INCORPORATING A BUSINESS ENTERPRISE:


Legal Framework for Business Activities

Methods of Conducting Business
All business enterprises must be registered with the Registrar-General of the Corporate Affairs Commission (CAC) (Registrar of Companies). A foreign investor wishing to set up business operation in Nigeria should take all steps necessary to obtain local incorporation of the Nigerian branch or subsidiary. Business activities may be undertaken in Nigeria as a :

1. Private or Public limited liability company;
2. Unlimited liability company;
3. Company limited by guarantee;
4. Foreign Company (branch or subsidiary of foreign company)
5. Partnership/Firm;
6. Sole Proprietorship;
7. Incorporated trustees;
8. Representative office;

INCORPORATING A BUSINESS ENTERPRISE:

The Companies & Allied Matters Act as Legal Framework for Business Activities
The Companies and Allied Matters Act, 1990 (the Companies Act) is the principal law regulating the incorporation of businesses. The administration of the Companies Act is under-taken by the CORPORATE AFFAIRS COMMISSION (CAC) and its functions include:
1. the regulation and supervision of the formation, incorporation, registration, management and winding up of companies.
2. the maintenance of a Companies Registry;
3. the conduct of investigation into the affairs of any company in the interest of share-holders and the public.

Minimum Share Capital and Disclosures in Memorandum of Association

The minimum authorised share capital is N10,000 in the case of private companies or N500,000 in the case of public companies. The Memorandum of Association must state inter-alia that the subscribers “shall take amongst them a total number of shares of a value not less than 25 per cent of the authorised capital and that each subscriber shall write opposite his name the number of shares he takes.” The law permits and acknowledges the roles of attorneys and other relevant professionals in facilitating business transactions provided, of course, that this “agency arrangement is disclosed".

Membership of the Company - Prohibition of Trusts
The Companies Act prohibits “notice of any trust, express, implied or constructive” and such shall not be entered on the register of members or be receivable by the CAC.

Shares
All categories of company shares to carry one vote. Shares with “weighted” voting right are prohibited. All shares (i.e. whether ordinary or preferential) issued by a company must carry one vote in respect of each share.
Consequently, preference shareholders are entitled to receive notices and attend all general meetings of the company and may speak and vote on any resolution before the meeting.

Disclosures To Be Published In Company Correspondence and Business Premises
Every company is obliged to disclose on its letterhead papers used in correspondence, the following particulars:
1. Name of the company/enterprise
2. Address
3. Registration/Incorporation Number
4. Names of Directors and Alternate Directors (if any)
In addition, the law requires companies/enterprises to ensure that the Certificate of Registration be displayed in conspicuous positions at their principal and branch offices.


INCORPORATING A BUSINESS ENTERPRISE:

Operations of Foreign Companies in Nigeria
A non-Nigerian may invest and participate in the operation of any enterprise in Nigeria. However, a foreign company wishing to set up business operations in Nigeria should take all steps necessary to obtain local incorporation of the Nigerian branch or subsidiary as a separate entity in Nigeria for that purpose. Until so incorporated, the foreign company may not carry on business in Nigeria or exercise any of the powers of a registered company.

The foreign investor may incorporate a Nigerian branch or subsidiary by giving a power of attorney to a qualified solicitor in Nigeria for this purpose. The incorporation documents in this instance would disclose that the solicitor is merely acting as an “agent” of a “principal” whose name(s) should also appear in the document. The power of attorney should be designed to lapse and the appointed solicitor ceases to function upon the conclusion of all registration formalities.

The locally incorporated branch or subsidiary company must then apply to the Nigerian Investment Promotion Commission (NIPC) for Business Permit and other requisite permits and licences.

Exemption to the General Rule
Where exemption from local incorporation is desired, a foreign company may apply in accordance with Section 56 of the Companies Act, to the National Council of Ministers for exemption from incorporating a local subsidiary if such foreign company belongs to one of the following categories:
(a) “foreign companies invited to Nigeria by or with the approval of the Federal Government of Nigeria to execute any specified individual project;
(b) foreign companies which are in Nigeria for the execution of a specific individual loan project on behalf of a donor country or international organisation;
(c) foreign government-owned companies engaged solely in export promotion activities;
(d) "engineering consultants and technical experts engaged on any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the Federal Government.”

The application for exemption from disclosing certain details about the applicant is to be made to the Secretary to the Government of the Federation (SGF). If successful, the request of the applicant is granted upon such terms and conditions as the National Council of Ministers may think fit.

Representative Offices

Foreign companies may set up representative offices in Nigeria. A representative office however, cannot engage in business or conclude contracts or open or negotiate any letters of credit. It can only serve as a promotional and liaison office, and its local operational expenses have to be inflowed from the foreign company. A representative office has to be registered with the CAC.

LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS:

Factories Act

This Nigerian law makes general and special provisions for the health, safety and welfare of persons employed in places statutorily defined as “factories” and for which a certificate of registration is required by law. It makes general provisions as to the standards of cleanliness, crowding, ventilation, lighting, drainage of floors, and sanitary conveniences: e.g. all factories must have potable water and washing facilities.

In respect of safety, there are general provisions as to the securing, fixing, usage, maintenance and storage of prime movers, transmission machinery, other machinery, unfenced machinery, dangerous liquids, automated machines, hoists and lifts, chains, ropes and lifting tackle, cranes and other lifting machines, steam boilers, steam receivers containers, and air receivers. There are in addition to these, standards set for the training and supervision of inexperienced workers, safe access to any work place, prevention of fire and safety arrangements in case of fire and first aid boxes.

Also, the law provides that adequate arrangements should be made for the removal of dust or fumes from factories, provision of goggles to protect the eyes in certain processes and the prevention of eating and drinking in places where poisonous or injurious substances give rise to dust or fumes.

It is mandatory that all accidents and industrial diseases be notified to the nearest inspector of factories and be investigated; it is prohibited for the occupier of a factory to make any deductions from the wages of any employee in respect of anything to be done or provided in pursuance of the Factories Act.

Workmen's Compensation Act

The laws provide for the payment of compensation to workmen for injuries suffered in the course of their employment.

LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS:
National Minimum Wage

Due to inflationary factors, further wage increases have been recommended, and minimum wages are about =N=5,000 about US$40.00 per month. An employer, defined as someone employing 50 or more persons, is required to pay the minimum wage, defined as the total emolument payable to a worker. However, the wage level in the public service has been substantially increased since the restoration of democracy in 1999.

All employers and trade unions in both the public and private sectors of the economy are permitted to make adjustments to total remuneration packages through the process of collective bargaining. The remuneration agreed requires the approval of the Federal Minister of Employment, Labour and Productivity. Approval will be given where the increases are moderate, non-inflationary and affordable. The agreed and approved remuneration will apply from the first day of the calendar month that follows such agreement. Back-dating of increments is not permitted.

LABOR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS:
Regulatory Bodies

Standards Organisation of Nigeria

The Nigerian Standards Organisation Act, 1971 was established as an integral part of the Federal Ministry of Industries, to carry out among other things, the following functions:-

•  to designate, establish and approve standards in respect of meterology, materials, commodities, structures and processes for the certification of products in commerce and industry throughout Nigeria;
•  to provide necessary measures for quality control of raw materials and products in conformity with the standards specifications;  
• to compile Nigerian standards specifications; 
• to ensure compliance with designated standards;  
• to establish a quality assurance system including certification of factories, products and laboratories; 
• to develop methods for testing of materials, supplies and equipment items purchased for use by public and private establishments; 
• to undertake preparation and distribution of standards samples;  
• to establish and maintain laboratories necessary for the performance of its functions.

