-oriented provisions that advocate Investment Facilitation and Institutional Governance
• Promotes sustainable development and provides room for a dispute mediation process

New model for Bilateral Investment Treaties

50

Notable Investment Laws (Cont’d)

Source: Enabling Busines Environment Secretariat November 2019

• No restriction on ownership assured except investment
• Listed under the ‘Negative ‘ lists
• Covered by the Nigerian Content and Cabotage Acts

Nigerian Investment Promotion Commission (NIPC) Act 16 of 1995

• Investors are free to repatriate their profits and dividends net of taxes through any authorized dealer in freely convertible currency

Foreign Exchange (Monitoring & Miscellaneous Provisions) Act 17 of 1995

• Promotion of non-export in Nigeria
• Articulate and promote appropriate export incentives, policies and programmes

Nigeria Export Promotion Council (NEPC) Act 64 of 1992

• Licensing, Monitoring and Regulations of Free Trade Zones
• No restriction on foreign ownership of investment
• Repatriation of capital, profit and dividend without restrictions

Nigeria Export Processing Zone Authority (NEPZA) Act 63 of 1992

51

Compendium of Investment Incentives in Nigeria

• Compilation of fiscal incentives in Nigerian tax

laws and duly approved sector-specific incentives

• 6 principal sections
• Investment policies and protections
• General tax-based incentives
• Sector-specific incentives
• Tariff-based incentives
• Export incentives
• Special Economic Zones
• First step in understanding impact of incentives in

achieving Government’s economic objectives and considering incentive reforms

• Available at www.nipc.gov.ng

52

Selection of Investment Incentives in Nigeria

Pioneer status incentive

• For companies in industries

recognised as “pioneer”

• Allows a company income tax holiday

for 3-5 years

• Dividends also exempt from tax

Deduction for research and development

• For companies undertaking R&D

activities for commercialization

• Allows 20% investment tax credit on

qualifying expenditures

Rural investment allowance

• For companies >20km from

government facilities who incur capex for providing electricity, water, tarred roads, etc for the purpose of a trade or business

• Allowance rates:
• 100%: no facilities, 50%: no

electricity, 30%: no water, 15%: no tarred road

Investment tax relief

• Similar to rural investment

allowance, but only available for 3 years max for companies who have not enjoyed pioneer status

Export expansion grant

• Post-shipment incentive for non-oil

exports

• Qualifying exports must fully

repatriate proceeds within 300 days

Export processing zones incentives

• 100% capital allowance
• Rent-free land during construction
• Full holiday from federal, state and

local government taxes

Source: Nigerian Investment Promotion Commission (NIPC) and Federal Inland Revenue Service 2017

53

Sector-Specific Incentives

Incentives Agriculture Solid Minerals Manufacturing Tourism/ Hospitality Oil & Gas Power Pioneer Status

✓ ✓ ✓ ✓ ✓ ✓

Enhanced capital allowance

✓

Exemption from minimum CIT

✓

Indefinite carryover of losses

✓

Interest drawback scheme

✓ (Cassava processing)

Tax holiday

✓ ✓

Investment allowance

✓ (Gas utilization)

Accelerated capital allowance

✓ ✓ (Gas utilization)

Tax-free dividend

✓ (Gas utilization)

Exemption of income earned in convertible currencies

✓ (25%)

Source: Nigerian Investment Promotion Commission (NIPC) and Federal Inland Revenue Service 2017

54

Notable infrastructure project: Power project to generate 25000MW of electricity

July 2019 - Nigeria and Siemens formalizes power deal to increase Nigeria’s power generation to 25000MW by 2025

• 7000MW of reliable power supply

by 2021 and 11000MW by 2023 – in phases one and two, respectively.

55

Notable infrastructure projects

• Largest private investment by China Civil Engineering

Corporation in SSA

• Expected to generate 5,000 jobs when completed
• Production of some parts of the wagons for the 156km

Lagos-Ibadan railway and 187km Abuja-Kaduna railway

• Deployment of off-grid electricity solutions to MSMEs in

economic clusters

• Aim to provide electricity access to over 80,000 retail shop

and empower 340,000 MSMEs

Renewable Energy off grid projects Railway - Construction of Wagon Assembly in Kajola, Ogun State

56

Project Mine (Made In Nigeria For Export)

Development of Special Economy Zones (SEZs) as a major strategic tool to accelerate the implementation of the Nigeria Industrial Revolution Plan (NIRP).

• Private Public Partnership (PPP): Crown

Realties Plc, the Host Communities, Abia State Government and the Federal Government of Nigeria

• Will at full capacity, provide over

625,000 jobs, urban housing of 300,000 units and estimated annual value output of $5bn

• Other SEZs - Lekki Epe Model Industrial

Park, Funtua Cotton Cluster, Katsina

Enyimba Economic City

• 6. Why Invest in

Nigeria?

