RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/39
8 June 1998
(98-2309)
Trade Policy Review Body Original: English
TRADE POLICY REVIEW
NIGERIA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review
Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Nigeria is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Nigeria.Nigeria WT/TPR/G/39
Page 3
CONTENTS
I. INTRODUCTION 4
II. TRADE POLICY FOCUS 4
III. LIBERALIZATION MEASURES 5
(i) Investment Policy 5
(ii) Tariff Measures 5
(iii) Fertilizer Policy 5
(iv) Interest Rate Policy 6
(v) Import Liberalisation 6(vi) Guided Privatisation 6
IV. ADMINISTRATIVE AND LEGAL REFORM MEASURES 6
(i) Customs and Port Reforms 7
(ii) Review of Laws Inhibiting Competition in Key Sectors of the Economy 7
(iii) Capital Market Reforms 8(iv) Tax Reform 8
(v) Bilateral Double Taxation Agreement 8
V. EXPORT INCENTIVES 9
VI. MULTILATERAL AND REGIONAL AGREEMENTS 9
VII. NEW INTITIATIVES 10Nigeria WT/TPR/G/39
Page 5
I. INTRODUCTION
1. Since the last review in 1991, the driving force of economic policy has been to promote greater
transparency and accountability in the economic management of the country.  The central objective of
this drive is to restore confidence in the Nigerian  economy so as to stimulate both local and foreign
investment.
2. Accordingly, Government as from 1994, introduced stringent fiscal measures aimed at curbing
waste in public sector spending.  Between 1986 and 1993 budget deficit rose steadily from 6% of
GDP to well over 12%.  However, as a result of fiscal prudence of Government the deficit was
reduced from N 110 billion in 1993 to N87 billion in 1994 and to a modest surplus of N1.0 billion in1995.  The prudent fiscal management has since become a permanent feature of economic
management In Nigeria.
3. To further enhance accountability find transparency, all Dedicated Accounts for funding priority
projects were closed down in 1995 and the revenues transferred to the public treasury.  Projects
hitherto funded from Dedicated Accounts have been admitted properly into the budgetary process.Additionally, extra-budgetary expenses, largely f unded from the CBN's Ways and Means Advances 
1,
have been curtailed.
4. These developments have had modest positive impacts on the Nigerian economy.  GDP grew
from 1.3% in 1994 to 2.2% in 1995.  The 1996 and 1997 fiscal years recorded growth rates of 3.25%
and 3.77% respectively, while tile projected figure for 1998 is 8.0%.  The agricultural, oil, buildingand construction, finance and insurance sectors have  been the main contributors to the growth of
CWDP.  The manufacturing sector remains a major problem, with growth in this sector declining
from .1,02% in 1996 to 0.72% in 1997.  The implications of poor performance of the manufacturing
sector for the growth of the economy and for expansion of non-traditional exports is a major concern
to Government.
5. Informal sector statistics are hard to assemble and to analyse, but this sector, Government mast
admit, has a staying power beyond the confines of public policy measures.  It has provided succour tomany Nigerian families in times of economic crisis.  The sector is dominant and important, not in
terms of incomes, but in terms of employment and relevance for survival.
II. TRADE POLICY FOCUS
6. The overall objective of Nigeria's trade policy Is to diversify the country's export base and to
continue to liberalise the import trade.  Export diversification strategy is multi-dimensional in terms ofpromoting the traditional non-oil exports of cocoa,  rubber and palm produce and the non-traditional
exports namely, manufactures which emphasise value added to export production.  The Import policy
on the other hand has seen progressive liberalisation since the last trade review in 1991.  Besides the
WTO agreements to which Nigeria is a signatory and ECOWAS in which Nigeria is a dominant
partner, three other factors which influence Nigeria's trade policy are the desire to promotenon-traditional (value-added) exports, the need to in tegrate the informal trade into the mainstream
formal trading activities, and the reaction of Nigeria's neighbours to her trade policies.
7. Under the policy of "guided de-regulation", Nigeria attempts to pursue a balanced policy of
encouraging non-oil export promotion and graduated import-liberalization without encouraging the
growth and expansion of the informal trade.
