NIGERIA Country Profile

General Information

The Political Climate


Nigeria, the most populous nation in Africa, offers investors abundant natural resources, a low-cost labour pool, and a potentially large domestic market. However, much of the market potential is unrealised, and the legacy of military rule combined with the oil boom has created dysfunctional elements in the business environment. Nigeria has been under military rule for most of its independent existence since 1960, which has created deep divisions between the state, the private sector and the civil society. Nigeria's oil boom began in the 1970s and has led to a rapid expansion of the scope of the state and its role as an economic actor through its ownership of parastatal companies. The country's economic development has enriched the military, political and administrative elite, and has spurred corruption and resulted in the loss of credibility of public institutions in the eyes of many Nigerian households and companies. Human Rights Watch 2007 estimates that the endemic nature of corruption in Nigeria led to the loss of USD 380 billion between independence 1960 and 1999, when democratic elections were first held. The enrichment of the elite is also evidenced by the fact that the last military leader, Sani Abacha, looted the Nigerian state of an estimated USD 4 billion. Recovery of these stolen assets is ongoing and is being facilitated by the cooperation of major international banks.

For years, Nigeria has struggled with a reputation of being one of the world's most corrupt countries, ranking at the bottom of various corruption-related indices. This has led households and companies to perceive corruption as one of the most severe problems in Nigeria. Transparency International Global Corruption Barometer 2009 reveals that the general public considers political parties and Parliament as the most corrupt bodies in Nigeria, and 17% of the responding households reveal to have paid a bribe at some point in time in the past year. In the same survey, however, 71% of the respondents consider the government's actions in fighting corruption as effective. This is in sharp contrast to the Afrobarometer 2008, in which 60% of respondents considered the government at the time to be handling the fight against corruption very or fairly badly. The same study reported that 33% of the surveyed citizens do not trust political parties.

Nigeria's first democratic elections of 1999 were won by former General Olusegun Obasanjo from the People's Democratic Party (PDP). Obasanjo was re-elected in 2003 and enjoyed significant international recognition despite evidence of electoral abuses and violence by his administration. Obasanjo initiated a comprehensive anti-corruption agenda, including transparency in government contracts, extractive industries and in public administration generally. He promoted himself as a key actor in combating corruption in the country. During his tenure, however, few high-ranking officials were indicted for corruption under the Corrupt Practices and Related Offences Act of 2000. Obasanjo's successor from the PDP, President Umaru Yar'Adua, won the last elections of May 2007 amid national and international allegations of electoral fraud, vote-rigging and violence. The PDP dominates the National Assembly and about 90% of the state governments. Yar'Adua is the first President of Nigeria not to come from a military background. President Yar'Adua has pledged a zero-tolerance for corruption policy. Since his election, the Economic and Financial Crimes Commission has charged 10 former state governors who served under Obasanjo for graft and money laundering. At the time of publication, only the former governor of the state of Edo had been convicted and no progress had been made in the cases of the remaining 9 former governors.

Business and Corruption

The Nigerian business environment is highly segmented into oil-related industries, public sector and parastatals (highly oil-dependent), organised private sector, and a thriving informal sector. The oil and gas sector alone contributes almost 99% of the country's export revenue and 85% of government revenues. In 2004, Nigeria established the Nigeria Extractive Industries Transparency Initiative (NEITI), aimed at improving transparency in payments by extractive industrial companies to government and government-linked entities. A NEITI Bill was signed into law in May 2007, giving the NEITI's activities legal backing and providing legal instruments to fight for increased transparency in the oil, gas and mining sectors in Nigeria. Furthermore, President Yar'Adua has initiated a complete unpacking and restructuring of the oil sector, including the Nigerian National Petroleum Corporation (NNPC), in order to increase the competitiveness of the sector and to root out corruption.

Companies operating in Nigeria are reportedly frequent targets of corrupt practices. This is especially the case for SMEs operating in the formal private sector. The manufacturing sector has declined during the last 20 years and the informal sector remains the main source of income and employment for most Nigerians. According to the World Bank & IFC Enterprise Surveys 2007, 60% of services companies report that they compete against unregistered or informal companies. Several business surveys indicate that corruption is widespread and constitutes a major obstacle for companies operating in Nigeria. For instance, the companies surveyed in the World Economic Forum Global Competitiveness Report 2009-2010 consider corruption to be among the most problematic factors for doing business in Nigeria, surpassed only by access to financing and inadequate supply of infrastructure. Top management business leaders indicate that the diversion of public funds to companies, individuals, or groups due to corruption is common. Furthermore, the World Bank & IFC Enterprise Surveys 2007 report that 25% of companies surveyed in Nigeria consider corruption to be a major constraint, and 41% of companies report that they expect to pay facilitation payments to public officials to 'get things done'. Nigeria's public procurement system is also reportedly prone to corrupt practices, with as many as 45% of companies expecting to give gifts to public officials in order to secure a government contract. In order to best reduce the risk of extortion and demands for bribes in the procurement process, companies considering bidding on public tenders in Nigeria are advised to use a specialised due diligence tool on public procurement. In general, the state level of governance is reported to be more corrupt than the federal level and has direct control of many areas important to business activity. State agencies tend to impose a wide range of fees, licences, fines and taxes arbitrarily. Some companies even report that they avoid posting signs identifying their factories, claiming that to do so would be an invitation to corrupt officials to stop by and solicit bribes.

The World Economic Forum Global Competitiveness Report 2009-2010 also reveals that the ethical behaviour of companies in Nigeria is fairly poor and constitutes a competitive disadvantage for doing business. Furthermore, business in Nigeria has a bad reputation, due largely to the widely known e-mail based 'advance fee frauds' committed by Nigerians. As a consequence, some Nigerian companies register in neighbouring countries or in the UK. Companies report that they are often forced to rely on lawyers to complete routine interactions with government that would normally be handled directly. In order to limit the possibility of corruption, it has been made a criminal offence for individuals to make or accept cash payments in excess of NGN 500,000 and for corporate bodies to make or accept cash payments in excess of NGN 2 million without going through a financial institution. Furthermore, international transfers of more than USD 10,000 must be reported to the Central Bank of Nigeria or the Securities and Exchange Commission. Foreign investors considering establishing themselves in Nigeria are generally advised to consult with experienced attorneys, to develop, implement and strengthen integrity systems, and to carry out extensive due diligence before committing funds and when already doing business in the country.