On the payment of a nominal fee, it is possible to obtain from the offices of the Standards Organisation of Nigeria the prescribed standards for a number of products.

National Agency for Food And Drug Administration and Control

NAFDAC was established in 1993 with functions to regulate and control the importation, exportation, manufacturing, advertisement, distribution, sale and use of food, drugs, cosmetics, medical devices, bottled water and chemicals.

Drugs and Related Products

No drug product, cosmetic or medical device shall be manufactured, imported, exported, advertised, sold or distributed in Nigeria unless it has been registered in accordance with the provisions of and regulations made under a 1993 Act.

Environmental Impact Regulation

Similar to what obtains in several other convention countries, environmental protection is accorded a lot of prominence in Nigeria. The Federal Environmental Protection Agency (FEPA) now converted to a full-fledged Federal Ministry of Environment, is charged with overall responsibility for monitoring, supervising and coordinating Environmental Impact Assessment (EIA).

A comprehensive Environmental Impact Assessment procedure for Nigeria, as well as EIA guidelines for various industrial sectors has been compiled.

LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS:
Trade Malpractices Decree 1992

This Law creates certain offences relating to trade malpractices and sets up a Special Trade Malpractices Investigation Panel to investigate such offences. The law provides against any person who:

• falsely labels, packages, sells, offers for sale or advertises any product so as to mislead as to its quality, character, brand, name, value, composition, merit or safety; or
• for the purpose of sale, contract or other dealing, uses or intends to use any weight, measure or number which is false or unjust; or 
• sells any product by weight, measure or number and delivers to the purchaser a less weight, measure or number than is purported to be sold,  
• advertises or invites subscription for any product or project which does not exist.

LABOUR, HEALTH, TRADE & ENVIRONMENTAL STANDARDS:
Consumer Protection Council

A Consumer Protection Council has been established in Nigeria with the objectives to:-

•  provide speedy redress to consumer complaints through negotiations, mediation and conciliation;
• seek ways and means of removing from the market hazardous products and cause offenders to replace such products with safer and more appropriate alternatives;  
• publish from time to time a list of products whose consumption and sale have been banned, withdrawn, restricted, or not approved by the Nigerian government or foreign governments;  
• cause an offending company, firm, trade association or individual to protect, compensate, provide relief and safeguards to injured consumers or communities from adverse effects of technologies that are inherently harmful, violent or highly hazardous; 
• organise and undertake campaigns and other forms of activities as will lead to increased public consumer awareness; 
• encourage trade, industry and professional associations to develop and enforce in their various field quality standards designed to safeguard the interests of consumers;  
• encourage the formation of voluntary consumer groups or associations for consumers’ well being.

In the exercise of its functions, the Council is empowered to:

•  apply to the court to prevent the circulation of any product which constitutes an imminent public hazard;
•  compel a manufacturer to certify that all safety standards are met in their products

FOREIGN INVESTMENT REQUIREMENTS AND PROTECTIONS:

Principal Laws on Foreign Investments

The principal laws regulating foreign investments are, the Nigerian Investment Promotion Commission Decree No.16 of 1995 and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Decree No.17 of 1995, now incorporated as Acts of the National Assembly.

Deregulation of Equity Structure in Nigeria Enterprises

Effectively, the Nigerian Enterprises Promotion (Repeal) Decree No. 7 of 1995 has abolished any restrictions, in respect of the limits of foreign shareholding, in Nigeria registered/domiciled enterprises.

The only enterprises which are still exempted from free and unrestrained foreign participation are those involved in:

•  Production of arms and ammunition;
• production of and dealing in narcotic drugs and psycothropic substances;

The Nigerian Investment Promotion Commission Decree No. 16, 1995 (NIPC Decree)

This decree established the Nigerian Investment Promotion Commission (NIPC) as the successor to Industrial Development Coordination Committee (IDCC)

Functions and Powers

The Nigerian Investment Promotion Commission (NIPC) is an Agency of the Federal Government with perpetual succession and a common seal which is specially established, among other things, to:

1. co-ordinate, monitor, encourage and provide necessary assistance and guidance for the establishment and operation of enterprises in Nigeria;
2. initiate and support measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors;
3. promote investments in and outside Nigeria through effective promotional means;
4. collect, collate, analyse and disseminate information about investment opportunities and sources of investment capital and advise on request, the availability, chance or suitability of partners in joint-venture projects;
5. register and keep records of all enterprises to which the NIPC legislation applies;
6. identify specific projects and invite interested investors for participation in those projects;
7. initiate, organise and participate in promotional activities such as exhibitions, conferences and seminars for the stimulation of investments;
8. maintain liaison between investors and Ministries, government departments and agencies, institutional lenders and other authorities concerned with investments;
9. provide and disseminate up-to-date information on incentives available to investors;
10. assist incoming and existing investors by providing support services;
11. evaluate the impact of the Commission on investment in Nigeria and recommend appropriate remedies and additional incentives;
12. advise the Federal Government on policy matters, including fiscal measures designed to promote the industrialisation of Nigeria or the general development of the economy; and
13. perform such other functions as are supplementary or incidental to the attainment of the objectives of NIPC Decree.

Provisions Relating to Investments

Notable amongst the provisions relating to investments are the following:

• A non-Nigerian may invest and participate in the operation of any enterprise in Nigeria;
• An enterprise in which foreign participation is permitted, shall after its incorporation or registration, be registered with the NIPC. 
• A foreign enterprise may buy the shares of any Nigerian enterprise in any convertible foreign currency.

A foreign investor in an approved enterprise is guaranteed unconditional transferability of funds through an authorised dealer, in freely convertible currency of:

1. dividends or profit (net of taxes) attributable to the investment;
2. payments in respect of loan servicing where a foreign loan has been obtained; and
3. the remittance of proceeds (net of all taxes) and other obligations in the event of sale or liquidation of the enterprise or any interest attributable to the investment.

Priority Areas of Investment

The NIPC issues guidelines and procedures which specify priority areas of investment and prescribed incentives and benefits which are in conformity with Government policy.

Incentives For Special Investment

For the purpose of promoting identified strategic or major investment, the NIPC may in consultation with appropriate Government agencies, negotiate specific incentive packages for the promotion of investment


FOREIGN INVESTMENT REQUIREMENTS AND PROTECTIONS:
Investment Protection Assurance

The NIPC Decree provides that:

1. No enterprise shall be nationalised or expropriated by any Government of the Federation; and
2. No person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other persons.

There will be no acquisition of an enterprise by the Federal Government unless the acquisition is in the national interest or for a public purpose under a law which makes provision for:

1. payment of fair and adequate compensation; and
2. a right of access to the courts for the determination of the investor’s interest of right and the amount of compensation to which he is entitled.

Compensation shall be paid without undue delay, and authorisation given for its repatriation in convertible currency where applicable.

