Nigeria risk report
Corruption is a significant obstacle to business in Nigeria: companies are very likely to encounter bribery and other corrupt practices. Corruption risks are pervasive throughout all institutions but the oil sector is particularly corrupt. Corruption is criminalised primarily by the Criminal Code and the Corrupt Practices and Other Related Offences Act. Accepting or giving gifts as well as facilitation payments are illegal, and individuals can be penalised with up to 7 years' imprisonment. Despite a strong legal framework, enforcement of anti-corruption legislation in Nigeria remains weak: in practice, gifts, bribery and facilitation payments are the norm.
Judicial system Very high risk
Companies face a high risk of corruption when interacting with Nigeria's judiciary; it is characterized by a high degree of corruption and political interference (FitW 2016). Companies report bribes to obtain favorable judgments are common (GCR 2015-2016). Nigeria's constitution establishes an independent judiciary, but other branches of government frequently interfere with it (BTI 2016). Nearly half of Nigerians perceive the judicial system to be corrupt (GCB 2015). The judiciary is plagued by understaffing, underfunding, inefficiency, and corruption (HRR 2016). Judges are susceptible to bribery and courts cannot be relied on for independent judgments (HRR 2016). Judges and court officials are poorly remunerated and court documents are not digitized, which encourages corruption (ICS 2016).
Businesses do not report sufficient trust in the efficiency of the legal framework to settle disputes or allow them to challenge regulations (GCB 2016-2017). Occasionally, businesses in Nigeria seek court injunctions from judges seen as favorable to their cause, to protect themselves against businesses or legal proceedings unfavorable to them (ICS 2016). Enforcing a contract can be costly, but the time it takes to enforce a contract is considerably shorter than the Sub-Saharan Africa regional average (DB 2017). On a more positive note, a very small percentage of companies see the courts as a constraint to business (ES 2014). Nigeria is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
In October 2016, law enforcement in Nigeria seized USD 800,000 in a raid targeting several senior judges (BBC News, Oct. 2016). Among those arrested was Supreme Court Justice Sylvester Ngwuta, who has been charged with fifteen counts of fraud amounting to nearly USD 1,5 million (BBC News, Nov. 2016). Additional charges have recently been added to the case (Premium Times, May 2017).
Police Very high risk
Businesses face a high risk of corruption in their interaction with the police. Almost all Nigerians believe the police is corrupt, making it the most corrupt institution in Nigeria (GCB 2015). The police in Nigeria is a strong impediment to business, which are considered very unreliable in enforcing the law (GCR 2016-2017). Over half of businesses pay for their own security in Nigeria (ES 2014). Police officers continue to operate with impunity (HRR 2016).
In one illustrative example, a bribe of NGN 2.7 million was recovered from Assistant Commissioner of Police; he is currently facing unspecified disciplinary action (Nigerian Monitor, Oct. 14, 2016). In another instance, it is alleged that a Nigerian police unit tasked with combating violent crime has been systematically torturing detainees in order to extract confessions and bribes. The unit has also been accused of stealing property from relatives of detainees (Amnesty International, Sept. 2016).
Public services Very high risk
Nigeria's public service suffers from widespread corruption. Government regulations are burdensome for businesses, and bribes and irregular payments are often exchanged (GCR 2016-2017). A third of companies expect to give gifts when trying to obtain electrical and water connections (ES 2014). Around one in four companies expects give gifts in order to obtain an operating license (ES 2014). A system of patronage exists in public institutions (The Economist, Feb. 2016). Diversion of public funds is so common, that an audit in December 2016 found and removed 50,000 'ghost workers' from the government's payroll, leading to savings quoted as USD 636 million (Africa News, Dec. 2016). In connection to this case, eleven main suspects have been referred to the Economic and Financial Crimes Commission (Africa News, Dec. 2016). No further update on the case was available at the time of review.
Starting a business takes less time than the regional average; dealing with the Commission for Corporate Affairs (CAC) is the most time-consuming part of the procedure (DB 2017). Getting electricity takes significantly longer than the regional average (DB 2017).
