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TITLE:  NIGERIAL ECONOMIC POLICY AND TRADE PRACTICES                             
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE
                             
                             
                             
                             
                             NIGERIA

                     Key Economic Indicators
            (Billions of naira unless otherwise noted)


Income, Production,                1991      1992      1993 1/
 and Employment

Real GDP (1984 factor cost)        94.6      98.4       n/a
Real GDP Growth (pct.)              4.5       4.2       n/a
GDP (at current prices)           324.8     443.4       n/a
By Sector(1984 factor cost):
  Agriculture                      36.8      37.9       n/a
  Energy and Water                 13.1      13.3       n/a
  Manufacturing                     7.9       8.5       n/a
  Construction                      1.8       1.9       n/a
  Rents                             2.4       2.5       n/a
  Financial Services                8.2       8.5       n/a
  Other Services                   16.5      17.0       n/a
  Government, Health
    and Education                   7.9       8.9       n/a
Real Per Capita GDP                 272       240       n/a
Labor force (millions)             30.5      32.5      34.5
Unemployment Rate (pct.) 2/         2.9       4.0       4.0


Money and Prices

Money supply (M2) (Naira billion)  86.2     135.4     199.8
Base Interest Rate                 20.1      25.7      38.2
Personal Savings Rate              13.9      15.5      19.1
Consumer Price Index (FOS)3/      330.9     478.4     728.3
Exchange Rate (Naira per $):
  Official (annual average)         9.9      17.6      22.4
  Parallel                         13.5      20.5      34.6


Balance of Payments and Trade
 (billion U.S. dollars unless noted)

Total Exports FOB 4/               12.3      11.9       n/a
  Exports to the U.S.               5.4       5.1       6.2
Total Imports CIF 4/                7.8       8.3       n/a
  Imports from the U.S.             0.8       1.1       0.9
Aid from U.S. ($ million)          11.2      16.5      22.8
External Public Debt               33.7      27.6      32.0
Debt Service Payments               4.2       2.4       2.4
Gold and Foreign Exchange
  Reserves (N billion)  5/         44.2      13.9      17.9
Trade Balance 4/                    4.5       3.7       n/a
  Balance with U.S.                 4.6       4.1       5.3



Notes:

n.a. = Not Available

1/ Figures projected from data available in October 1993.
2/ According to Federal Office of Statistics data.  Embassy
estimates unemployment at 30 to 40 percent.
3/ Base year 1985, Federal Office of Statistics.
4/ Merchandise only, not including services and income.
5/ End of year figures.

Sources: Central Bank of Nigeria, IMF, Federal Office of
Statistics, U.S. Department of Commerce, and U.S. Embassy
estimates.



1.  General Policy Framework

    Though blessed with considerable human and material
resources, Nigeria is one of the poorest countries in the
world, and ended up 21st-lowest in GNP per capita according to
a 1993 World Bank ranking.  Its population of 88 million
(according to the 1992 census) is the largest in Africa. 
Nigeria's crucial petroleum sector provides the government with
over 95 percent of all foreign exchange earnings and 83 percent
of budgetary revenue.  Agriculture, which accounts for nearly
40 percent of GDP and employs about two-thirds of the labor
force, is dominated by small-scale subsistence farming.

    After a period of relative fiscal austerity in the late
1980's, the Nigerian Government has run budget deficits ranging
from 9.8 to 12.4 percent of GDP since 1990.  Proposals to
reduce the deficit include reducing large government fuel price
subsidies (the official price of gasoline was about seven U.S.
cents per gallon in October 1993), shelving a number of
government projects which are of doubtful economic value, and
reducing leakages from government income due to corruption. 
The government announced plans to institute a modified
value-added tax (MVAT) in October 1993.  If it can be
implemented as planned, the MVAT would impose a flat 5 percent
tax on a wide range of goods and services, and would serve as a
major new source of government revenue.

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

    In an effort to mitigate the inflationary effects of
government deficits, the Central Bank has since 1990 forced the
banking sector to finance part of the deficit through large
purchases of government securities.  In July 1993, the Central
Bank also began auctioning treasury certificates to the banking
sector at competitive rates in an attempt to finance more of 
the deficit through voluntary purchases from the private
sector.  While these measures have succeeded in limiting the
budget deficit's inflationary effects, they have also served to
"crowd out" long-term private sector borrowing by driving up
interest rates.