Regulatory Environment

A lack of clear policy formulation by the central government has created complex and varying regulatory interpretations and applications at all levels of the state structure. Consequentially, Nigeria's administrative systems are unnecessarily complex and opaque, with overlapping authorities in many areas, such as taxation and licensing. The federal states have considerable independence, and the central government's capacity to govern has been systematically undermined by corrupt public officials, the military and patronage networks. Nigeria's legal regulatory framework is generally consistent with international standards, but enforcement of rules and legislation are often cited as inadequate and inconsistent. According to the World Economic Forum Global Competitiveness Report 2009-2010, companies cite policy instability as the fourth most severe obstacle to doing business in Nigeria. State and local officials are known to impose arbitrary taxes and licensing requirements in order to raise extra revenue. Administrative barriers, red tape and delays are major constraints on foreign as well as domestic companies, especially for SMEs with less financial resources. Official business registration fees are generally low, but associated costs and facilitation payments reportedly make the total price relatively high and unpredictable. For example, a simple business registration that officially costs NGN 5.50 can easily end up costing more than NGN 1,000. According to the World Bank & IFC Enterprise Surveys 2007, senior management can expect to spend approximately 6% of its time dealing with the requirement of government regulations in Nigeria. According to the World Bank & IFC Doing Business 2010, the requirements to start a business have eased in recent years to an average of 31 days and 8 procedures at a cost of 76.7% of GNI per capita, which is well below regional averages. Dealing with licences and permits, however, is much more problematic, complicated, and prone to corrupt practices. According to the US Department of State 2009, dealing with the tax system is another area of concern for companies, as the tax administration is highly uneven and lacks transparency. This has led to high levels of tax evasion and tax officials demanding bribes and facilitation payments in return for lower tax rates.

Despite difficulties and barriers to entry, Nigeria has a large and dynamic private sector, although many smaller companies remain within the informal sector. A significant challenge is that there is generally little consistent and systematic interaction between the formal business sector and the different levels of government. Some recent initiatives have been undertaken, especially in the extractive industries, such as the Niger Delta Development Commission (NDDC), a leader in the development of Nigerian natural resources, and the Nigeria Extractive Industries Transparency Initiative (NEITI). The Nigeria Economic Summit Group (NESG) is the prime forum for business-government interaction at the federal level and has launched a SME Working Group. The Nigerian government has also launched the Nigerian Investment Promotion Commission (NIPC), an open to public one-stop shop providing information on investment requirements in Nigeria. The NIPC provides information on business registration procedures and links to relevant authorities.

Companies should note that, according to the US Department of State 2009, although property rights, intellectual property rights and trademark laws exist, enforcement of the rules is weak and subject to corruption. Transferring property is complex and usually involves state governor's offices, while acquiring and maintaining rights to real property are major challenges. The legal system is based on English common law, but civil codes exist for certain issues. For example, some legal codes are based on Shari'a (Islamic law) in the north and others on customary law, known as 'traditional law', in the south. The multiple and sometimes overlapping jurisdictions of federal, state and local governments in various aspects of commercial activity make the bureaucratic process complex. Due to this inefficient legal system, it is common to settle disputes out of court using various forms of arbitration and negotiation. The Arbitration and Conciliation Act of 1988 provides for a unified and straightforward legal framework for the settlement of commercial disputes through the Nigerian Arbitration Institute, and the Lagos Chamber of Commerce & Industry also handles arbitration. The act furthermore provides for the application of arbitration rules under the United Nations Commission on International Trade Law (UNCITRAL) and has made the Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention 1958) applicable to enforcement of contracts. Nigeria is also  a member of the International Centre for the Settlement of Investment Disputes. Larger companies typically use arbitration under the London Court or the International Chamber of Commerce (ICC).

Corruption Levels

Sectors (Judicial System, Police, etc.) describe which kind of corruption can be encountered in different areas. This section covers various forms of corruption, including bribes and facilitation payments. All information is based on publicly available information and should be viewed as general guidelines on the types of corruption existing in the country.

Levels of corruption in the different sectors indicate where corruption can be encountered. The levels are defined as follows:

  • Individual Corruption: Corruption that takes place primarily in relations between individual citizens and public officials and authorities.
  • Business Corruption: Corruption that takes place primarily in relations between enterprises/companies and public officials and authorities.
  • Political Corruption: Corruption that takes place in the higher echelons of public administration and on a political level.

Frequency refers to quantitative surveys on corruption in the respective sectors.

Judicial System

Individual Corruption

According to Global Integrity 2008, legal costs are extremely high, which makes it difficult for average citizens to afford a legal suit. Very few lawyers are assigned to legal aid, which creates massive delays in trials. The high costs of litigation have spurred several civil society initiatives to provide legal aid to individuals. Amongst these organisations is the Nigerian Bar Association. These projects are located in the larger cities.

Business Corruption

According to the Bertelsmann Foundation 2010, the judiciary in Nigeria lacks resources and qualified personnel and it is hampered by corruption. Global Integrity 2008 reports that due to prohibitive legal costs and the time consuming process, many small companies prefer to settle cases outside the courts.

Nigeria's slow judicial system makes contract enforcement between private companies difficult, thus limiting financial institutions' willingness to provide credit. As a result, lawsuits can be an attractive strategy for delay, as even the most frivolous cases are rarely weeded out due to understaffing at the courts.

Corruption often involves tampering with evidence by prosecutors for financial and material gain, and in such cases the prosecutors usually collaborate with the police. According to Transparency International's Global Corruption Report 2007, the main reason to pay bribes to courts is to expedite court processes or to be granted bail. It is further reported that lawyers and businesspeople are more likely than other court users and judges to experience corruption within the judiciary.

Political Corruption

The constitution provides for an independent judiciary. However, according to Freedom House 2009 the judiciary still suffers from political interference. Moreover, corruption and inefficiency remain a problem, especially at the lower levels.