Land administration Very high risk
There is a high risk of corruption in Nigeria's land administration. Land is granted to businesses as a hereditary lease from the Nigerian government and can be contingent on corruption and favoritism (BTI 2016). A significant number of businesses report being expected to give gifts or facilitation payments to obtain a construction permit (ES 2014). The state governors, in charge of land administration, often abuse their office by giving land to their clientele (BTI 2016). Corruption and favoritism among land officials are reported reasons behind certain cases of property demolition (HRR 2016). Investors should also be aware that due to the hereditary system, proper documentation for land rights is sometimes found to be lacking, leading to local chiefs selling land that afterwards is revealed to have an unsecured title (BTI 2016). One illustrative example is former state governor Ladoja, who has been charged with fraud amounting to over USD 14 million, including fraud in property sale (The Nation, Mar. 2017). Property transfers in Nigeria are complex and maintaining property rights has become problematic (ICS 2016). The Federal Capital Development Authority (FCTA) in Abuja allegedly evicts residents and businesses that do not comply with the Abuja city plan, even if permits are in place and acquired through the FCTA (ICS 2016). Land may be expropriated with compensation when natural resources are discovered on the land (BTI 2016).
Property rights in Nigeria are regulated but not sufficiently protected (GCR 2016-2017). Registering property is a lengthy process that involves significantly more steps than the regional average (DB 2017).
Tax administration Very high risk
Companies interacting with the Nigerian tax administration face high risks of corruption. One in four companies expect to be asked for a bribe, gift or facilitation payment when interacting with tax officials (ES 2014). Over half of Nigerians consider the tax authorities to be corrupt (GCB 2015). Tax collection processes are non-transparent and tax evasion among businesses is widespread due to collusion between businesses, individuals, and tax officials (ICS 2016). Companies may face multiple taxes within concurrent state and local jurisdictions (ICS 2016). Tax revenues currently only amount to 8% of GDP (pwc 2017). In a recent push, the Nigerian government identified 700,000 firms that have never paid taxes; it announced plans to raise back taxes from these firms (News24, Sept. 2016).
Companies spend nearly three times the amount of hours on filing taxes as the regional average and the frequency of payments is also much higher (DB 2017).
Customs administration Very high risk
There is a significant risk of corruption in Nigeria's customs sector. Bribery is common among Nigeria's customs and port authorities, and smuggled goods regularly enter seaports and cross borders (ICS 2016). Customs processes are handled exclusively by the Nigerian Customs Service (NCS) and the Nigerian Ports Authority (NPA). A significant number of firms expect to give gifts or payments to obtain an import license (ES 2014). Onerous import procedures and corruption at the border are the most problematic factors for imports, and the efficiency of the clearing process is considered poor (GETR 2016). Reports of nepotism and corruption within the organization remain common, despite a public drive against corruption in the NCS (Premium Times, Mar. 2017). In October 2016, 29 senior officials with the NCS were fired for corruption-related offenses (Pulse, Oct. 2016).
Public procurement Very high risk
Corruption is common in Nigeria's public procurement sector, with up to one-third of companies expecting to give gifts or payments to secure a government contract (ES 2014). Companies report that irregular payments are very common in public procurement procedures (GCR 2015-2016). The diversion of public funds to well-connected firms and individuals as well as favoritism in decisions of government officials is widespread (GCR 2016-2017). Foreign companies are generally treated on equal terms with domestic companies, but they may in some localities be required by law to partner with a local firm (ICS 2016). Occasionally, foreign financing appear to be essential in the award of government procurement (ICS 2016). Difficulties in obtaining payments for projects has rendered companies reluctant to bid on public contracts (ICS 2016). There has been some improvement in the process of awarding contracts in the natural resources sector, but irregularities including the award of contracts to firms with histories of fraud and bribery and the award of contracts outside the regular bidding process persist (NRGI, Oct. 2016). Nigeria has undertaken various efforts to reform public procurement policies, the most notable of which is the Public Procurement Act, which regulates public procurement and aims to minimize the abuse of rules, processes and standards in the award and execution of public-sector contracts. Companies can find information on legislation, complaints procedures and contracts at the Bureau of Public Procurement. Businesses are recommended to implement special due diligence procedures to assess the risk of encountering corruption in Nigeria's procurement process.
There is a high risk of corruption in defense sector procurement (GDACI 2015). A panel found that over USD 15 billion was stolen from the state coffers under the guise of fraudulent arms procurement deals during the administration of President Goodluck Jonathan (Reuters, May 2016). The panel launched investigations into 15 retired and serving military officers, as well as 22 companies and aides of suspects (Sahara Reporters, Apr. 2017). A member of the panel, Rear Admiral in the Nigerian Navy Daniel Ikoli, died under suspicious circumstances in April 2017, prompting the other members of the panel to seek special protection (Sahara Reporters, Apr. 2017).
Bala Ngilari, the former governor of the state of Adamawa, was sentenced to five years in jail for failing to adhere to proper procedures for awarding a contract to supply 25 vehicles according to the public procurement laws of the state (Daily Post, Mar. 2017). After serving only a few weeks in prison, he was released due to health concerns, allegedly based on a fraudulent letter (Premium Times, Mar. 2017).