Apart from the investment guarantee assurances of the NIPC Decree, countries are welcome to execute and enter into bilateral Investment Promotion and Protection Agreements (IPPA) with the Nigerian government. Several countries have thus concluded such agreements with Nigeria.


FOREIGN INVESTMENT REQUIREMENTS AND PROTECTIONS:
Checklist of Steps For Establishing New Companies in Nigeria with Foreign Shareholding

STAGE A

1. Establish partners/shareholders and their respective percentage shareholdings in the proposed company.
2. Establish name, initial authorised share capital and main objects of proposed company.
3. [EXCEPT in instances where the proposed company will be 100% owned by non-resident shareholders] - Prepare Joint-Venture Agreement between prospective shareholders. The Joint-Venture may specify; inter-alia, mode of subscription by parties, manner of Board Composition, mutually protective quorum for meetings, specific actions which would necessitate share-holders approval by special or other resolutions.
4. Prepare Memorandum and Articles of Association, incorporating the spirit and intents of the Joint-Venture Agreement.
5. Foreign Shareholder may grant a power of attorney to its Solicitors in Nigeria, enabling them to act as its Agents in executing incorporation and other statutory documents pending the grant of Business Permit (i.e. formal legal status for foreign branch/subsidiary operations) to the foreign shareholder.
6. Conduct a search through the CAC as to the availability of the proposed company name and, if available, reserve the name with the CAC.
7. Effect payment of stamp duties, CAC filing fees and process and conclude registration of the company as a legal entity.

STAGE B

1. Obtain “Tax Clearance Certificate” for the newly registered company
2. 2. Prepare Deeds of Sub-Lease/Assignment, as may be appropriate, to reflect firm commitment on the part of the newly registered company, to acquire business premises for its proposed operations.

STAGE C

1. Prepare and submit simultaneous applications to the NIPC (on the prescribed NIPC Application Form) for the following approvals:-

• Business Permit and Expatriate Quota;
• Pioneer Status and other incentives (where applicable)

2. The application to the NIPC should be accompanied with the following documents:-

• Copies of the duly completed NIPC Form;
• Copies of the treasury receipt for the purchase of NIPC Form; 
• Copies of the Certificate of Incorporation of the applicant company; 
• Copies of the Tax Clearance Certificate of the applicant company; 
• Copies of the Memorandum and Articles of Association; 
• Copies of treasury receipt as evidence of payments of stamp duties on the authorised share capital of the company as at date of application; 
• Copies of the Joint-Venture Agreement - UNLESS 100% foreign ownership is envisaged; 
• Copies of feasibility Report and Project Implementation Programme of a company for its proposed business. It is advisable that quotations, letters of intent and other such documentations relating to industrial plant and machinery to be acquired by the company, be forwarded either as annexes or separately. In order to discourage the dissipation of administrative energy on speculative applications, the NIPC favours the applicant who has demonstrated positive intention to commence business as and when approvals are granted. Hence, the requests for evidence of acquisition of business premises and evidence of having sourced the plant and machinery to be utilised in the company’s business; 
• Copies of Deed(s) of Sub-Lease/Agreement evidencing firm commitment to acquire requisite business premises for the company’s operation. By implication, the ultimate NIPC approvals do incorporate approvals of the industrial site locations indicated in the application; 
• Copies of training programme or personnel policy of the company, incorporating management succession schedule for qualified Nigerians; 
• Particulars of names, addresses, nationalities and occupations of the proposed directors of the company; 
• Job title designations of expatriate quota positions required, and the academic and working experience required for the occupants of such positions. It is pertinent to note that expatriate quota on a “Permanent Until Reviewed” (PUR) status is only accorded to a Managing Director, where the non-resident shareholders own a majority of the company’s shares, and the authorised capital of the company is N5 million and above; 
• Copies of information brochure on foreign shareholder (if available) as testimony of international expertise and credibility of the foreign partner in the proposed line of business.

STAGE D

1. Having obtained the requisite NIPC approvals and Business Permit Certificate, the non-resident shareholder must act with despatch to import its foreign equity holding in the company. To ensure prompt importation of the foreign equity components, the NIPC may grant Business Permit but defer approvals for Expatriate Quota and Pioneer Status and other applicable investment incentives until evidence of capital importation is produced.
2. After obtaining Certificate of Capital Importation from the bank, the NIPC is to be notified of this fact with the supporting documentation, in order for it to resume processing of pending approvals that might have been deferred on such ground.
3. As soon as expatriate quota position are granted and the respective individuals to fill the quota positions are recruited, the company must embark on steps to obtain work permit and residency status for the expatriate employees and their accom-panying spouses and children (if any).

The Difference Between ‘BUSINESS PERMIT’ and ‘EXPATRIATE QUOTA’

Business permit, as the name connotes, is the permanent authorization for the local operation of businesses with foreign investments either as branch/subsidiary of a foreign company or otherwise.

Expatriate quota is the official permit to a company, conveying permission for the company to employ individual expatriates to specifically approved job designations, and also specifying the permissible duration of such employment. The expatriate quota forms the basis of work permits for expatriate individuals employed ( whose qualifications must fulfill the criteria established for the particular quota position). Expatriate quota positions are usually granted for 2-3 years subject to renewal, EXCEPT in cases where companies qualify for and are granted not more than one (1) “PUR” Quota ( i.e. Permanent Until Reviewed) position.

The Current Regulation on The Appointment of Foreign Directors

The promoters of business ventures in Nigeria are free to appoint Directors of their choice, either foreign or Nigerian, and the Directors may be resident or non-resident. The application to the NIPC must reflect the names of the proposed Nigerian and foreign Directors (with an indication of resident and non-resident Directors). The Business Permit Certificate consequently issued following such application usually reflects the respective names of the proprietors of the company, as well as the Directors representing each proprietor or co-proprietor.

Payments of foreign directors’ fees are remittable in the same manner as dividends accruing to the foreign company. However, since such fees are taxed at source (5% as a withholding tax), each foreign director’s fees are remittable subject to satisfactory evidence that the taxable amounts on such fees have been paid.

Pioneer Status (Tax Holiday) Advantages to a Company

The Industrial Development (Income Tax Relief) Act, Cap. 179 Laws of Nigeria, 1990, declares a number of industries as pioneer industries. Thus, any company whose products fall within the categorised industries could be conferred with Pioneer Status.

This designation is not necessarily a reflection that a company was pioneer per se in the industry, as several companies within the same pioneer industry classification could qualify for Pioneer Status. Where the activities of a company include the production of pioneer and non-pioneer products, the tax relief available on conferment of Pioneer Status would be restricted to income derived from pioneer products only. Under the current industrial policy, conferment of Pioneer Status accords a company relief from income tax liability for a period of up to 5 years (tax-holiday status).

Finally, it should be noted that even if a company’s activities and/or products are classified within pioneer industries, the grant of Pioneer Status is not automatic. The criteria for granting Pioneer Status are related and/or based on the following considerations:-

1. the amount of underlying capital investment in a company (N5 million and above) must be verifiable by physical inspection and supported by a report of the Industrial Inspectorate Division of the Federal Ministry of Industries, before a Pioneer Certificate is granted.
2. the socio-economic advantages of a company’s activities to the Nigerian economy as set out in its Feasibility Study is also an important consideration.