                                                     
1 Ways and Means Advances of the CBN are limited to 12.5% of recurrent revenue of the fiscal year and must
be retired at the end of the fiscal year.WT/TPR/G/39 Trade Policy Review
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III. LIBERALISATION MEASURES
8. Nigeria, since the last trade review has continued to Introduce and/or strengthen trade
liberalization measures aimed at stimulating produc tion, promote competition and efficiency and thus
help to reduce the cost of doing business.  These measures are helping, generally, to increase
international confidence in the economy.  Some of the measures taken by Nigeria since 1991 are in
the following areas:
(i) Investment Policy
9. In 1995, the Nigerian Investment Promotion Commission (NIPC) was established through
Decree 16 of 1995.  NIPC absorbs and replaces the Industrial Development Co-ordinating Committee
(IDCC).  NIPC provides for a foreign investor to set up a business in Nigeria with 100% ownership.
Before the NIPC, foreign equity participation in Nigerian businesses was limited to 40%.  On theprovision of relevant documents, NIPC will approve the application within 14 days (as opposed to
4 weeks tinder IDCC) or advise the applicant otherwise.  The applicant will then register the new
company with the Corporate Affairs Commission (CAC) in accordance with the provisions of the
Companies and Allied Matters Decree of 1990.  The new company will finally register with the NIPC
as a foreign enterprise for completeness of record.  This procedure allows NIPC to determine howmany of the approved applications actually got registered as business enterprises in Nigeria.  NIPC
also eliminates the need to apply to the Ministry of Finance for "approval-in-principle".  Under the
NIPC, foreign investment Is guaranteed against nationalisation or expropriation by Government.
Compulsory ceding of shares by an existing holder to another person, as for example, under the
Indigenisation Decree of 1972, is not allowed. Foreign companies are free to invest in any sector of
the economy except for sectors in the "negative list", which Is currently cruder review to give greater
scope to foreign Investment in key sectors of the economy. (See Section III(ii) below).
10. Consistent with the NIPC, the Foreign Exchange (Monitoring and Miscellaneous Provisions)
Decree No 17 of 1995 was promulgated to enable foreigners invest in enterprises in Nigeria or money
market instruments with foreign capital which is legally brought into the country.  The decree permits
free repatriation of dividends accruing from such investment or of capital in event of sale or
liquidation.
(ii) Tariff Measures
11. New Customs and Tariff rates covering the period 1995-2001 were introduced in 1995.  In
the 1995 tariff review, the tariff range was seduced by 50% from 0-300% to 0-150%.  The 1995-2001
tariff structure is designed to stimulate competition and efficiency by reducing tariffs on consumer
items relative to tariffs on raw materials and intermediate and capital goods.  The reduction of tariffon final consumer goods will expose domestic manufacturers to import competition while the
relatively higher tariffs on raw materials will attract investment into raw material and intermediate
goods production.
(iii) Fertilizer Policy
12. Trade in fertilizer has been liberalised with effect from 1997.  Private importers are now free to
import fertilizer and sell in the open market in competition with the local producer(s) and blenders.  In
addition, with effect from January 1, 1998 import duties on fertilizers have been reduced from 10%
to 5%.Nigeria WT/TPR/G/39
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(iv) Interest Rate Policy
13. Interest rates were deregulated in October 1996.  Before the deregulation, the rates were fixed at
13.5% and 21% for deposits and lending respectively, with a spread of 7,5%.  With the deregulation,
the rates crashed to as low as 2% for deposits and 16% for lending.  Currently deposit (savings) ratesrange between 4 % to 12.5% while average lending rates vary between 18% and 20%, thus giving a
much wider spread than before the deregulation.  Bank depositors are thereby placed at a
disadvantage.  In order to ensure a more competitive banking environment, and attractive yields on
financial instruments including savings, investment in treasury securities will from 1998 be made
more attractive to the non-bank public through higher yields, low transaction costs and publicitycampaigns.  The provision of such market regulated alternative to bank deposit will help to engender
more competitive deposit rates in the banking system and thus reduce the wide spread between the
two rates.
(v) Import liberalisation
14. The list of items removed from import prohibition list continues to lengthen.  Rice, which is fast
becoming a staple food in Nigeria was removed from  the import prohibition list in 1995.  Similarly,
meat, fish, vegetable, fruits and fruit juice can now be imported into the country.
15. With effect from January 1, 1998, live or frozen poultry, beer and stout, barley and malt as well as
mineral find similar waters have been removed fr om the import prohibition list.  As already stated
above, the fertilizer trade has been fully liberalised.