2.  Exchange Rate Policies

    The Central Bank of Nigeria administers an official Foreign
Exchange Market (FEM) in which it sells hard currency to
licensed banks at a set exchange rate.  The FEM exchange rate
for the naira is pegged to the U.S. dollar, and varies with the
dollar against other currencies.  Though the official
naira/dollar exchange rate is periodically adjusted, it has
been held at 21.99 naira per $1.00 since April 1993.

    Outside the official foreign exchange market, foreign
exchange can legally be bought and sold at the "autonomous" or
free market rate at bureaux de change.  Besides the FEM and the
bureaux de change, foreign investors may also purchase naira
using Nigerian debt instruments obtained on the secondary
market through the CBN's debt conversion program.  This program
can provide investors with a premium over the official exchange
rate; special restrictions apply to dividend remittances and
capital repatriation, however.  Even for normal remittances,
lengthy administrative delays are common.  Nigeria maintains a
comprehensive system of exchange controls; individual
transactions must receive the approval of the Ministry of
Finance before external remittance is allowed.


3.  Structural Policies

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

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


4.  Debt Management Policies

    Nigeria's foreign debt ballooned from $13 billion in 1981
to $24 billion in 1986 when sharply lower oil revenues and
continued high import levels created large balance of payments
deficits.  By the end of 1992, total external debt (not 
including arrears) had reached $27.6 billion, with 59 percent
of the debt ($16.4 million) owed to the creditor governments of
the Paris Club, and the rest spread among London Club banks
($2.1 billion), commercial creditors ($3.2 billion),
multilateral agencies ($4.5 billion), and others ($2.3 billion).

    In January 1992, in an effort to reduce its external stock
of debt, the Nigerian Government concluded an agreement with
the London Club which gave commercial banks a menu of options
from which to choose in reducing Nigeria's commercial debt. 
The menu included debt buy-backs (at 40 cents on the dollar),
new money bonds, and collateralized par bonds.  As a result of
the agreement, Nigeria was able to reduce its external debt by
$3.9 billion, but the accumulation of arrears on other debt
since that time has brought external debt back to previous
levels.  Including arrears, official foreign obligations exceed
$32 billion as of October 1993.

    During the period 1986 to early 1992, on the basis of a
comprehensive Structural Adjustment Program (SAP), Nigeria
reached three standby agreements with the IMF.  The most recent
of these was approved in January 1991 and expired in April
1992.  Discussions with the IMF since then have not resulted in
a new agreement.

    Nigeria's most recent rescheduling agreement with the Paris
Club expired at the same time as its standby agreement and debt
repayment obligations have grown significantly.  Nigeria's
record on debt repayment, meanwhile, has deteriorated.  In
1992, Nigeria made debt service payments of $2.4 billion,
against interest and principal payment obligations of $5
billion.  Faced with similar obligations in 1993, budgeted
external debt service payments for 1993 are only $2.0 billion,
meaning Nigeria will accumulate arrears of approximately $3
billion during the year.


5.  Significant Barriers to U.S. Exports

    Nigeria abolished all import licensing requirements and cut
its list of banned imports in 1986.  As of October 1993, the
importation of approximately 22 different items is banned,
principally agricultural items and textiles.  These bans were
initially implemented to restore Nigeria's agricultural sector
and to conserve foreign exchange.  Although the bans are
compromised by widespread smuggling, the reduced availability
of grains has raised prices for both banned commodities and
locally produced substitutes.  The higher prices have helped to
expand local production, but Nigerian agriculture continues to
wrestle with other adverse factors such as bad weather,
disease, lack of credit, poor distribution of such inputs as
fertilizer, fungicides, and pesticides, and marketing
constraints.  In April 1993, the government issued a decree
lifting the wheat ban, and U.S. imports of the grain are on the
rise.  Publication of the lifting decree in the Official
Gazette, which will make the lifting of the ban permanent, is
promised to occur before the end of 1993.

    In some cases, Nigeria uses tariffs as a substitute for
administrative controls on imports.  For example, the 
200-percent duty on legally imported cigarettes, which replaced
a ban on cigarette imports in January 1990, amounts to a
virtual ban.