Without prejudice to these conditions, NIPC is empowered to confer Pioneer Status and other investment incentives in any other deserving circumstance as the Council of NIPC may approve.

Introduction

As part of the efforts to provide an enabling environment for the growth and development of industries, inflow of foreign direct investment (fdi), shield existing investments from unfair competition, and stimulate the expansion of domestic production capacity, the Federal Government of Nigeria has developed a package of incentives for various sectors of the economy. These incentives, it is hoped, will help revive the economy, accelerate growth and development and reduce poverty.

Nigerian government accepts the private sector as the engine of growth and the creator of wealth, while the government's major responsibility is to provide the enabling environment for the private investors to operate. In this regard, laws which had hitherto hindered private sector investments have been either amended or repealed and a national council on privatisation has been established to oversee orderly investment by private operators in vital areas of the economy such as mining, transportation, electricity, telecommunications, petroleum and gas.

Nigerian government's policy of economic deregulation and liberalisation has opened up new windows of opportunity to all investors wishing to invest in the country's economy. In this connection, an interest rate regime supportive of the real sector of the economy as well as an exchange rate that is market determined are the object of government policy. The security of life and property of the citizens are being vigorously pursued with the reorganisation and strenghtening of the Nigerian Police Force.In addition, the Nigerian Investment Promotion Council (NIPC) has been strenghtened to enable it serve as a one-stop office for clearing all the requirements for investment in the country. The tarrif structure is being reformed with a view to boosting local production.Government has introduced a new visa policy to enable genuine foreign investors to procure entry visas to Nigeria within 48 hours of submission of required documentation to the Nigerian diplomatic or consular missions abroad.

Existing "expatriate quota" requirement for foreign nationals working in Nigeria is in the process of being replaced with "work permit" which will be administered by the Nigerian Investment Promotion Council (NIPC).Within the past few years following the end of military dictatorship in Nigeria, government has progressively introduced a number of incentives designed to promote investments. These are grouped as follows:

Industrial sector Taxation:
Fiscal measures have been drawn to provide for deductions and allowances in the determination of taxable income of manufacturing enterprises, including:
· Pioneer status, which is a concession to pioneer companies located in economically disadvantaged areas, providing a tax holiday period of five to seven years. These industries must be considered by the government, to be beneficial to the country's economy and in the interest of the public.
Companies that are involved in local raw material development; local value added; labour intensive processing; export oriented activities; in-plant training are also qualified for additional concessions.

Tax relief for research and development (r&d)
Up to 120% of expenses on r&d are tax deductible provided that such r&d activities are carried out in Nigeria and are connected with businesses to which allowances are granted. The result of such research could be patented and protected in accordance with internationally accepted industrial property and copyright laws.
Local raw materials utilisation:
30% tax concession for five years to industries that attain minimum local raw materials utilisation as follows:-
- agro 80%
- agro allied 70%
- engineering 65%
- chemical 60%
- petro-chemical 70%

Labour intensive mode of production:
15% tax concession for five years. The rate is graduated in such a way that an industry employing one thousand persons or more will enjoy 15% tax concession while an industry employing one hundred people will enjoy only 6%, while those employing two hundred will enjoy 7%, and so on.
Local value added
10% tax concession for five years. This applies essentially to engineering industries, while some finished imported products serve as inputs. This is aimed at encouraging local fabrication rather than the mere assembly of completely knocked down parts. In-plant training
2% tax concession for five years, of the cost of the facilities for training. Export oriented industries 10% tax concession for five years. This concession will apply to industries that export not less than 6% of their products. Infrastructure
20% of the cost of providing basic infrastructure such as roads, water, electricity, where they do not exist, is tax deductible once and for all.

Investment in economically disadvantaged areas
100% tax holiday for seven years and additional 5% depreciation over and above the initial capital depreciation.

Abolition of excise duty
All excise duties were abolished with effect from the 1st of January, 1999.

Import duty rebate
A 25% import duty rebate was introduced in 1995 to ameliorate the adverse effect of inflation and to ensure an increase in capacity utilisation in the manufacturing sector. Investors are however, advised to ascertain the current operative figures at the time of making an investment, because these concessions have undergone some ammendments in the past few years.

Re-investment allowance
This incentive is given to manufacturing companies that incur capital expenditure for purposes of approved expansion of production capacity; modernisation of production facilities; diversification into related products. It is aimed at encouraging reinvestment of profits.

Investment tax allowance
Under this scheme, a company would enjoy generous tax allowance in respect of qualifying capital expenditure incurred within five years from the date of the approval of the project.
Dividends derived from manufacturing companies in petro-chemical and liquefied natural gas sub-sector are exempt from tax.
Companies with turnover of less than N1 million are taxed at a low rate of 20% for the first five years of operation if they are into manufacturing.
Dividend from companies in manufacturing sector with turnover of less than N100 million is tax-free for the first five years of their operation.

Investment guarantees/effective protection
Transferability of funds section 24 of NIPC Decree provides that a foreign investor in an enterprise shall be guaranteed unconditional transferability of funds through an authorised dealer in freely convertible currency of:
- Dividends or profit (net of taxes) attributable to the investment;
- Payments in respect of loan servicing where a foreign loan has been obtained;
- Remittance of proceeds (net of all taxes)and other obligations in the event of a sale or liquidation of the enterprise or
- Any interest attributable to the investment.

Guarantees against expropriation
By the provision of section 25 of the same NIPC decree, no enterprise shall be nationalised or expropriated by any government of the federation, unless the acquisition is in the national interest or for public purpose; and no person who owns either wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other person.
These can only be done under a law that makes provision for:
- Payments of fair and adequate compensation; and
- Right of access to the courts for the determination of the investor's interest or right and the amount of compensation to which he is entitled.
In addition to all these safeguards, the Nigerian government is prepared to enter into investment protection agreement with foreign enterprises wishing to invest in Nigeria.

Access to land
Any company incorporated in Nigeria is allowed to have access to land rights for the purpose of its activity in any state in the country. It is, however, a requirement that industrial companies comply with regulations on use of land for industrial purposes and with environmental regulations. Land lease is usually for a term of 99 years unless the company stipulates a shorter duration.

Oil & gas sector
The following fiscal incentives have been approved by the government in the gas production phase:
- Tax rate under petroleum profit tax (ppt) act to be at the same rate as company tax which is currently at 30%;
- Capital allowance at the rate of 20% per annum in the first 4 years, 19% in the 5th year and the remaining 1% in the books;
- Investment tax credit at the current rate of 5%;
- Royalty at the rate of 7% on shore and 5% offshore.

Gas transmission and distribution
- Capital allowance as in production phase;
- Tax rate as in production phase;
- Tax holiday under pioneer status.

Liquified Natural Gas (LNG) projects
- Applicable tax rate under ppt is 45%;
- Capital allowance is 33% per annum onsight-straight-line basis in the first three years with with 1% remaining in the books;
- Investment tax credit of 10%;
- Royalty of 7% on shore, 5% offshore tax deductible.

Gas exploitation (upstream operations)
- All investments necessary to separate oil from gas from the reserves into suitable products is considered part of the oil field development;
- Capital investment facilities to deliver associated gas in usable form at utilisation or transfer points will be treated for fiscal purposes as part of the capital investment for oil development;
- Capital allowances, operating expenses and basis for assessment will be subjected to the provisions of the PPT Act and the revised memorandum of understanding (mou).