16. Also with effect from 1998 fiscal year, second hand vehicles (locally known as "Tokunbo") and
motor-cycles can now be imported into Nigeria at the appropriate duties.
17. Finally, necessary steps are being taken by Government to comprehensively eliminate all existing
items on the Import Prohibition List as soon as possible.
(vi) Guided privatisation
18. Government defines guided privatisation as "a carefully planned and systematically implemented
programme of government withdrawal from the control of business enterprises which can be moreeffectively and efficiently run by private sector operators".  Competitive privatisation will be
encouraged in order to stimulate new investment and give the consumer an opportunity for a choice.
The import of this policy is that sectors previously closed to private sector participation, such as
petroleum refining, are being removed from the negative list for private sector investment.  With
respect to existing public sector investment, Government's desire is to ensure effective and efficientmanagement of the public enterprises so that the nation can get maximum benefits from the resources
so committed.
19. In order to ensure that the privatisation exercise achieves its desired objectives, Government will,
in 1998, set up a National Committee of Experts on Privatisation to be chaired by the Head of State, to
among other things examine and implement all aspects of the privatisation programme.
IV. ADMINISTRATIVE AND LEGAL REFORM MEASURES
20. The major objective of these reforms is to reduce transaction and business costs, provide a level
playing field for investors, stimulate confiden ce in the economy and encourage competition and
efficiency to the benefit of the consumer.WT/TPR/G/39 Trade Policy Review
Page 8
(i) Customs and Port Reforms
21. Nigerian Ports had been extremely/highly congeste d in the past.  Goods were cleared at the ports
without the required Import Duty Report (IDR) and genuine importers experienced long delays in the
clearance of their goods.  Customs Service was ill-equipped to handle the Ports.  The result was that
Government lost substantial amounts of revenue.  By the end of 1995 it was estimated that
Government lost about N8 billion as a result of malpractices at the Ports.
22. Following these developments, Government from June 1995, Introduced a number of reform
measures.  From this date, importers were required to pay customs duties through any of six
designated banks.  In 1996 the "Ports Related Offenses etc, Decree 1996 was promulgated and a task
force on sea-port security to streamline the activities of the security agencies at the ports and to clear
undesirable elements at the Ports was established.  Identity cards are now worn by every personentering the Nigerian Ports; Magistrate Courts are also established at the Ports to try violators of Port
rules and regulations.  As a result of these m easures import duty collected  rose from N39.00 billion
in 1995 to N55 billion in 1996.
23. The attempt at a speedy clearance of goods within 48 hours has however, not been successful.  In
consequence, Government has introduced the 24 hours round the clock service at the Ports.  Theoperations of the Nigerian Customs Service as well as documentation procedures are also being
computerised with effect from 1998.  The valuation data base within the Customs, using the
Automatic System for Customs Data Entry (ASYCUDA) is being introduced to correctly assess
import ditties.  In addition, the X-ray Scanning Inspection System is being installed at Apapa and
Tin Call Island Ports.  Port-Harcourt, Calabar- and Warri Ports will have the X-ray Scanning System
in 1999.
24. In addition, to facilitating speed-operation at the Ports, the scanners will permit security
verification by different security agencies to be car ried out at one spot rather than the time consuming
practice of carrying out the examination at different times.  With the introduction of the Scanning
System, the need for physical inspection of imports will be greatly reduced.
25. The introduction of the ASYCUDA, is expected to replace pre-shipment inspection once it is fully
operational.  In the meantime preshipment inspection is reinstated pending the effective take-off of theASYCUDA.
(ii) Review of Laws Inhibiting Competition in Key Sectors of the Economy
26. A number of changes in legislation designed to liberalise the economy through, in particular, the
elimination of monopolies have been put in place and/or planned for implementation in 1998.
27. In the Petroleum Sector, the Petroleum Act (Cap. 350 LFN 1990) will be reviewed with
particular. reference to sections that permit only Nigerians to be granted licenses and leases,  and the
power of the Minister to revoke the lease or license of foreign investors.  Similarly, relevant sections
of the Minerals Act (Cap 226 LFN 1990) will be re viewed to encourage foreign investment in the
solid minerals sector.  Section(s) of the Nigerian  Coal Corporation Act which contain restrictions on
granting rights; licenses leases, under the Minerals Act will be amended to allow private investors,both local and foreign, to prospect for coal. This is part of the strategy for competitive privatisation.