The National Judicial Council has the power to suggest the appointment and removal of judges. According to Global Integrity 2008, judges are generally selected based on professional criteria.

The Independent Corrupt Practices and Other Related Offences Commission (ICPC) has only prosecuted a few judges, and the judicial system has generally not been very proactive in investigating and prosecuting cases of corruption. An exception to this is Lagos State, which has been active in enforcing anti-corruption legislation and has made significant efforts to tackle corruption in the judiciary.

Frequency

The World Bank & IFC: Doing Business 2010:
- On average, it takes a company 39 procedures, 457 days at a cost of 32% of the claim to enforce a commercial contract.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give Nigeria's judiciary a score of 4.1 on a 7-point scale in relation to the judiciary's independence from political influence of members of government, citizens, or companies (1 being 'heavily influenced' and 7 'entirely independent').

Transparency International: Global Corruption Barometer 2009:
- Citizens give the judiciary a score of 3.4 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

- 26% of households surveyed consider the judiciary to be 'extremely corrupt'.

- 18% of households who had contact with the judiciary in 2008 report to have paid a bribe.

Afrobarometer: Summary of Results Nigeria 2008:
- 18% of respondents in this public opinion survey believe that most judges and magistrates are involved in corruption.

- 34% of the surveyed citizens believe that people are always treated unequally under the law.

Transparency International: Global Corruption Report 2007:
- Half the Nigerian judges agree that the judiciary is controlled by the government, and more than half of Nigerian lawyers regard court decisions to be influenced by politics.

- Between 30 to 50% of court users indicate that they will not use the courts again based on previous experiences.

- Resolving a case in Nigeria takes between 16 to 36 months on average.

Police

Individual Corruption

The police are perceived by citizens as the most corrupt institution in Nigeria, according to Independent Advocacy Project's Nigeria Corruption Index 2007. Harassment, extortion and violence by the police force are widespread, as is corruption.

Checkpoints are used all over the country as a means of extorting bribes from travellers. Prolonging detentions and demanding bribes to release individuals are also known to be practiced. Global Integrity 2008 reports that, according to the Police Annual Report 2007, about eight hundred police officers were dismissed within the reporting period for various acts of indiscipline and corruption.

Business Corruption

Companies should note that the police force in Nigeria is notoriously slow to act on complaints and reported criminal activity. According to the World Economic Forum Global Competitiveness Report 2009-2010, top management business leaders report that the police in Nigeria cannot be relied upon to enforce law and order and thereby protect companies from the costs of crime. Moreover, business executives in the Bribe Payers Index 2008 rank the police as the most corrupt institution in the country.

The US Department of State 2009 reports that the police have little understanding of intellectual property rights (IPR). However, efforts to curtail IPR abuse have proven effective, and companies selling and producing pirated software and videos have been raided.

Political Corruption

Human Rights Watch 2007 reports that the executive and state governors are known to exert undue influence on the police force. The police are also reported to be used by politicians to intimidate citizens during elections, including over the alleged rigging of the 2007 polls. According to the same report, service conditions in the police force are very bad and its funding and equipment are insufficient.

Corruption in the police force is systemic, and the requirement for low-ranking officers to pay part of the bribes they collect to their superiors forms part of this system. Police appointments at all levels are officially regulated by the Service Commission and, according to Global Integrity 2008, appointments are generally made based on merit.

The X Squad is the disciplinary body responsible for investigating corruption inside the police. It has dismissed some police officers on charges of corruption, but according to Global Integrity 2008, politically influential offenders are rarely investigated. The Police Annual Report 2007 discloses that about 800 police officers were dismissed within the reporting period for various acts of indiscipline and corruption.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the police a score of 2.9 on a 7-point scale (1 being 'cannot be relied upon at all' and 7 'can always be relied upon').

Transparency International: Global Corruption Barometer 2009:
- 40% of households who had contact with the police in 2008 report to have paid a bribe.

Afrobarometer: Summary of Results Nigeria 2008:
- 34% of the surveyed citizens believe that most of police officers are involved in corruption.

- 50% of the surveyed citizens report no trust in the police at all.

Transparency International: Bribe Payers Index 2008:
- Business executives give the police a score of 3.7 on a 5- point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

Independent Advocacy Project: Nigeria Corruption Index 2007:
- Nigerians consider the police force to be the most corrupt institution in the country.

Licences, Infrastructure and Public Utilities

Business Corruption

Infrastructure in general and electricity provisions in particular are inadequate in Nigeria, with the result being that many companies and households are forced to operate their own generators. Moreover, according to the World Bank & IFC Enterprise Surveys 2007, companies report that public utilities services in Nigeria are rife with corruption.

Obtaining construction permits can be very problematic, and the licences and inspections system is pervaded by corrupt practices. The process varies considerably across jurisdictions.

Global Integrity 2006 reports that officers at the Corporate Affairs Commission demand bribes, and if a bribe is not paid, the registration process may be delayed, sometimes beyond a month.

Frequency

The World Bank & IFC: Doing Business 2010:
- On average, it takes a company 18 procedures, 350 days at the cost of 573% of income per capita to build a warehouse.

Transparency International: Global Corruption Barometer 2009:
- Respondent citizens give public officials and civil servants a score of 3.4 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

- 21% of households who had contact with registry and permit services in 2008 report to have paid a bribe.

- 17% of households who had to obtain public utilities in 2008 report to have paid a bribe.

Afrobarometer: Summary of Results Nigeria 2008:
- 37% of the surveyed citizens believe that most of public officials are involved in corruption.

Transparency International: Bribe Payers Index 2008:
- Business executives give the Registry and permit services a score of 3.9 on 5- point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

The World Bank & IFC: Enterprise Surveys 2007:
- 40% of companies expect to give gifts to get an operating licence.

- 53% of companies expect to give gifts to get a construction permit.

- 39%, 33% and 24% of companies expect to give gifts to get an electrical connection, a water connection and a phone connection respectively.

Land Administration

Business Corruption

According to the US Department of State 2009, enforcement of the property rights laws in Nigeria is weak and subject to corruption. Transferring property is complex as the majority of land transfers are carried out at the state level and governors have to approve transactions. Acquiring and maintaining rights to real property are reported to be major challenges. For example, the Federal Capital Territory government in Abuja cancelled all property allotments and subjected them to reregistration, but denied renewing those it deemed conflicting with city plans. It is further reported that, even despite court injunctions, buildings on these conflicting properties have frequently been demolished.