Gas Utilisation (downstream operations)
Incentives for encouragement of exploitation and utilisation of associated gas for commercial purpose include:
- An initial tax free period of three years renewable for an additional two years;
- 15% investment capital allowance which shall not reduce the value of the asset;
- All fiscal incentives under the gas utilisation down-stream operations in 1997 are to be extended to industrial projects that use gas in power plants, gas to liquid plants, fertiliser plants and gas distribution/transmission plants;
- The initial tax holiday is to extend from three to five years;
- Gas is transferred at 0% ppt and 0% royalty;
- Investment capital allowance is increased from 5% to 15%;
- Interest on loans for gas projects is to be tax deductible provided that prior approval was obtained from the federal ministry of finance before taking the loan;
- All dividends distributed during the tax holiday shall not be taxed.

Oil & gas free zone
Incentives and fiscal measures approved by the government that favour and encourage large investment in the region include:
- No personal income tax;
- 100% repatration of capital & profit;
- No foreign exchange regulation;
- No pre-shipment inspection for goods imported into the free zone;
- No expatriate quota;
- Initial tax holidays period has been extended from 3 to 5 years and renewable for another 2 years;
- Investment capital allowance has been increased from 5% to 15%;
- All dividends distributed during the tax holiday shall be tax-free, etc.

Petroleum Industry
Very similar generous incentives package was granted the joint venture system and is contained in the MOU signed with oil companies. Agriculture
Without prejudice to governments deregulation of the financial sector, banks have been enjoined to recognise the differences in the gestation periods within each category of agricultural loans ranging from 6 months to 10 years, for crops, livestock, fisheries, forestry and wild life.
In addition, the following incentives are also available;
- Companies in the agro-allied business do not have their capital allowance restricted to 60% but graduated in full - 100%;
- Agro-allied plant and equipment enjoy enhanced capital allowances of up to 50%.

Solid minerals
Nigeria is richly endowed with a variety of solid minerals of various categories ranging from precious metals, stones and industrial
Minerals such as barytes, gypsum, kaolin and marble.
The ministry of solid minerals has worked out a package of attractive incentives for potential investors in the solid minerals sector, including:
- 3 to 5 years tax holiday;
- Deferred royalty payments depending on the magnitude of the investment and strategic nature of the project;
- Possible capitalisation of expenditure on exploration and surveys;
- Provision of 100% foreign ownership of mining companies or concerns;
- In addition to roll-over relief under the capital gains tax (cgt), companies replacing their plants and machinery are to enjoy a once-and-for-all 95% capital allowance in the first year with 5% retention value until the asset is disposed of, etc.

Tourism
The tourism sector was accorded preferred sector status in 1991. This makes it qualify for such incentives as tax holidays, longer years of moratorium and import duty exemption on tourism related equipment;
State governments are prepared to facilitate acquisition of land through the issuance of certificate of occupancy for the purpose of tourism development;
25% of income derived from tourists by hotels in convertible currencies are tax-exempt provided such income is put in a reserve fund to be utilized within 5 years for expansion or the construction of new hotels, conference centres, etc that are useful for tourism development.

Energy sector
All areas of investment in this sector are considered to be pioneer product or industry. As a result, there is a tax holiday of 5 to 7 years for investments in the sector.
There has been a deregulation of this sector resulting in the emergence of independent power producers (ipp) that have started to operate in Nigeria.

Telecommunications
Government provides non-fiscal incentives to private investors in addition to a tariff structure that ensures that investors recover their investment over a reasonable period of time, bearing in mind the need for differential tariffs between urban and rural areas. Rebate and tax relief are provided for the local manufacture of telecommunications equipment and provision of telecommunication services. The telecommunication sector is rapidly being deregulated and privatized. This has led to the emergence of many operators of the GSM such as MTN, Globacom, and Vodacom, including M-TEL as mobile phone service providers in Nigeria. Teledensity has now expanded, as a result, in leaps and bounds.

Tax incentives for other lines of trade
Companies profits in respect of goods exported from Nigeria, are exempt from tax provided the proceeds are repatriated to Nigeria and used exclusively for the purchase of raw materials, plants equipment and spare parts.
Profits of companies whose supplies are exclusive inputs to the manufacturing of products for exports, are excluded from tax.
All new industrial undertakings including foreign companies and individuals operating in an export processing zone (epz), are allowed full tax holidays for three consecutive years.
As a means of encouraging industrial technology, companies and other organisations that engage in research and development activities for commercialisation are to enjoy 20% investment tax credit on their qualifying expenditure.
All companies engaged wholly in the fabrication of tools, spare parts and simple machinery for local consumption and export are to enjoy 25% investment tax credit on their qualifying capital expenditure while any tax payer who purchases locally manufactured plants and machinery are similarly entitled to 15% investment tax credit on such fixed assets bought for use.

Export incentives for non-oil sector
Export proceeds can be retained in foreign currency in a domiciliary account with any authorised bank in Nigeria.
A special export development fund has been set up by the government to provide financial assistance to private sector exporting companies to cover a part of their initial expenses in some export promotion activities, including training courses, symposia, seminars and workshops, export market research, advertising and publicity campaigns in foreign markets, trade missions, etc.
There is also an export adjustment fund scheme which serves as supplementary export subsidy to compensate exporters for the high cost of local production arising mainly from infrastructural deficiencies and other negative factors beyond the control of the exporter.

Finally, Nigerian government established in i991, an export processing zone (EPZ), which allows interested parties to set up industries and businesses within demarcated zones, with the objective of exporting the goods and services manufactured or produced within the zones.
Calabar in Cross River State has been designated as the primary epz territory in Nigeria. Incentives within the territory include, tax holiday relief; unrestricted remittance of profits and dividends earned by foreign investors; no import or export licenses are required; up to 100% foreign ownership of enterprises; sale of up to 25% of production is permitted in domestic market; etc,
All exports under the Nigerian value added tax (vat) system are zero-rated and dividends received from investment in export-oriented businesses are to be free of tax

JOINT VENTURE & INVESTMENT OPPORTUNITIES IN THE TRANSPORTATION SECTOR

Aviation Sub-Sector
1) Maintaining a Hangar. Existing hangar owned by the airline needs refurbishment and modern equipment;
2) Aircraft Engine Workshop - A workshop that can effect A, B, C, & D checks on various grades of aircrafts used in the Country and in the West African sub-region;
3) Development and management of a five-star hotel in Lagos.
4) Provision of catering equipment and infrastructure to meet the needs of the airline industry;
5) Establishment of a modern aircraft training facility;
6) Development/construction of airport terminals.

Maritime Sub-Sector
1) Liner Services - Foreign Shipping Companies can engage in the provision of Liner Services through joint sailing agreement with Nigerian shipping companies;
2) Cabotage - Government encourages joint ventures in the ownership and operation of light vessels between ports, which must be fully registered in Nigeria;
3) Ship Acquisition and Ship Building Fund/Lifting of Crude Oil and Gas;
4) Pollution Control in the Oil Producing Coastal Regions
5) Search and Rescue - provision of equipment to meet various requirements;
6) Training /Technical Assistance;
7) Tanker Trade - joint venture with Nigerians in the exportation of Nigerian crude oil;
8) Proposed Nigerian Maritime Consultancy Centre - this will cover the following:
a) Marine engineering spare parts supplies;
b) Ships and Port management;
c) Ships, Ports and boat supplies;
d) Seaports, oil terminals and ship communication equipment;
e) Seaports and ships educational material;
f) Combined maritime publications.