Natural resources Very high risk
Nigeria's natural resources sector has a high risk of corruption. Reporting practices and safeguards and quality controls are particularly weak (NRGI 2017). The sale of oil in Nigeria carries high corruption risks, stemming from a reliance on oil traders, unqualified 'middleman' companies, and a general lack of transparency (NRGI 2015).
Nigeria's Extractive Industries Transparency Initiative (NEITI) called upon the government to recover over USD 21 billion from the Nigerian National Petroleum Corporation in Nigeria and to investigate non-transparent contracts and transactions of the Nigeria National Petroleum Corporation (NNPC) (Premium Times, Apr. 2017). Moreover, NEITI also called for a probe into USD 15.8 billion related to the status of dividend and loan repayments by Nigeria Liquefied Natural Gas (NLNG) from 2000 to 2014 (Premium Times, Apr. 2017). A deal between the Nigerian government and Royal Dutch Shell, worth USD 1.3 billion, for an offshore oil exploration license called OPL 245 has come under intense scrutiny. It is alleged that high-ranking executives at Royal Dutch Shell were aware that part of the money would be used to enrich former oil-minister Etete as well as former President Goodluck Jonathan (Financial Times, Apr. 2017). Royal Dutch Shell is currently being investigated over these allegations by prosecutors in Nigeria, Italy, and the Netherlands (Financial Times, Apr 2017). Despite the turmoil, the Nigerian government has indicated that it intends to move forward with the deepwater exploration project (AllAfrica, May 2017).
The Nigerian Extractive Industry Transparency Initiative Act establishes the Nigerian Extractive Industry Transparency Initiative, which ensures, monitors and reviews transparency and accountability in the reporting and financial disclosure of extractive companies. Offences against the Act can be penalized by two or more years' imprisonment and/or a fine of up to USD 151,000.
Nigeria has a well developed anti-corruption legal framework, but enforcement is very weak. It has been estimated that corruption could cost Nigeria up to 37% of its GDP by 2030 if corruption is not dealt with (pwc 2017). The Criminal Code criminalizes corruption and the abuse of office, and the Corrupt Practices and Other Related Offences Act criminalizes active and passive bribery, as well as attempted corruption, fraud, extortion and money laundering. Penalties apply both to individuals and companies and include fines and/or up to seven years' imprisonment. Accepting or giving gifts or facilitation payments is illegal. Nigeria's Constitution specifies requirements for asset disclosure and regulations governing the offering and receiving of gifts for members of the executive, parliament and legislature.
The Advance Fee Fraud and other Fraud Related Offences Act combats the persistently large body of fraudulent activities in Nigeria with up to 15 years in prison. The Money Laundering (Prohibition) Act regulates making and accepting cash payments. Whistleblowers have little legal protection. The institutions established to combat corruption, namely the Independent Corrupt Practices Commission (ICPC) and Economic and Financial Crimes Commission (EFCC), have proved ineffective in curbing corruption, owing to incompetent leadership, insufficient funds, a lack of capacity, and no political support (BTI 2016). The EFCC has proved itself to be incapable of diligent prosecution, often by not providing substantial evidence for charges or making mistakes allowing the defendants to be acquitted on technicalities (Mondaq, May 2016). Nigeria has established a whistleblowing policy under which individuals can anonymously provide tips online; if these lead to the successful recovery of funds, the whistleblower is entitled to 2,5%-5% of proceeds. In the first two months since the policy has been in place, over USD 180 million have been recovered (Quartz, Feb. 2017).
Nigeria has ratified the Convention on Mutual Administrative Assistance in Tax Matters, the United Nations Convention against Corruption (UNCAC) and the African Union Convention on Preventing and Combating Corruption.
Freedom of expression is protected by the Constitution but is not always respected in practice; courts do not always judge fairly in cases involving journalists (FotP 2016). Journalists occasionally face interference from public officials, especially when reporting on high-level corruption (FotP 2016). Government officials do not always provide information to the press that they are legally bound to disclose (FitW 2016). Journalists and reporters continue to suffer from intimidation and harassment (FotP 2016). In one prominent case, two journalists faced eleven criminal charges, which were later dropped, including forgery and conspiracy to commit a felony, after reporting on plans by President Goodluck to increase fuel prices and oppose the merger of two opposition political parties (FotP 2016). The newspaper Premium Times, known for its investigative journalism, has faced repeated harassment (GIJN, Jan. 2017). Small-scale bribes and gifts to journalists are very common, but journalists themselves do not consider them a problem (FotP 2016), which calls their independence into question. Nevertheless, the media landscape is described as one of the most vibrant and diverse on the African continent (FotP 2016). The press is considered 'partly free' (FotP 2016).