According to the World Bank & IFC Doing Business 2010, Nigeria performs poorly in relation to registering property. Most land in Nigeria is publicly held and granted only in hereditary leases. A customary land allocation system exists parallel to the state system. The record keeping is poor and the process very slow. Time requirements of 6 months to 2 years are not uncommon. Legitimate fees alone can be as high as 15% of land value. It is a standard practice to hold land in corporations in order to avoid high fees, cumbersome bureaucratic procedures and corruption when the land is sold. Changes in ownership of hereditary leases can be difficult due to the weak judiciary system. It is also reported that land with unsecured status is at times sold.

Frequency

The World Bank & IFC: Doing Business 2010:
- Registering property requires a company to go through an average of 13 administrative procedures, which take an average of 82 days and cost 21% of the property value.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give property rights, inclunding financial assets, a score of 3.9 on a 7-point scale (1 being 'very weak' and 7 'very strong').

Transparency International: Global Corruption Barometer 2009:
- 20% of the households surveyed reported to have paid a bribe to land services in 2008.

Tax Administration

Individual Corruption

According to the Transparency International Global Corruption Barometer 2007, Nigerians perceive tax revenue authorities to be corrupt. The US Department of State 2009 reports that many individuals avoid paying taxes or are able to underpay through the use of bribes.

Business Corruption

The Nigerian tax regime is reported to be very cumbersome and time-consuming, although corporate tax levels are fairly standard (30%). Tax evasion with the complicity of tax authorities is widespread amongst individuals and companies. The practice of 'tax collection consultants', police or military forces extorting companies for tax payments is declining, but it still occurs.

According to Global Integrity 2008, tax laws are not always enforced uniformly or without discrimination due to subversion by corrupt officials and their agents. Many companies state that they have 'negotiated' their own taxation levels with or without bribery, even at federal and state levels. With the exception of banks and listed companies, many companies simply pay no official taxes on corporate profits. Many taxes seem to be arbitrarily levied, and corruption often plays a role in the assessment of tax levels.

According to the US Department of State 2009, the administration of taxes appears to be highly irregular and lacks transparency. The system sometimes encourages companies to operate in the informal sector, where they are less visible to regulatory oversight and thus less subject to demands for bribes.

Political Corruption

There are numerous taxes at federal, state and local levels, and the system is very complex. Some observers suggest that the complexity of regulations and insufficient training result in mismanagement, misinterpretation and corruption by agency staff.

Frequency

The World Bank & IFC: Doing Business 2010:
- A company spends an average of 938 hours per year paying taxes in Nigeria, making an average of 35 payments at a total tax rate of a little more than 32% of profits.

Transparency International: Global Corruption Barometer 2009:
- 20% of households who had contact with tax revenue services throughout 2008 report to have paid a bribe.

Afrobarometer: Summary of Results Nigeria 2008:
- 30% of the surveyed citizens believe that most or all of the tax officials are involved in corruption.

Transparency International: Bribe Payers Index 2008:
- Business executives give the tax revenue authorities a score of 3.7 on a 5- point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

The World Bank & IFC: Enterprise Surveys 2007:
- 23% of companies expect to give gifts in meetings with tax officials.

- 68% of companies report that a typical company declares less than 100% of its sales for tax purposes.

Customs Administration

Individual Corruption

The Nigeria Customs Service (NCS) is a notoriously corrupt public institution, according to Transparency International 2005. Various customs laws and regulations are applied arbitrarily in order to solicit bribes.

Business Corruption

According to Global Integrity 2008, due to corruption, customs and excise laws are not always enforced uniformly or without discrimination. The process of clearing goods through Nigerian ports is very bureaucratic and prone to corruption. According to the US Department of State 2009, companies are known to attempt to undervalue their goods to evade duties. Furthermore, due to the high number of companies operating in the informal sector that are not formally taxed, many companies resort to smuggling instead of legal trade.

As a response to the high levels of duty evasion, the government has instituted a 100% inspection requirement in the Port of Lagos, which has resulted in massive congestion and delays. However, according to the US Department of State 2009, shippers now report that the efforts to modernise and professionalise the process have reduced the resulting clearance times caused by the congestion and delays.

Political Corruption

The borders of Nigeria are porous, and smuggling through Nigeria's seaports and land borders is common. In particular, the smuggling of subsidised Nigerian petrol is widespread and lucrative. Due to the high levels of smuggling, the Nigeria Customs Service (NCS), a paramilitary organisation, has an armed paramilitary unit. According to the US Department of State 2009, the smuggling is facilitated by the high frequency of corruption amongst customs and port officials.

Many government agencies are allowed to operate in Nigeria's harbours and airports, but only the NCS and the Nigeria Ports Authority (NPA) are empowered to assess and collect duties through an authorised procedure. Trade is frequently diverted through Benin and Togo and conducted informally to avoid the high risks of fraud and corruption in Nigerian customs.

Some observers suggest that the complexity of regulations and insufficient training of customs officials result in mismanagement, misinterpretation and corruption by NCS staff. Nigeria is known as one of the most uncertain customs environments in the world, and the NCS has been involved in several corruption scandals in which NCS officials have received USD millions in bribes. Tariffs are above world average, which is thought to contribute to smuggling. A tariff reform in 1995-2001 was not consistently implemented. Recent attempts have been made to improve the customs service.

In 2007, three subsidiaries of the oil service company Vetco pleaded guilty to US authorities for authorising a Swiss based freight company, Panalpina, to make a series of illegal payments amounting in total to USD 2.1 million to the Nigerian Customs Service officials between 2002 and 2005 in exchange for preferential treatment.

Frequency

The World Bank & IFC: Doing Business 2010:
- It takes an average of 25 days and 10 documents to export a standard container from Nigeria, at a cost of USD 1,263.

- It takes an average of 41 days and 9 documents to import a standard container to Nigeria, at a cost of USD 1,440.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business leaders give the customs procedures in Nigeria a score of 2.7 on a 7-point scale (1 being 'extremely inefficient' and 7 'extremely efficient').