Railway
There is need for modernization of the Nigerian Railway System which is still based on the prevailing technology at its inception early in the century, that is the 3" - 6" (1067mm) guage. These include:
1) Conversion of wagon bearings to roller bearings;
2) Conversion of train braking system from vacuum to air;
3) Conversion of AB coupler to more effective system;
4) Modernisation of track maintenance;
5) Improvement of ticketing system;
6) Manpower development and training.

Road Transport Provision of:
1) modern buses equipped with communication system;
2) trams to facilitate passenger movement in both rural and urban areas;
3) suitable haulage trucks for goods and services;
4) service facilities at the terminals on both the highways and destinations;
5) collection of tolls for the use of the service facilities provided to help sustain the system;
6) computerization of services to enhance efficiency and control of operations;
7) commercialization of terminal facilities;
8) central terminals in various urban and rural locations in the country with service facilities.

National Inland Waterways
1) Dredging of the River Niger;
2) Rehabilitation of Warri and Lokoja Dockyards, operational vessels, pollution control, etc;
3) Study and Development of River Benue System for all year round navigation;
4) Dredging of Oguta Lake for effective navigation with larger vessels.

Free Port Zones
The establishment of the Onne Free Port Zone makes Nigeria the focal point for the oil and gas industry in West Africa. It provides incentives such as, easy registration in the Nigerian oil and gas market - drilling, construction, pipe coating, ship repair, etc, minimum bureaucracy, free corporate tax, import and export duties exemption for goods within the zone, 100% foreign repatriation of capital and profit, 100% foreign ownership, free pre-shipment inspection for imported goods, free expatriate quota and the possibility to sell products and services in the West African sub-region.
It also offers excellent business opportunities to investors wishing to participate in both planned and existing projects that require huge investment - the Bonny Terminal, Eleme Petrochemical complex (NNPC), fertilizer plant (NAFCON), aluminum smelter plant (ALSCON) and the West African Gas Pipeline (Escravos - Ghana).

Proposed Terminals
1) Bulk Cargo Terminal - major bulk commodities such as coal, sugar, petroleum, grain, ore and bauxite, can be handled here.
2) Onne Self-Run Transit Terminal - this will accommodate a container terminal, a RORO terminal and a center with trans-shipment facilities for the West African sub region and neighbouring land-locked countries.
3) Lagos Specialised Trans-Shipment Terminal - this will provide a break away from the usually congested Apapa and Tin Can Island ports, serving both the manufacturing and trading sectors.

CONTACT ADDRESSES

Nigeria Airways Limited
Airways House
Murtala Mohammed Airport
Ikeja, Lagos
Tel: 234-(1)-493-7464, 497-0872/3
e-mail: wt-md@skypower-ng.com

Federal Airports Authority of Nigeria
Murtala Mohammed International Airport
P.M.B. 21607
Ikeja, Lagos
Tel: 234 (1) 496-8080, 496-8084

Nigeria Civil Aviation Authority
Aviation House (Domestic Wing) Ikeja Airport
P.M.B. 21029, 21038
Ikeja, Lagos
Tel: 234 (1) 493-0030, 470-8951, 493-0026

Nigerian Airspace Management Agency
Murtala Mohammed International Airport
Domestic Wing
P.M.B. 21084
Ikeja, Lagos
Tel: 234 (1) 470-8956 Fax: 234 (1) 497-0870
e-mail: iidrisu@nama.com

Nigerian College of Aviation Technology
P.M.B. 1039
Zaria
Tel: 234 (69) 322-021/2, 330-233; Fax: 234 (69) 334-756/869

Federal Ministry of Aviation
Federal Secretariat
Abuja
Tel: 234 (9) 523-2053, 523-9101, 523-2112

National Maritime Authority
4, Burma Road
Apapa, Lagos
Office of the Director-General
Tel: 234 (1) 587-1673, 580-4800-4
Fax: 234 (1) 545-0722
e-mail: dgnma@nigeria-maritime.com
Web-site: http://www.nigeria-maritime.com/

Office of the Director (Commercial & Operations Department)
Tel: 234 (1) 587-2068, 580-4800
Fax: 234 (1) 587-0477
e-mail: docnma@nigeria-maritime.com

Federal Ministry of Transport
Annex 3, New Federal Secretariat Complex
Shehu Shagari Way
Abuja
Tel: 234 (9) 523-7051 - 3

Nigerian Ports Authority (NPA)
Tofa House, Plat 770
Central Business District Area,
Wuse, Abuja
Tel: 234 (9) 523-7140-4
Fax: 234(9) 523-7143

Nigerian Railway Corporation (NRC)
Yellow House, Plot 739
Off Ibrahim Babangida Avenue
Maitama District
P.M.B. 5016, Abuja
Tel: 234 (9) 523-1912/3

Nigerdock Nigeria, plc
C/o Federal Ministry of Transport
2nd Floor, Annex 3, Federal Secretariat,
P.M.B. 1136,
Abuja

Nigeria Shippers' Council
51, Usuma Street, Maitama District
P.M.B. 296, Garki
Abuja
Tel: 234 (9) 523-0653

National Inland Waterways Authority
Lokoja, Kogi State
Maritime Academy of Nigeria
Oron, Akwa-Ibom State

1. Introduction

Under the privatisation programme as announced on July 20, 1998 by H.E Gen Abdulsalami Abubakar, Government will retain 40% of the telecom, electricity, petroleum refineries, coal and bitumen production, tourism, and spill-overs from the first phase of privatisation equities of the affected enterprises whilst 40% will be alienated to strategic investors with the right technical, financial and management capabilities. The remaining 20% will be sold to the Nigerian public through the Stock Exchange.

1.2 President Olusegun Obasanjo in his Presidential order to the Vice President of the Federal Republic of Nigeria dated 6th July 1999, directed that as the first step in the phased implementation of the administration's privatisation programme, action was to be initiated to enable the sale of shares listed on the Lagos Stock Exchange and owned by the Federal Government and its agencies in:

• Commercial and Merchant Banks
•  Cement Plants 
• Petroleum Marketing Companies

The sales are to be completed by December, 1999 and Core Investors are to be encouraged to buy into any of the privatised enterprises which will be paid in foreign currencies.

1.3 The second phase will consist of hotels and vehicles assembly plants, amongst others.

1.4 The third phase will involve work on the companies currently being prepared for privatisation or currently being audited, including NEPA, NITEL, NAFCON, Nigeria Airways, Refineries, etc.

2. Objectives of the Privatisation & Commercialisation Programme 

The objectives of the Privatisation and Commercialisation programme are:

1. to restructure and rationalise the public sector in order to lessen the dominance of unproductive investments in the sector;
2. to re-orientate the enterprises for privatisation and commercialisation towards a new horizon of performance improvement, viability and over all efficiency;
3. to raise funds for financing socio-economic developments in such areas as health, education and infrastructure;
4. to ensure positive returns on public sector investments in commercialised enterprises, through more efficient management;
5. to check the present absolute dependence on the Treasury for funding by otherwise commercially oriented parastatals and so, encourage their approach to the Nigerian Capital Market to meet their funding requirements;
6. to initiate the process of gradual cession to the private sector of such public enterprises which are better operated by the private sector;
7. to create more jobs, acquire new knowledge and Technology and expose the country to international competition.