58

Nigeria is strategically located with access to ECOWAS and the rest of Africa

▪

4 International airports and major seaports in Lagos, Calabar and Bonny island

▪

3,798 km of railway tracks and 168,000 km road network

▪

Land borders with Benin, Cameroon, Chad & Niger and a natural hub for the region

* Rest of West Africa (ROWA) excluding Nigeria

5’45” Cairo

5’40” Johannesburg

5’ Dakar 5’20” Addis Abba 3’05’ Tunis

▪ African Growth & Opportunity Act (AGOA) provides enhanced access to the US market for qualifying Sub- Saharan African countries, including Nigeria. ▪ Under AGOA, about 6,500 product are granted duty- free access.

421 233 190 181 163 65 East Africa North Africa Nigeria Rest of West Africa Central Africa Southern Africa

Population across Africa, 2017 (millions)

Source: United Nations World Population Prospects 2017

59

191 206 234 264 297 333 371 411 2017 2020 2025 2030 2035 2040 2045 2050 4.2 2.4 1.5 1.4 1.3 1.0 1.0 0.5 0.4

Labour costs (US$/hr) Population (millions) 35% 61% 4%

3rd most populous country by 2050

Source: United Nations World Population Prospects 2017

Favourable Demographics

• ffer an affordable long term talent pool

60

Why invest in Nigeria?

14th ₦

Source: Nigerian Investment Promotion Commission (NIPC) 2019

PEBEC/EBES Office: 4th Floor, Nigeria Investment Promotion Commission (NIPC), Plot No. 1181 Aguiyi Ironsi Street, Maitama,Abuja Email: info@ebes.gov.ng | www.businessmadeeasy.ng | @EBESnigeria facebook.com/ EBESnigeria

THANK YOU

APPENDICES

Source: Nigerian Investment Promotion Commission (NIPC) 2019

62

63

Tax Regime in Nigeria

Profits of oil exploration and production (E&P) companies; tax rate – 85% or 65.75% for companies within first 5 years of production or 50% for companies under a Production Sharing Contract Legislation: Petroleum Profit Tax Act(PPTA) Profits of all corporate entities other than E&P companies; tax rate is 30% Legislation: Companies Income Tax Act (CITA) Charged on all goods and services other than those which are exempt such as medicines, books, basic food items etc.; tax rate is 5% of invoice value Legislation: Value Added Tax Act (VATA) Charged on profits of all corporate entities; tax rate is 2% of assessable profit. Legislation: Tertiary Education Trust Fund Establishment Act

Petroleum Profit Tax (PPT) Companies Income Tax (CIT) Value Added Tax (VAT) Education Tax

FIRS

Administered by

64

Tax Regime in Nigeria

Charged on profits of telecoms and internet companies, financial institutions, insurance and pensions companies; tax rates is1% of profit before tax for companies with a turnover of N100m and above Legislation: National Information Technology Development Agency Act Charged on income of individuals (employment and non-employment) and enterprises; tax rate graduated between 7% to 24% (top rate) Legislation: Personal Income Tax Act(PITA) Charged on all goods and services other than those which are exempt such as medicines, books, basic food items etc.; tax rate is 5% of invoice value Legislation: Capital Gains Tax Act (CGTA) Charged on documents/instruments Promissory notes, Agreements, Contracts, etc. Legislation: Stamp Duties Act (SDA)

National Information Technology Development Levy (NITDL) Personal Income Tax (PIT) Capital Gains Tax (CGT) Stamp Duties

FIRS

FIRS for SBIRs for other Individuals and Enterprises

FIRS for Companies SBIRs for Individuals and Enterprises Administered by FIRS if a company is involved in the execution of the instrument SBIRs if the instrument is executed between individuals

65

Tax Reliefs Under the Capital Gains Tax Act (CGTA)

Section 30 of CGTA Gains accrued to a person from disposal by him

• f Nigerian Government securities, stocks and

shares shall not be chargeable gains. Section 41 CGTA Any arrangement set out in an order made under Section 38 PITA and Section 45 CITA so far as they provide (in whatever terms) for relief from tax chargeable in Nigeria on capital gains by virtue of this section, have effect in relation to CGT. Section 33 CGTA Gains accruing to unit holders in a trust in respect of disposal of securities, shall not be chargeable on tax provided the proceeds are re- invested. Section 32 CGTA Gains arising from acquisition of shares either taken over, absorbed or merged by another company as a result of which the acquired company loses its identity as a limited company, provided no cash was exchanged in respect of the shares.