Transparency International: Bribe Payers Index 2008:
- Business executives give the customs a score of 3.7 on a 5- point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

The World Bank & IFC: Enterprise Surveys 2007:
- More than 33% of companies expect to give gifts in order to obtain an import licence.

Public Procurement and Contracting

Business Corruption

Nigeria's public procurement system is reportedly prone to corrupt practices, with nearly 45% of companies in the World Bank & IFC Enterprise Surveys 2007 reporting that they expect to give gifts to public officials in order to secure a government contract. Business executives surveyed by the World Economic Forum Global Competitiveness Report 2009-2010 report that government officials in Nigeria frequently favour well-connected companies and individuals when deciding upon policies and contracts. According to the US Department of State 2009, US companies report that they are at a disadvantage when seeking government contracts. US companies bidding on government contracts further report that collusion occurs between foreign competitors and key government officials. Bureaucratic corruption is rampant, the conflict of interest legislation is not enforced, and procurement for capital projects is often subject to over-invoicing, which leaves room for improper payments to brokers, contractors and public sector officials. The government enacted the Public Procurement Act in 2007, creating a more transparent and competitive procedure for awarding public contracts and introducing a debarment procedure for corrupt companies, allowing the Bureau of Public Procurement to debar companies for no less than five years and impose fines. The BPP offers an online complaints and petitions mechanism regarding particular procurement processes.

Corruption in contracting is typically carried out through brokers or agents who obtain contracts through bribes and patronage. SMEs face problems competing for government contracts against well-connected large companies with more resources and experience in bribing public officials. In late 2007, two multinational companies, Wilbros and Siemens, were convicted both in the US and Europe for bribing public officials in Nigeria in order to obtain lucrative contracts in the country. Companies are advised to use a specialised public procurement due diligence tool in order to mitigate the corruption risks associated with public procurement in Nigeria.

Read more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

Despite official legislation, Global Integrity 2008 claims that there is no effective law to monitor public officials' spending, assets and income unless one is suspected of money laundering. This means that corrupt officials in public procurement can be difficult to trace due to a lack of effective monitoring of assets declarations. The Code of Conduct Bureau (CCB) collects declarations of assets, but the effectiveness of these declarations is disputed.

According to Transparency International 2004, the tender boards have been largely ineffective and have even promoted corruption and kickbacks. The greatest success of the Independent Corrupt Practices and Other Related Offences Commission was the arrest of several former ministers in December 2003 on charges of corruption. Allegedly, an ID-card contract of USD 214 million with Sagem, a French electronics company, was inflated by USD 2.5 million. These funds were used to pay off high-ranking politicians and officials in return for awarding the contract.

Read more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the favouritism of government officials when deciding upon policies and contracts a score of 2.3 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 2.3 on a 7-point scale (1 being 'very common' and 7 'never occurs').

The World Bank & IFC: Enterprise Surveys 2007:
- 44.5% of companies polled expect to give gifts to secure a government contract.

- The value of a gift expected to secure government contracts amounts to 4.65% of the contract value.

Environment, Natural Resources and Extractive Industry

Business Corruption

An Environmental Impact Assessment is required for a wide range of business activities. The assessment is administered by the Federal Environmental Protection Agency (FEPA), but the agency has proven to be unable to assist companies in meeting the requirements. Global Integrity 2008 reports that environmental regulations are not always enforced uniformly or in an even-handed manner.

CMI 2009 reports that misallocation of funds and contracts is common in the oil industry in Nigeria. Another problem is the theft of crude oil from pipelines, which is estimated to be around 100,000 bpd. According to CMI 2009, government and oil companies' representatives are generally perceived to be complicit in those theft activities.

Political Corruption

Nigeria has comprehensive environmental regulations, but these are often weakly and unevenly enforced and circumvented by bribes.

Explosions due to the vandalising of oil pipelines in order to steal oil are common. The incident of vandalism in Abule-Egba, on the outskirts of Lagos, in December 2006, resulted in the deaths of several hundred persons. It is claimed that there has been massive corruption and misappropriation of funds from the oil industry by top politicians and officials within the Nigerian National Petroleum Corporation (NNPC).

See a US Energy Information Administration analysis of the Nigerian energy sector.

Public Anti-Corruption Initiatives

  • Legislation: Nigeria ratified the United Nations Convention against Corruption in December 2004 and the African Union Convention on Preventing and Combating Corruption in September 2006. The Corrupt Practices and Other Related Offences Act 2000 applies to all public officials and criminalises active and passive bribery, as well as attempted corruption, abuse of office, fraud, extortion, and money laundering. The Money Laundering (Prohibition) Act 2004 repealed the previous act from 2003 and criminalises individuals making or accepting cash payments in excess of NGN 500,000 and corporate bodies making or accepting cash payments in excess of NGN 2 million without going through a financial institution. The National Assembly also passed the Advance Fee Fraud and other Fraud Related Offences Act 2006 in order to combat the persistently large body of fraudulent activities in Nigeria that have negatively affected Nigeria's business reputation. The Nigerian Constitution 1999 specifies requirements for asset disclosure, regulations governing the offering and receiving of gifts for members of the executive, Parliament and legislature. These issues are detailed in various codes of conduct for public officials, including the Code of Conduct for Ministers and Special Advisers and backed by the Code of Conduct Bureau and Tribunal Act 1999. According to Global Integrity 2008, the Nigerian legal framework for addressing corruption is 'very strong'. However, rule of law and law enforcement is described as moderate for reasons such as government interference with public law enforcement agencies, vague and ineffective regulations governing the acceptance of gifts for public officials, and ineffective conflict of interest regulations, among others. Access the Lexadin World Law Guide for a collection of legislation in Nigeria.