28. Similarly, reviews are being undertaken in resp ect of National Electric Power Authority (NEPA)
and Nigeria's Telecommunications Limited (NITEL) in order to break their monopoly as well as
protect the consumer.  In 1998, NITEL will he privatised while NFPA will be reorganised and
prepared for privatisation.Nigeria WT/TPR/G/39
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(iii) Capital Market Reforms
29. As a result of extensive consultations and in-depth studies of the Report of the Panel on the
Review of the Nigerian Capital Market, Government has adopted measures designed to reform and
internationalise the Nigerian Capital Market.  These measures include inter alia :
- the provision of new Capital Market Infrastructures to facilitate among other things
the adoption of a screen-based trading system in lieu of the existing call over system,
the setting up of a Central Depository Corporation and Independent Clearing
Corporations;
- the establishment of a Stock Exchange in Abuja and Capital Trade Points in
designated locations in the country;
- the Provision of a framework for the establishment of Options, Futures and
Commodities Exchanges;
- the development of a National Unit Trust Scheme which would, among other things,
assist in fund mobilization and give the rural community the opportunity ofparticipating in the equity market including privatisation issues;
- the establishment of an Investment Service Tribunal to speedily try Capital Market
disputes;
- manpower training and development and the establishment of Capital Trade
Associations.
30. A new legal framework which provides, among others, for the registration and regulation of the
investments and securities business in Nigeria is also being put in place.  To that end, the draft
Nigerian Capital Market Investment and Securities Decree will be promulgated before the end of this
year.
(iv) Tax Reform
31. Businesses were, up till 1996, subjected to multiple taxes by the three tiers of Government.  In
response to this and some other related problems, the Value-Added Tax (VAT) was introducedin 1994 to replace sales tax and fees for the registration of business premises which were charged by
State and Local Governments.  The problem still persists, nonetheless and it has become a major
obstacle to internal (inter-state) trade.  As a result, Government, in 1997, directed the Joint Tax Board
(JTB) to publish the approved list of taxes and levies which are to be collected by every tier of
Government.  This approved list which will be enacted into the tax law in 1998, will eliminate theproblem of multiple taxes and levies by States and Local Government, hence facilitate interstate trade
flows.
32. Similarly, in order to encourage investment and to boost the capital market, government has, with
effect from 1
st January, 1998, exempted stocks and shares of every description from the list of
chargeable assets liable to capital gains tax.
(v) Bilateral Double Taxation Agreement
33. The Double Taxation Agreement (DTA) was signed with the Philippines in September 1997,
while agreement with Poland has been concluded, and negotiation with Turkey is in progress.WT/TPR/G/39 Trade Policy Review
Page 10
Government will pursue negotiations and conclusion of tax treaties with Russia, India and Korea
in 1998.
V. EXPORT INCENTIVES
34. The focus of fiscal policy in relation to exports has been to diversify the country's export base
through the promotion of non-oil value-added exports.  Existing export incentive schemes include the
duty draw-back scheme, export expansion grant and manufacture in-bond schemes.  In 1996,Government introduced export pre-shipment insp ection by private companies to complement the
functions of the Federal Produce Inspection Service.  The objectives are to ensure that the dwindling
quality of Nigeria's traditional exports is improved upon and that both quantity and value of exports
are properly recorded in order to ensure appropriate repatriation of export proceeds.
35. The Calabar EPZ is a new export production facility with its own utilities to facilitate efficient
production.  Established in 1992, the EPZ Calabar is already in operation and the Government of
Nigeria has notified WTO of the exemption from the payment of income tax tinder the EPZ law.  The
inland city of Kano has also identified as another site for the EPZ and construction work is now in
progress.  In fact, with effect from 1996, factories operating outside the export processing zones can
apply and be granted export processing status and incentives in any part of the country.  TheAluminium Smelting Company (ALSCON) in Akwa-Ibom State has been granted such status since.
There is also the "Onne/Ikpokiri" Oil and Gas Free Zone serving specifically the needs of the oil
industry in Nigeria.
36. Located in the heart of the Gulf of Guinea, the Onne/Ikpokiri Oil and Gas Free Zone aims to
enable Nigeria become a central logistic point for the oil and gas industry in West Africa.  Established
by the Oil and Gas Export Free Zone Decree No. 8 of March 1996, the zone is expected to create
tremendous opportunities for investors in the oil and gas sector.