3. Legal Framework

The legal framework, for the programme is the Public Enterprises (Privatisation and Commercialistion) Act of 1999. It was promulgated by the previous administration.

4. Definitions

For the purpose of this programme the following definitions will be used:

1. Full Privatisation
Means divestment by the Federal Government of all its ordinary shareholding in the designated enterprise.
2. Partial Privatisation
Means divestment by the Federal Government of part of its ordinary shareholding in the designated enterprise.
3. Full Commercialisation
Means that enterprises so designated will be expected to operate profitably on a commercial basis and be able to raise funds from the capital market without government guarantee. Such enterprises are expected to use private sector procedures in the running of their businesses.
4. Partial Commercialisation
Means that such enterprises so designated will be expected to generate enough revenue to cover their operating expenditures. The government may consider giving them capital grants to finance their capital projects.

In both full and partial commercialisation, no divestment of the Federal Government's shareholding will be involved, and subject to the general regulatory powers of the Federal Government the enterprises shall:

1. Fix rate, prices and charges for goods produced and services rendered;
2. Capitalise assets; and
3. Sue and be sued in their corporate names. 


5. Implementation Arrangements

1. Technical/Financial Advisers
World class advisers comprising investment banks, lawyers and other consulting firms shall be engaged to undertake strategic review, restructuring and sale preparation in respect of affected enterprises, based on an approved terms of reference. However, only consultants that are registered by the Bureau of Public Enterprises will be eligible for consideration.
2. Committees and Sub Committees
The National Council on Privatisation (NCP) in accordance with the provisions of the Public Enterprises (Privatisation and Commercialisation) Act of 1999 will from time to time appoint committees and sub-committees comprising knowledgeable individuals to tackle some of the preparatory works necessary at enterprise level in order to ensure a speedy and smooth privatisation/commercialisation exercise.
3. Floatation Advisers
Public offer of shares through the Stock Exchange will be the dominant method of privatisation to be used in the sale of the 20% equity reserved for Nigerian investors under the programme. In order to handle the floatation of the shares of affected enterprises on the Stock Exchange, the National Council on Privatisation (NCP) shall appoint professional advisers, in accordance with powers conferred on it to do so by Section 13 (c) of the Public Enterprises (Privatisation and Commericialisation) Act of 1999. The most important professional advisers in each case are:
1. The Issuing House
2. The Solicitor to the Issue
3. The Reporting Accountant
4. The Stockbroker to the Issue
5. Asset Valuers

These professional advisers are responsible for gathering, analysing and reporting on the operations of the affected enterprise, in such a way as to enlighten the prospective investor on the activities of the enterprise to be privatised and whose shares are being sold. The responsibilities of these advisers are described briefly hereunder: 


1. Issuing House

• Preparation of information memorandum, prospectus, application to the Securities and Exchange Commission (SEC) for the offer price and the Stock Exchange for listing;
• Sale of shares and receiving subscription funds; 
• Preparation of the basis of allotment; 
• Representing the BPE and the company before SEC and the Stock Exchange;
• Co-ordination of all-parties meetings culminating in the Completion Board Meeting

2. Reporting Accountant
The Accountants are responsible for providing accounting data and calculations for forecasts of the Company's future profits. In expressing his opinion on forecasts, the Reporting Accountant must consider the following:

• The general character and recent history of the company's business with particular reference to its main products, markets, customers, suppliers, labour force and trend of results.
• The accounting policies normally adopted in preparing the Company's Annual Accounts and the fact that those have been consistently applied in the preparation of profit forecasts. 
• Whether or not the preparation of the forecast was consistent with the economic, commercial, marketing and financial assumptions which the Directors have stated to be the underlying bases. 
• The Company's general procedures in the preparation of forecast. In particular, the accountant would ascertain whether forecasts are regularly prepared for management purposes and if so, the degree of accuracy and reliability normally achieved. He would also wish to discover the extent to which the forecast results of the expired period are supported by reliable interim accounts; and how the forecasts take account of any material exceptional items; 
• Matters of general interest including the adequacy of provisions made for foreseable losses and contingencies, and the adequacy of working capital as indicated by properly prepared cash-flow forecasts.

All these are done to ensure that ultimately, the new shareholders would be buying a good product.

3. Solicitors to the Issue
The Solicitor is expected to primarily advise on compliance with the law at every stage of the exercise. He is expected to:

• Examine the Company's Memorandum and Articles of Association to ensure that those provisions which are considered unnecessary in a public limited liability company are deleted.
• Cause all the necessary resolutions for the different stages of the floatation e.g. restructuring of capital, creation of new shares etc., to be passed. 
• Registration of all documents and resolutions with the Corporate Affairs Commission and other Regulatory agencies. 
• Following up verifications with the Land Registry etc., on the title deeds held by the company. 
• Preparation of Management Agreements, Sale and Purchase Agreements, Shareholders' Agreement etc., where necessary or reviewing same to ensure that the interest of the company and country are safeguarded. 
• Take such actions as are considered necessary in a public floatation in accordance with the law.

4. The Stockbrokers to the Issue
The principal role of the Stockbroker is to introduce the Securities on the trading floor of the Stock Exchange. Technically, shares of a publicly quoted Company can only be traded on the floor of the Stock Exchange.
1. Asset Valuers
Asset Valuers undertake the professional valuation of the assets of the affected enterprises to provide a guide on the current replacement value of the Company.

6. Marketing of Shares of Enterprises Designated for privatisation

6.1 In order to ensure effective coverage of the country, the following arrangements will apply:

1. Availability of Application Forms:
The maximum possible number of people would be given the opportunity to apply for the shares of privatised public enterprises. Therefore, application forms will be printed in sufficient quantities and distributed to all local government areas in the country.
Abridged prospectus outlining the main features of the offer will be published in national newspapers.
2. Minimum Application
In order to ensure widespread ownership of shares amongst the different classes in the society, the minimum application for general allotment of shares shall be 100 shares of 50k each. In this way low income earners and even students will be able to participate in the privatisation exercise.
3. Distribution of Application Forms
Application forms will be distributed through the branch network of the banking system, stockbrokers, local government offices, State Investment companies, Post Offices, Offices of Chambers of Commerce & Industy across the country, State Ministries of Commerce and Industries, Nigerian Missions abroad. Distribution of application forms to receiving agents will be programmed to commence about one week before the opening of application list to prevent late arrival of forms.

6.2 Application Prices

The application prices of shares will be as determined by the National Council on Privatisation on the recommendations of the Bureau of Public Enterprises.

6.3 In line with the Privatisation Act, shares will be made available for participation by all interested investors subject to strict conformity with the following guidelines:

1. Multiple applications will not be allowed.
2. Share of privatised enterprises are to be allotted equally between Federal Constituencies. Only residents of the Constituencies are expected to buy such shares.
3. Fictitious names used in applications will be rejected.
4. Only Nigerian citizens aged 18 and above are eligible. 