  • Government Strategies: Corruption continues to be a major problem in Nigeria, and several public strategies and campaigns to curb corruption have been launched during the last three decades. Among these can be mentioned the Ethical Revolution (1981-83), the War Against Indiscipline (1984), the National Orientation Movement (1986), the Mass Mobilisation for Social Justice (1987) and the new War Against Indiscipline (1996). However, it was only with the signing of the Corrupt Practices and Other Related Offences Act in 2000, during the Obasajo presidency, that Nigeria first imposed a legal framework and severe sanctions to fight corruption. In the wake of this act, three main agencies were created with different mandates regarding corruption: the Independent Corrupt Practices and Other Related Offences Commission (ICPC), the Economic and Financial Crimes Commission (EFCC) and the Code of Conduct Bureau (CCB) (see below). President Yar'Adua has proposed a merger of these three anti-corruption agencies in order to coordinate their work. Some observers interpret this measure as a tactic to accommodate the critique of these agencies that they have been biased in their investigations by primarily targeting political opponents of former President Obasanjo. However, other observers fear that the merger of the agencies indicates a desire by the executive to exercise political control over anti-corruption cases. Even though the House of Representatives agreed to the proposal in January 2008, there is still no evidence of an official merger at the time of publication.

  • Anti-Corruption Agency: The Independent Corrupt Practices and Other Related Offences Commission (ICPC) was established in 2000 with a mandate to investigate reports of corruption, review government systems prone to corruption and educate the public about corruption. The ICPC is legally protected form political interference. However according to Global Integrity 2008, the ICPC is sometimes influenced by political incentives. Today the ICPC is accredited as a cornerstone in the fight against corruption in Nigeria. The ICPC can initiate investigations and does so often. However only a few high-level prosecutions have taken place, with few or no consequences. Due to underfunding, the commission has a backlog of cases. Its reports are not regularly published and are not available to the public.

  • Economic and Financial Crimes Commission (EFCC): The EFCC is a law enforcement agency that was set up in 2004 and includes a Financial Intelligence Unit to fight economic crime, including the infamous 'advance fee fraud' e-mail scams that emanate from Nigeria. The legal instrument backing the EFCC is the EFCC Establishment Act from 2004, which mandates the EFCC to prevent, investigate, prosecute and penalise financial and economic crimes. Under the leadership of former Chairman Nuhu Ribadu, the EFCC was active in investigating and prosecuting several high-profile individuals involved in financial corruption. In 2006, 31 out of Nigeria's 36 governors were being investigated by the EFCC for corruption, and it is currently investigating former President Obasanjo's daughter for allegedly having received stolen money from the Ministry of Health. However, there have been some concerns over the EFCC's independence. In January 2008, Chairman Ribadu was ordered on a year-long training course and a new chairman, Farida Waziri, was appointed by President Yar'Adua. Transparency International has expressed concerns that due process might not have been followed in the appointment of the new chairman. Individuals and organisations can file complaints through a written petition to the EFCC, which will then initiate investigations if the case falls within the scope of the EFCC's mandate.

  • Code of Conduct Bureau (CCB): The mission of the CCB is to establish higher standards of morality in the conduct of government activities through the enforcement of a 1999 Code of Conduct for Ministers and Special Advisers. The CBB was established in 1999 in accordance with the Code of Conduct Bureau and Tribunal Act. The CCB monitors public officials through the collection and verification of annual asset declarations. All public servants are required to file an asset disclosure form, but the CCB focuses primarily on fixed tenure, career civil servants. Although these declarations are not made public, the CCB can take officials to court.

  • Ombudsman: The Public Complaints Commission (PCC) is the Nigerian equivalent to an Ombudsman. The PCC has offices in all Nigerian states and is empowered to investigate citizens' complaints against any governmental or private body. The agency is formally independent and, according to Global Integrity 2008, there has been no case of political inference with the office. Appointments to the agency are based on criteria of personal integrity and other relevant qualifications. The PCC receives regular funding and has a full-time staff; however, according to Global Integrity 2008 the agency has a significant backlog of cases, largely due to a lack of human resources and funding. The agency publishes publicly available reports and the government usually acts on its findings. However many complaints are never investigated due to the lack of resources.

  • Auditor General: Established under Section 85 of the Constitution 1999, the Auditor General of the Federation (AG) heads the Supreme Audit Institution (SAI) and is responsible to the National Assembly, but also takes directives from and cooperates with the executive in matters relating to the audit of government accounts and agencies. The agency is legally independent and the same seems to be true in practice according to Global Integrity 2008. The AG receives regular funding and has a full time staff. Although it publishes reports, Global Integrity 2008 reports that those are neither issued regularly nor available to the public. Furthermore, the government rarely acts on these reports even though the AG has indicted several government bodies and revealed instances of corruption and irregular procedures.

  • Nigerian Extractive Industries Transparency Initiative (NEITI): The NEITI is the Nigerian subset of a global initiative, the Extractive Industries Transparency Initiative (EITI), aimed at following due processes and achieving transparency in payments by extractive industries companies to governments and government-linked entities. The NEITI was launched by President Obasanjo in 2004 and is implemented through a National Stakeholders Working Group (NSWG). Nigeria signed the NEITI Act into law in May 2007 and was accepted as an EITI candidate country in September 2007. The act mandates the NEITI to promote due process, independent auditing, and transparency in extractive revenues, particularly oil and gas revenues, paid to and received by government as well to ensure transparency and accountability in the application of extractive revenues.

  • Budget Monitoring and Price Intelligence Unit (BMPIU): The BMPIU was established under the Office of the Principal Secretary to the President in 2003 as an operationally independent body designed to harmonise regulations and standards in public tender procedures and monitor all government contracts and procurement of goods and services. The BMPIU has instituted a process of contract award review in public contracting in order to ensure transparent and competitive bidding.

  • E-Governance: The Nigerian government has taken steps in relation to e-governance to improve its dealings with the business sector. The Nigerian Investment Promotion Commission (NIPC) is a public one-stop shop for information on investment in Nigeria. The NIPC provides information on business registration procedures and links to relevant authorities. State websites also provide and are further developing online business services. For example, the Federal Inland Revenue Service (FIRS) provides relevant information on how and where to pay corporate and individual taxes.