Civil society in Nigeria is weak, fragmented and lacks resources, although there is a positive trend in its development (BTI 2016). While the landscape of civil society organizations is among Africa's most vibrant (FitW 2016), civil society organizations continue to suffer from weak representation and limited organizational resources (BTI 2016). Labor unions suffer from similar limitations (BTI 2016). Private media and religious groups have increasingly taken on the tasks of civil society (BTI 2016).
- World Bank: Doing Business 2017.
- Natural Resource Governance Institute: Nigeria Country Profile 2017.
- pwc: Impact of Corruption on Nigeria's Economy 2017.
- Premium Times: "Nigeria: Govt Amends Corruption Charge Against Supreme Court Judge", 16 May 2017.
- AllAfrica: "Nigeria: Despite Malabu Scandal, Shell, Eni Will Continue To Operate OPL 245 - Govt", 3 May 2017.
- Financial Times: "Shell and Eni Embroiled in 'Unholy Mess' over Nigerian Oil", 20 April 2017.
- Sahara Reporters: "USD 15 billion Arms Deals: Panel Members Seek Protection From Buhari", 8 April 2017.
- Premium Times: "NEITI Calls for Probe of USD 15.8 Billion NLNG Dividends from 2004 to 2014", 6 April 2017.
- Premium Times: "NEITI Wants Nigerian Govt. to Recover Unremitted USD 21.8 Billion Oil funds from NNPC", 4 April 2017.
- Premium Times: "Convicted Governor who Secured Bail with 'Fraudulent' Letter Released from Prison 'illegally'", 29 March 2017.
- The Nation: "Ladoja's Fraud Trial Resumes", 27 March 2017.
- Daily Post: "Former Governor, Bala James Ngilari Sentenced to 5 Years in Prison", 6 March 2017.
- Premium Times: "Revealed: Despite Leadership Change, Nigerian Customs Remains Riddled with Corruption, Inefficiency", 5 March 2017.
- Global Investigative Journalism Network: "GIJN Joins Calls for End to Harassment of Premium Times by Nigerian Military", 23 January 2017.
- World Economic Forum: Global Competitiveness Report 2016-2017.
- World Economic Forum: The Global Enabling Trade Report 2016.
- Bertelsmann Foundation: Bertelsmann Transformation Index 2016.
- US Department of State: Human Rights Practice Report 2016.
- US Department of State: Investment Climate Statement 2016.
- Freedom House: Freedom in the World 2016.
- Freedom House: Freedom of the Press 2016.
- Africa News: "Nigeria Rids Civil Service of 50,000 Ghost Workers, Saving Over USD 600 million", 28 December 2016.
- BBC News: "Nigerian Supreme Court Judge Charged with Corruption", 21 November 2016.
- Nigerian Monitor: "How Police Recovered N2.75m Bribe From Serving Assistant Commissioner of Police", October 2016.
- Pulse: "Agency Sacks 29 Senior Officers for Alleged Corrupt Practices", 20 October 2016.
- NRGI: "Tender Moment for Oil Sale Governance in Nigeria", 19 October 2016.
- BBC News: "Nigeria Seizes USD 800,000 in 'Anti-Corruption Raids' on Judges", 9 October 2016.
- News24: "Nigeria Hunts Down 700,000 Companies over Tax Evasion", 23 September 2016.
- Amnesty International: "Nigeria: Special Police Squad 'Get Rich' Torturing Detainees and Demanding Bribes in Exchange for Freedom", 21 September 2016.
- Mondaq: "Nigeria: The Anti-Corruption Legal Framework and Its Effect On Nigeria's Development", 13 May 2016.
- Reuters: "Nigeria's Vice President Says USD 15 Billion Stolen in Arms Procurement Fraud", 3 May 2016.
- Quartz: "Nigeria's Whistle-Blower Plan to Pay Citizens to Report Corruption is Off to A Great Start", 13 February 2017.
- The Economist: "The USD 20 Billion Hole in Africa's Largest Economy", 2 February 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- Transparency International: Global Corruption Barometer 2015.
- NRGI: Inside NNPC Oil Sales: A Case for Reform in Nigeria 2015.
- Reuters: 'Nigeria starts investigating crude oil swap contracts', 15 June 2015.
- World Bank Group: Enterprise Surveys - Nigeria 2014.