Regulatory Regimes And The Ease Of Doing Business In Nigeria

is a government agency (two companies/organisations), the required governing law is either Nigeria’s or that of a neutral jurisdiction.

The rationale behind this regulation is that the transferee is always in a weaker bargaining position than the transferor while negotiating such contract for the transfer of technology, and as such should be protected. This practice has the effect of forcing, instead of encouraging, the transferors of foreign technologies into submitting to the Nigerian jurisdiction (governing statutes and the courts). This may actually be counter-productive for a developing country like Nigeria that is in dire need of technological advancement and the regulatory authority must thus find a balance.

A better practice will be one that allows the two contracting parties to a contract for the transfer of foreign technologies, to freely and in the spirit of consensus ad idem, agree on the law that will govern their relationship. NOTAP is commissioned under its enabling law (see section 4(b), NOTAP Act) to facilitate “the development of the negotiation skills of Nigerians with a view to ensuring the acquirement of the best contractual terms and conditions by Nigerian parties entering into any contract or agreement for the transfer of foreign technology”. It is instructive to note that only a free atmosphere of constant mutual relations (supervised to avoid only unduly onerous terms), rather than a protectionist-policy, can help improve the negotiation skills of Nigerian parties.

Equally worthy of mention is the challenge facing foreign investments in Nigeria. A foreign investor desirous of doing business in Nigeria is expected to procure a business permit from the Federal Ministry of Interior and also procure expatriate quota approvals, where such foreign investor intends to hire expatriate staff. One of the current requirements for the issuance of a business permit and/or expatriate quota approvals is the provision of evidence of importation of machinery and equipment for investment as equity or loan, for which a Certificate of Capital Importation (“CCI”) in the amount of $300,000 (Three Hundred Thousand US Dollars), must be obtained by the investor.

Respectfully, the $300,000 investment requirement amounts to a form of trade barrier and a disincentive to foreign investments in Nigeria. In an era of globalisation in which free trade among nations of the world is consciously being promoted, it becomes a burden for a nation like Nigeria that is a signatory to the World Trade Organisation’s Free Trade Agreements to place such a high “tariff” on international commercial transactions in its economy. Again, this works to defeat the original purpose of the NIPC, which is to facilitate foreign direct investments and foreign portfolio investments into the country through the means of attractive incentives. This requirement would also not be realistic in relation to investments which are not so capital intensive at commencement and which would only need to import such significant amounts of foreign capital into Nigeria over a longer period of time. A substantial reduction in the value of the required CCI is recommended or in the alternative, a process whereby such investments are staggered over a definite period, so as to enhance the ease with which foreign participation takes place in the Nigerian economy.

Whilst not specifically pertaining to transfer of capital, it is also a notable challenge that business entities applying for pioneer status (a tax incentive available to highly technical industries and those established in economically disadvantaged locations, as well as investments made in sectors that are designated as priority areas of the economy) in Nigeria face difficulties in processing their applications at the NIPC. Many of the qualifications quoted for this incentive lack clarity and the list of criteria and/or eligibility requirements are amended from time to time; thus posing impediments to the enjoyment of the incentive by domestic and foreign investors alike.