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

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

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


6.  Export Subsidy Policies

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

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


7.  Protection of U.S. Intellectual Property

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

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

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

    In the past, few companies have bothered to secure
trademark or patent protection in Nigeria because it is
generally considered ineffective.  Losses from poor
intellectual property rights protection are substantial,
although the exact cost is difficult to estimate.  The majority
of the sound recordings sold in Nigeria is pirated and the
entire video industry is based on the sale and rental of
pirated tapes.  Satellite signal piracy is common, but any
infringement of other new technologies is infrequent, as most
computer and computer-related technologies are not yet
widespread.  The International Intellectual Property Alliance
estimated that U.S. companies lost $39 million in 1988 due to
copyright piracy, excluding losses from computer software.


8.  Worker Rights

    a.   The Right of Association

    All Nigerian workers, with the exception of members of the
armed forces and employees of "essential services," may join
trade unions.  Essential sectors include, firefighters, police,
employees of the central bank, the security printers and
customs and excise staff.  Utilities, the national airline,
public sector enterprises and the post office are not
considered essential services and are unionized.  Nigerian
labor unions have proposed that unions be banned only for the
armed forces, firefighters and police.  The government is
unlikely to act on this proposal, however, until the transition
to a civilian government is complete.  Under Nigerian law,
enterprises with more than 50 employees must recognize trade
unions and pay or deduct dues.  Most of the agricultural
sector, the informal sector and practically all small
industries and businesses remain non-unionized.  The right to
strike is recognized by law, except in the case of essential
services.  While the trade union movement has considerable
latitude for action, it remains subject to government
oversight.  The government has established a single central
labor body, the National Labour Congress (NLC), by forcibly
merging the country's industrial unions.  Nigerian labor unions
are allowed to affiliate with international organizations, but
only for training and educational purposes.

    b.   The Right to Organize and Bargain Collectively

    Nigerian labor law grants both the right to organize and
the right to bargain collectively.  Collective bargaining is,
in fact, common in many sectors of the economy.  The Nigerian
Industrial Court, an independent arm of the judiciary, handles
complaints of antiunion discrimination.  However, the
government retains broad authority over labor matters and can
intervene forcefully to end debate on issues that it feels
contravene its essential political or economic programs.  As a
result, unions often take their demands directly to the
government rather than to the employers.

    c.   Prohibition of Forced or Compulsory Labor

    Nigeria's 1989 Constitution prohibits forced or compulsory
labor, and this prohibition is generally observed.

    d.   Minimum Age of Employment of Children

    Nigeria's 1974 Labor Decree prohibits employment of
children under 15 years of age in commerce and industry, while
allowing child labor in home-based agricultural or domestic
work.  Casual observation of the informal sector in urban
areas, however, suggests that child labor is widespread. 
Children between the ages of 13 and 15 are allowed, under
specific conditions, to undertake apprenticeships in a wide
range of crafts, trades and state enterprises.  Apprentices
over the age of 15 are not specifically regulated by the
government.  Primary education is compulsory in Nigeria though
the law is only sporadically enforced, particularly in rural
areas where most Nigerians live.

    e.   Acceptable Conditions of Work

    Nigerian labor law establishes a 40-hour workweek,
prescribes 2 to 4 weeks of annual leave, and sets a minimum
wage for commerce and industry.  Despite this, the minimum wage
has not kept up with Nigeria's high inflation rate and the
falling value of the naira.  The general health and safety 
provisions contained in Nigerian labor law, some aimed
specifically at youth and female workers, are enforceable by
the Ministry of Labour.  Employers are required to compensate
injured workers and dependent survivors of those killed in
industrial accidents.  Enforcement of these provisions remains
spotty.

    f.   Rights in Sectors with U.S. Investment

    Worker rights in petroleum, chemicals and related products,
primary and fabricated metals, machinery, electric and
electronic equipment, transportation equipment, and other
manufacturing sectors are not significantly different from
those in other major sectors of the economy.




         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (millions of U.S. dollars)

Category                                    Amount

Petroleum                                               159
Total Manufacturing                                      63
    Food & Kindred Products                     D
    Chemicals and Allied Products              17
    Metals, Primary & Fabricated                2
    Machinery, except Electrical                0
    Electric & Electronic Equipment             2
    Transportation Equipment                    5
    Other Manufacturing                         D
Wholesale Trade                                           D
Banking                                                   D
Finance and Insurance                                     D
Services                                                  4
Other Industries                                          0

TOTAL ALL INDUSTRIES                                    274


(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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