7. Funding of Share Purchase

Government will provide the enabling environment to facilitate access to capital credit for purchase of shares by the general public. Employers of Labour in both the public and private sectors are urged to extend financial assistance to their employees to enable them purchase shares in privatised enterprises. Commercial Banks in the country are enjoined to extend credit to their adjudged customers against the security of share certificates to be issued. In this way, even those who do not have savings will be able to participate in the programme.

8. Debt conversion programme & privatisation

Participation is open to owners of converted debts subject to allotment principles guiding the privatisation programme. This programme of debt conversion has now been suspended.

9. Communications

A co-ordinated and integrated communications programme has been developed to ensure that the concept of privatisation, the processes adopted and the affected enterprises are marketed in such a way that all stakeholders participate effectively in the programme. This is with a view to building a better Nigerian society for the optimisation of the economic resources. Extra effort will be made to mobilise and sensitise the grassroots.

10. Allotment of Shares

10.1 Allotment of shares in privatised enterprises will generally be guided by government policy of "wide geographical spread of ownership". All share allotments will be published in national newspapers. The shares on offer to Nigerians would be sold on the basis of equality of Federal Constituencies.

10.2 Staff Participation
A minimum of not less than 1% of total shares on offer shall be reserved for the staff of any privatised enterprise.

10.3 Limitation on Individual Shareholding
No individual shall be allowed to acquire more than 1% equity in any enterprise whose shares are offered for sale under this programme and where applicants resort to multiple applications, these will be rejected outright or cancelled if subsequently discovered. In the event, they will be refunded their application money only.

10.4 General Allotment
The shares on offer to Nigerians shall be sold on the basis of the equality of Federal Constituencies and of the residents of the Federal Capital Territory, Abuja.

11. Strategic Investors/Core-Groups

11.1 Core Investors or Strategic Investors can be described as formidable and experienced groups with the capabilities for adding value to an enterprise and making it operate profitably in the face of international competition. They should possess the capabilities of turning around the fortune of such an enterprise, if by the time of their investment, the enterprise is unhealthy. The major characteristics that distinguish strategic/core group investors are: 

1. They must posses the technical know-how in relation to the activities of the enterprises they wish to invest in. For example, a Core Investor into a Cement Company must have access to cement production expertise with regard to optimal use of the machinery, maintenance of such machinery and other technical aspects of Cement Production such as procurement of raw materials, etc.
2. The Core Investors must also posses the financial muscle, not only to pay competitive price for the enterprise they wish to buy into but also to turn around its fortune, using their own resources without relying on the Government for funds. Each Core/Strategic Investor is expected to prepare a Short/Medium/Long term plan for the development of the enterprise and indicate how it will be financed.
3. The Core Investor must have the management know-how to run a business profitably in a competitive environment where market forces dictate the business environment.

11.2 Given the magnitude of investment level in the utilities earmarked for privatisation, the lack of absorptive capacity of the Nigerian Capital Market, our low technological level among other reasons, it is quite obvious that there is need to utilise the services of core investors in the new dispensation.

11.3 In consonance with S(4) of the Privatisation Act, privatised enterprise which requires participation by Strategic Investors may be managed by the Strategic Investors as from the effective date of privatisation on such terms and conditions as may be agreed upon. 
 
12. Procedures for identifying strategic/core investors

12.1 There is need to employ the services of world class investment banks, lawyers and other consultants (as privatisation advisers) in the identification and selection of Core Investors. The starting point in the identification of strategic/Core Investors is to place advertisements in Local and International Journals and Magazines inviting strategic investors to submit their expressions of interest to invest in the specified public enterprises. They are then supplied with copies of laws and regulations on privatisation of the country and an information memorandum on the affected enterprise. At the same time, they are given a specific period within which to undertake due diligence studies on the subject enterprise and submit economic bids to the implementation agency for evaluation. After submission of their bids interviews would be held with the parties concerned to discuss their bid contents and the National Council on Privatisation will select the Core Investors. This has been the procedure scrupulously followed by the Bureau of Public Enterprises so far, which has ensured transparency of the system.

12.2 The Council intends to use the Technical and Financial Advisers (Privatisation Advisers) as the leading light in the identification and assessment of Core Investors. Such advisers know fairly intimately who are the major actors in the different industries and almost invariably they would have dealt with them elsewhere in the world. A Committee of the Council, supported by the Advisers will pre-qualify and later interview those adjudged suitable for further negotiations culminating in recommendations to be made to the Council for ultimate appointment as the Strategic/Core Investor to acquire up to 40% of the equity capital of the affected enterprise. Management and Shareholders Agreements will be signed to protect the enterprise from undue interference in routine business decisions by ministry officials post privatisation. 

12.3 The critical areas of interest in negotiations with the potential strategic/core investors are:

1. The price to be paid for the 40% equity to be acquired.
2. The terms of payment.
3. The role of the Strategic/Core Investor in the future management of the public enterprise being privatised.
4. The level of participation by Nigerian managers and technology transfer.
5. The future development of the public enterprise as perceived by the Strategic/Core Investor.
6. The funding arrangements for rehabilitation expansion or diversification of the enterprise post-privatisation.
7. Staff welfare, retraining and development.

12.4 The entire process of identifying Strategic/Core Investors will be open and transparent.

13. Timing Of implementation

13.1 The Council will draw up a detailed implementation time table covering the entire list of enterprises to be privatised and prioritise the pace of implementation. In the first batch, all those enterprises already listed on the Stock Exchange will be privatised subject to the absorptive capacity of the capital market. The other phases will be implemented as outlined by Mr. President.

13.2 In respect of the 20% equity reserved for Nigerian investors in NITEL, NEPA, NAFCON and others, adequate time will be given to the Strategic investors to settle down and add value to these organisations before arrangements are made to offer the shares of the affected enterprises to the general investing public through the Stock Exchange. This may take anything between two to three years. It is also quite clear that due to the size of the offering it would be necessary to stagger such offerings in tranches to accord with the absorptive capacity of the Nigerian Capital Market.

14. Issue of share certificates

Share Certificates shall be issued within the usual time specified by applicable regulations to enable successful allotees to exercise their ownership rights in the affected enterprises. However, the Council in collaboration with the SEC and the Stock Exchange will together institute measures designed to outlaw nominal transfers post-privatisation, so as to prevent irregular accumulation of privatised shares.

15. Accounting to government in respect of completed privatisation

All proceeds from completed sales shall be paid into the Consolidated Revenue Fund and Federal Government will decided on the use of such funds. This will include the use of the funds for productive investment and for the improvement of education, agriculture, health and the settlement of Nigeria's External Debts. 

16. For further information please contact:

Director-General
The Bureau of Public Enterprises
The Presidency
1 Osun Crescent
Maitama
Abuja
Nigeria
Tel: + 234 9 4134636 - 46
Fax: + 234 9 4134657, 4134671 - 2
Web: http://www.bpeng.org/
e-mail: bpegen@micro.com.org & bpe@bpeng.org

Imani Estate Annex:
Opposite MTN Head Office
Adjacent Defence Guest House
Shehu Shagari Way
Maitama
Nigeria
Tel: + 234 9 4130784 - 7
Fax: + 234 9 4130789

17. PRIVATIZATION NEWS

• BPE lists more companies for sale in 2004
• Progress of Privatisation