  • Public Procurement: Nigeria enacted the Public Procurement Act (PPA) in 2007, creating the Bureau of Public Procurement (BPP) and laying down the procedure by which the BPP can debar companies guilty of major violations in procurement processes from participating in future government contracts. The PPA addresses conflicts of interest for procurement officials and empowers the BPP to undertake professional training of these officials. The PPA also establishes requirements for open competitive bidding, defines bid security, ensures clarified tendering procedures and mobilisation fees, and provides for an audit process. Government tenders are advertised in newspapers and on websites, including the BBP section on Federal Government Procurement Notices. Unsuccessful parties to the bidding process can make administrative appeals using the BBP complaint mechanism and challenge procurement decisions in the courts. However, the BBP is a relatively new institution, as is the legal framework within which it works, and the effectiveness of either is yet to be seen.

  • Whistle-Blowing: According to Global Integrity 2008, civil servants and private sector employees reporting cases of corruption have no legal protection from recrimination or other negative consequences. Complaints cannot be submitted anonymously, although some anti-corruption agencies, such as the Independent Corrupt Practices and Other Related Offences Commission (ICPC) and the Economic and Financial Crimes Commission, have their own internal mechanisms to protect informants' identities. The ICPC has a reporting mechanism on its website to which any person (private and public) can submit complaints if they suspect that an offence has been committed under the Corrupt Practices and Other Related Offenses Act.

  • General Comments on the Public Anti-Corruption Initiatives: The legal and administrative framework for combating corruption is generally in place. However, as with legislation and regulations in general in Nigeria, implementation and enforcement is weak.

Private Anti-Corruption Initiatives

  • Media: The Nigerian Constitution provides for freedom of speech and press and according to Freedom House 2009, those rights are generally respected in practice. The Nigerian press is independent and often criticises the government and exposes corruption cases; however, journalists are at times subjected to harassment, arrest and other forms of repression, especially when reporting on sensitive issues, such as corruption. The media is also impaired by restrictions on access to information. A number of laws prevent civil servants from imparting official facts and figures, especially the Official Secrets Act, which makes an offence for civil servants to disseminate government information and for anyone to receive or produce such information. A Freedom of Information Bill was introduced in 1999, but has yet to be signed into law by the time of publication. The private print press has actively reported corruption. However, according to the Bertelsmann Foundation 2010, this is changing as the private media becomes more biased and more of a public relations agency for different groups. Furthermore, Global Integrity 2008 reports that cases of cash-for-stories, where journalists are paid to write, abstain from writing or alter stories, are not unusual in Nigeria. Freedom House 2009 ranks Nigeria 114th out of 195 countries and describes the country's press environment as 'partly free', while the Reporters Without Borders Worldwide Press Freedom Index 2009 ranks Nigeria 135th out of 175 countries.

  • Civil Society: The constitution guarantees freedom of assembly, association and religious freedom. However, according to Freedom House 2009 and several human rights organisations, these basic rights are not effectively upheld and protected in reality, and there have been several reports of abuses by authorities. The Bertelsmann Foundation 2010 reports that civil society in Nigeria is weak and usually ignored by the political leadership. However, a generally positive trend is reported in the development of civil interest groups as well as civic support for democracy.

  • Convention on Business Integrity (CBI) consists of Nigerian and foreign companies operating in Nigeria who have signed a Code of Business Integrity originally adopted in 1998. Members are to go through an accreditation process and adhere to values of corporate integrity and transparency. Read more about the Nigerian CBI presented by a Business Fighting Corruption case study.

  • Zero Corruption Coalition (ZCC) is a network of over 100 civil society organisations campaigning against corruption in Nigeria. The ZCC is a partner in the 'Accountability Nigeria' coalition of public and private organisations working with transparency and accountability in Nigeria. The ZCC does advocacy work with legislators and government anti-corruption agencies on the need to domesticate and implement both the UNCAC and the AU Convention on Preventing and Combating Corruption.

  • Integrity: Integrity is a Nigerian non-profit anti-corruption NGO founded in 1995. It is working to empower and inform civil society in order to tackle corruption in Nigeria, and to coordinate efforts between public and private institutions in a national fight against corruption. Integrity has published several reports on good governance and is running programmes and projects aimed at promoting transparency and integrity. For example, it has been awarded a European Community grant to run a budget monitoring project in Nigeria aimed at promoting good governance, transparency and respect for the rule of law in budgetary matters.

  • Independent Advocacy Project (IAP): IAP is an NGO working to promote transparency, accountability and good governance in Nigeria by building partnerships between individuals and organisations through information sharing. The NGO issues a monthly electronic newsletter, an in-depth quarterly report and specialised reports. It also produces the Nigerian Corruption Index (NCI) in order to empirically determine the degree of corruption in Nigeria. The NCI, however, is not freely available on the Internet.

  • Transparency International Nigeria is the local chapter of the international anti-corruption NGO Transparency International. It was founded in 1994 to provide a forum for individuals and the public, as well as for private institutions to exchange ideas and share experiences and to take appropriate action towards reducing corruption.

Resources

The websites listed below provide useful facts on Nigeria as well as contacts and tools for companies operating in Nigeria:

 

Sources for further reading:

Conventions and Indices

UNCAC Status: Signed 9 December 2003. Ratified 14 December 2004.

Status on UNCAC Implementation
This field describes the country's status on the United Nations Convention against Corruption. Please note any declarations and reservations made upon ratification. The list of signatories can be found on the UNODC website. Read Transparency International's summary and assessment of the UNCAC.

 

Other Relevant Conventions or Treaties:

 

Transparency CPI: 2009: 130/180 (Score: 2.5)

Transparency CPI
This field consists of the score for the country in question on the Corruption Perceptions Index from Transparency International as well as its ranking.

 

World Bank CORR Index (-2.5 - +2.5): 2008: -0.92

World Bank Corruption Index
This field consists of the score for the country in question on the 'Control of Corruption'-indicator in the World Bank Governance Research Indicator Country Snapshot (GRICS): 1996-2008.

 

OECD Country Risk Classification (0-7): 2009: 6

Country Risk Classification
The classification of countries by risk category has the aim of providing OECD countries with a basis for calculating the premium interest rate to be charged to cover the risk of non-repayment of export credits. Countries are placed in risk categories 0 - 7, with 0 being the lowest risk category and thus the least expensive. Conversely, premium group 7 is the highest risk category. Each classification is comprised of 2 components: 1) an assessment of the country's economic/financial situation, and 2) its overall political stability. Access the complete list of OECD Country Risk Classification figures.