66

Tax Reliefs Under the Value Added Tax Act (VATA)

Part II First Schedule VAT Act has been modified in VAT (Exemption of Commissions on Stock Exchange Transactions) Order, 2014. The order shall be in force for a period of 5 years. There is an exemption from VAT on commissions from the following: (a) earned on traded value of shares; (b) payable to Securities and Exchange Commission; (c) payable to Nigerian Stock Exchange; and (d) payable to the Central Securities Clearing System

• n stocks.

Sections 2 & 3 First Schedule VAT Act list the goods and services exempted from VAT: Part 1. Goods (a) All medical and pharmaceutical products; (b) Basic food items; (c) Books and educational materials; (d) Baby products; (e) Fertilizer, locally produced agricultural and veterinary medicine, farming machinery and farming transportation equipment; (f) All exports; (g) Plants and machinery imported for use in Export Processing Zones; (h) Plants, machinery and equipment purchased for utilization in gas down-stream petroleum operations; and (i) Tractors, ploughs and agricultural equipment and implements purchased for agricultural purposes. Part 2. Services (a) Medical services; (b) Services rendered by Community Banks, Peoples’ Bank and Mortgage institutions; (c) Plays and performances conducted by educational institutions as part of learning; and (d) All exported services

67

Tax Reliefs Under the Companies Income Tax Act (CITA)

❑ Section 26 of CITA provides for R&D allowance ❑ Maximum R&D allowance deductible is 10% of total profit for that year ❑ 20% Investment Tax Credit for companies engaged in R&D activities for

Deduction For Research and Development (R&D)

❑ Section 11(2) of CITA provides for exemption from tax on interest on any loan granted by a bank to a company engaged in: i. agricultural trade or business; or ii. the fabrication of any local plant and machinery; or iii. providing working capital for any cottage industry.

Exemption Of Interest On Loan

❑ CIT (Exemption of Bonds and Short Term Government Securities) Order 2011 provides tax exemption for interest earned on: i. short term Federal Government securities such as treasury bills and promissory notes ii. bonds issued by Federal, State and Local Government and their agencies iii. bonds issued by corporate bodies including supra- nationals

Exemption of Bonds and Short Term Government Securities

❑ Industrial Development (Income Tax Relief) Act - IDITRA ❑ Approved list of ‘pioneer industries or products’ ❑ Income tax relief for a period

• f three years

❑ Extension for a period of one year or for one period of two years ❑ Dividends paid by the company from its pioneer period profit shall be exempt from tax, ❑ Loss from pioneer period can be carried over to post pioneer period.

Pioneer Status Incentive

Tax Reliefs Under The Companies Income Tax Act (CITA)

❑Section 23(1) of CITA exempts certain profits from tax including the profits of; i. a company other than a Nigerian company which, but for this paragraph, would be chargeable to tax by reason solely of their being brought into or received in Nigeria; ii. dividend, interest, rent, or royalty derived by a company from a country outside Nigeria and brought into Nigeria through Government approved channels;

• iii. the interest on deposit accounts of a foreign non-resident company;
• iv. the interest on foreign currency domiciliary account in Nigeria;

v. dividend received from small companies in the manufacturing sector in the first five years of their operation;

• vi. dividend received from investments in wholly export-oriented businesses;
• vii. any Nigerian company in respect of goods exported from Nigeria;
• viii. a company whose supplies are exclusively inputs to the manufacturing of products for export; and
• ix. a company established within an export processing zone or free trade zone.

Exemption of Profits ❑Section 32 of CITA makes available to a company an investment allowance of 10% of the actual expenditure incurred on plant and equipment, in addition to an initial allowance under the Second Schedule of the Act. Reconstruction Investment Allowance

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69

Tax Reliefs Under the Companies Income Tax Act (CITA)

No Water 30% No Electricity 50% No Tarred Road 15% No Facilities at all 100%

Eligibility i. The company must be located at least 20 kilometres away from such facilities provided by the government ii. Cannot be enjoyed if already enjoyed Reconstruction Investment Allowance;

• iii. Allowance can only be applied against the profit of the

year in which such investment (facility) was completed. Rural Investment Allowance Section 34 of CITA provides that where a company incurs capital expenditure on the provision of facilities such as electricity, water

• r tarred road for the purpose of a trade or business, such

company shall enjoy an additional allowance under the Second Schedule to CITA at the appropriate rate as above. Investment Tax Relief (Section 40 of CITA) Where a company has incurred an expenditure on electricity, water, tarred road or telephone for the purpose of a trade or business carried on by the company, the company shall be allowed an “investment tax relief” at the rates of expenditure as above. Eligibility i. The company must be located at least 20 kilometres away from such facilities provided by the government; ii. The relief shall be for each year expenditure is incurred on each of such facilities;

• iii. A company shall not be allowed to claim the

investment tax relief for more than 3 years

• iv. The relief shall not be available to a company already

granted the Pioneer Status.