VI. MULTILATERAL AND REGIONAL AGREEMENTS
37. Nigeria ratified the WTO Agreement in December 1994 and thus became a founding member of
the WTO in January 1995.  The country is very concerned about the growing concensus, especially
among the developed countries, for another round of negotiations to commence by the year 2000.
The WTO Agreements, unlike the GATT, have been accepted as a single undertaking, and there isneed for members to fully understand the gamut of  the provisions related to their rights and
obligations.  In addition, it has also become necessary to allow time to develop the appropriate
institutional and regulatory capacity for implementation.
38. In that regard, Nigeria is in favour of efforts aimed at ensuring that the Uruguay Round
Agreements are first fully understood and implemented before new negotiations.  In the immediate,Nigeria requires technical assistance from the WTO and the developed countries to work on
realigning its domestic regulations with the various requirements of the WTO Agreements, and to
develop the human capacity and strengthen relevant institutions which are necessary for the successful
implementation of the Agreements.
39. Nigeria is also a founding member of ECOW AS.  Under the ECOWAS Trade Liberalisation
Scheme (TLS), there are about 160 participating companies and 354 products of which Nigeria
accounts for about 50% and 53% respectively.  The success of the TLS is hampered by the high
volume of informal trade among member States and by the failure of the ECOWAS members to pay
their dues.  Nigeria is among the very few members whose payment of dues is up-to-date, and
in 1997, Nigeria made available $7 million to the ECOWAS to assist it relocate its headquarters from
Lagos to Abuja.  In fact, at the present, Nige ria is about the only member contributing to theNigeria WT/TPR/G/39
Page 11
Compensation Fund which was established to facilitate the full implementation of the TLS.  Nigeria is
therefore very much committed to ECOWAS, but the organisation also needs technical assistance
from both bilateral donors and other relevant international organisations, particularly the WTO to
carry its programme through.
40. Nigeria also has bilateral trade agreements with a number of countries including Turkey,
Zimbabwe, Benin, Bulgaria, Jamaica, Niger,  Romania, Equatorial Guinea and Uganda.
VII. NEW INITIATIVES
41. Following the Liberalisation programmes initiated under SAP, the Marketing Boards were
scrapped. Government has taken steps to introduce a Commodity Exchange avid Futures Market(COMEX) to fill the vacuum.  The ground work  for the COMEX has been completed and the
enabling Decree on COMEX which has been drafted, will soon be enacted into law.
42. Similarly, Nigeria, in 1992, promulgated a decree  for the operation of Export Processing Zones
(EPZ).  The first of such EPZ is ready in Calabar.
43. In order to ensure greater transparency and accountability for existing Government enterprises
which are not covered by the provisions of the Companies and Allied Matters Decree No 1 of 1990,
Government has signed into law the Public Enterprise Regulatory Decree No 35 of 1996.  The central
objective of this decree is to, in the absence of formal incorporation, regulate and supervise theoperations of public enterprises with a view to enhancing transparency and accountability.  Many of
these enterprises have not had their accounts audited in more than five years.  The decree, otherwiseknown as "Failed Contracts" Decree will instil discipline in the management of the affected
enterprises and help to move them towards economic viability and financial solvency.
44. Finally, to provide for long-term perspective on economic development, Government has
introduced a market-oriented economic development programme to the year 2010 known as
"Vision 2010".  The Vision 2010, which was submitted to Government in September 1997, has since
been adopted and its implementation has been made part of the 1998 budget.
45. The Vision is intended to serve as a "compass" to guide the collective economic and political
actions of Nigeria to achieve set targets by the y ear 2010.  Crucial to the success of Vision 2010 is a
programmed share of responsibilities between the public and private sectors of the economy.
Government is expected to devote resources to the creation of an enabling environment, the provision
of infrastructure, the development of human capital, the formulation and implementation of stable and
consistent economic policies and effective and transparent governance in order to stimulate privatesector savings and investment.  GDP is expected to grow steadily front 6 to 10% per annum during
this period.
46. To ensure that top level attention is paid to Vision 2010, a National Council on Nigerian Vision
(NCNV) chaired by the Head of State, is now in place for the implementation of the programme.
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