 

Data Verification:

Latest update: December 2009

Data verified by: Global Advice Network

Information Network

 

Relevant Organisations

 

Transparency International Nigeria

Plot 1269 Arthur Unegbe
Suite No. 206, Second Floor
Area 11 Garki
Abuja

Contact Person:
Mr. Osita Nnamani Ogbu
Secretary General

Tel/Cell: +234 80 6863 0889
E-mail: transparencynigeria(at)yahoo.com / centreforruleoflaw(at)yahoo.com

NGO. Local Transparency International chapter.

Nigerian Bar Association

Plot 1261 Adeola Hopewell Street
Victoria Islands
Lagos

Tel: +234 1 461 8287 / 470 7432
Fax +234 1 461 8287
E-mail: nba(at)nigerianbar.org

Legal Association. Active in various anti-corruption coalitions and initiatives.

Independent Corrupt Practices and Other Related Offences Commission

Abuja Office - Headquarter
Plot 802 Constitution Avenue
Central District
PMB 535, Garki
Abuja

Tel/Fax: +234 9 523 8810
E-mail: info(at)icpc.gov.ng

Lagos Office
No. 10 Okotie Eboh street, Off Awolowo Road
SW - Ikoyi
Lagos

Tel/Fax: +234 1 267 3150
E-mail: lagos(at)icpc.gov.ng

Public anti-corruption commission.

Nigerian Extractive Industries Transparency Initiative

NEITI Secretariat
The Presidency
40 Jimmy Carter Street
Asokoro
Abuja

Tel: +234 9 314 6191/6192
Fax: +234 9 314 6193
E-mail: info(at)neiti.org / infoneiti(at)gmail.com

Monitors extractive industries. Joint public-private organisation.

Convention on Business Integrity (under the organisation Integrity)

5th Floor SIO Towers
25 Boyle Street
Onikan
Lagos

Tel: +234 0 473 8689 / 791 5712
Fax: +234 1 270 7092
E-mail: info(at)theconvention.org

Business anti-corruption coalition under the umbrella organisation Integrity.

Nigerian Investment Promotion Commission

Plot 1181 Aguiyi Ironsi Street
Maitama District
PMB 381 Garki
Abuja

Tel: +234 9 413 4380/1403/0581
Fax: +234 9 413 4112
E-mail: osicinfodesk(at)nipc.gov.ng / infodesk@nicp.gov.ng / nipc(at)nipc-nigeria.org

Public agency.

Economic and Financial Crimes Commission

EFCC Head Office
No5 Fomella Street
Off Adetokunbo Ademola Crescent
Wuse II
Abuja

Tel: +234 9 644 1000
Fax: +234 9 314 8074
E-mail: info(at)efccnigeria.org
Scam Mails: scam(at)efccnigeria.org

Public commission combating financial crime.

Zero Corruption Coalition

Suite C206
No 11 Dunukofia Street
Area 11 Garki
Abuja

Tel: +234 1 263 7913

NGO network of over 100 CSOs campaigning against corruption.

Integrity

B3 Bensima House
Aguyi Ironsi Street, Maitama
Abuja

Tel: +234 9 413 1744
Fax: +234 9 413 3166
E-mail: info(at)integrityng.org

CBi, 5th floor SIO Towers
25 Boyle Street, Onikan
Lagos

Tel: +234 1 791 5712
Fax: +234 1 320 9222
E-mail: info(at)theconvention.org

National Anti-Corruption NGO.

Independent Advocacy Project

2. Floor, 17/19 Allen Avenue,
Oshopey Plaza
P. O. Box 15399
Ikeja
Lagos

Tel: +234 1 497 7101 / 791 5198
Fax: +234 1 791 5198
E-mail: info(at)ind-advocacy-project.org

NGO working to promote open and transparent governments.

Nigerian Economic Summit Group

1st Floor, Maku House
109 Awolowo Road
P.M.B. 71347
Ikoyi
Lagos

Tel: +234 1 461 8869/8870
Fax: +234 1 263 6356
E-mail: info(at)nesgroup.org

Business organisation promoting dialogue between the business and the public sector.

 

Partner Embassies

 

Royal Danish Consulate General (Nigeria is covered by the Danish Embassy in Ghana)

Maersk House
121 Louis Solomon Close
P.O. Box 72554
Victoria Island
Lagos

Tel: +234 1 280 6101
Cell: +234 80 3421 0001
Fax: +234 1 262 6428
E-mail: ngaconsuldk(at)maersk.com

Consulate.

Embassy of the Netherlands

21st Crescent, off Constitution Avenue
Central Business District,
Abuja

Tel: +234 9 461 1200
Fax: +234 9 461 1240
E-mail: abj(at)minbuza.nl

Embassy.

Embassy of Norway

54, T.Y. Danjuma Street
Asokoro
Abuja

Tel: +234 98746989
E-mail: emb.abuja(at)mfa.no

Embassy.

Embassy of Sweden

Plot 1520, T. Y. Danjuma Street
41 Asokoro District
Abuja

Tel: +234 9 87 469 13 / 9 87 469 15
Fax: +870 782 248789
E-mail: ambassaden.abuja(at)foreign.ministry.se

Embassy.

British High Commission

Dangote House
Aguiyi Ironsi Street
Wuse
Abuja

Tel: +234 9 413 2010/2011
Fax: +234 9 413 4565/3552
E-mail: information.abuja(at)fco.gov.uk / commercial.abuja(at)fco.gov.uk

High commission.

Embassy of Austria

Plot 9, Usuma Street
Maitama
Abuja

Tel: +234 706 418 3226
Fax: +234 9 461 2715
E-mail: abuja-ob(at)bmeia.gv.at

Embassy.

 

Country Profile Sources

General Information Sources

Corruption Levels Sources

Judicial System

Police

Licences, Infrastructure and Public Utilities

Land Administration

Tax Administration

Customs Administration

Public Procurement and Contracting

Environment, Natural Resources and Extractive Industry

Public Anti-Corruption Initiatives Sources

Private Anti-Corruption Initiatives Sources