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Tax Reliefs Under the Companies Income Tax Act (CITA)

Gas Utilization Incentives

Interest Deduction Tax-free Dividend Investment Allowance Accelerated Capital Allowance Section 39(e) of CITA provides that interest payable on any loan obtained for a gas project shall be deductible, subject to obtaining prior approval of the Minister of Petroleum Resources for such loan, Section 39(d) of CITA provides for tax-free dividend during the tax-free period for companies in gas utilization (downstream operations). Eligibility i. the investment for the business should be in foreign currency; or ii.

• ii. the introduction of imported

plant and machinery during the period should not be less than 30% of the equity share capital of the company Section 39(c) of CITA provides for accelerated capital allowance after the tax-free period for companies in gas utilization (downstream operations), as follows: i. an annual allowance of 90% with 10% retention, for investment in plant and machinery ii. an additional investment allowance

• f 15% which shall not reduce the

value of the asset For companies in gas utilization (downstream operations), an additional investment allowance of 35% (which shall not reduce the value of the asset) is allowed, as an alternative to the initial tax-free period granted under Section 39(b) of CITA.

71

Tax Reliefs Under The Personal Income Tax Act (PITA)

Tax Credit Allowance Tax credit allowable against tax payable on income derived from

• utside Nigeria if brought into

the country through Government approved channels (Section 11 of PITA) Consolidated Relief Allowance Section 33 (1) of PITA allows a Relief Allowance of N200,000 subject to a minimum tax of 1% of gross income whichever is higher, with the balance taxable in accordance with the Income table in the Sixth schedule to PITA. Returns Not To Be Filed Where Income Is N30,000 or Less Section 43 PITA provides that no return of income shall be filed by a person whose only source of income in any year of assessment is employment in which he earns N30,000 or less from that source. Income Exempted Section 19(1) PITA specifies several incomes that are exempted from tax, in the Third Schedule to the Act. Exemption of Interest on Loan Granted by Banks Section 19(7) PITA exempts interest on any loan granted by a bank to a person engaged in: (a) agricultural trade or business; and (b) the fabrication of any local plant and machinery. Exemption of Dividend from Tax The Third Schedule to PITA lists incomes exempted from Personal Income Tax Paragraph 25 of the Third Schedule to PITA exempts some dividends from tax

72

Tax Reliefs - Agriculture

a) 95% capital allowance is enjoyed in the year expenditure is incurred pursuant to Paragraph 24 Table1 & 2 Second Schedule of CITA b) Companies engaged in wholly agricultural activities are entitled to unrestricted capital allowances pursuant to Paragraph 24 (7) CITA c) Companies engaged in wholly agricultural activities are entitled to carry forward unutilized capital allowances indefinitely Section 33(3)a of CITA, exempts the income of a company carrying on agricultural trade from payment of minimum tax. Section 31(3) CITA allows companies engaged in agricultural trade or business to carry forward their losses indefinitely.

73

Tax Reliefs - Others

Investment Tax Credit Or Allowance Investment tax credit or allowance is granted in accordance with the provisions of the Production Sharing Contract (PSC). The investment tax credit rate applicable to the contract area is 50% of chargeable profit for the duration of the production sharing

• contract. (Section 22 of PPTA)

Allowable Deductions Allowable deductions are treated as charges against income and not as tax

• ffsets and are wholly incurred in the

process of petroleum operations. (Section 10 of PPTA) Tax Holiday Section 36 of CITA provides that a new company going into the mining of solid minerals shall be exempt from tax for the first three years of its operation. Accelerated Capital Allowance Second Schedule to CITA provides for accelerated capital allowance at 95% of qualified capital expenditure on Mining in the first year of use of the asset.

74

International Tax Relief

International Tax

Avoidance of Double Taxation Agreements (ADTA)

▪ Completed the Negotiation of three (3) ADTAs in the last 3 years while nine (9) are on on-

• going. Active ADTAs with a

total ** countries.

EASE OF VOLUNTARY COMPLIANCE

Incentive:

EXPANSION OF TREATY NETWORK

Impact:

Transfer Pricing Regulation

Nigeria is a member of the Commonwealth, and, as part of its independent policy to foster the relationship among other commonwealth nations, Nigeria provides in Section 44 of CITA a tax relief for profits earned in Commonwealth countries which are also liable to tax in Nigeria.

AVOIDANCE OF DOUBLE TAXATION

Incentive:

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Source: KPMG

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Source: KPMG