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Article: Trade & Investment

The New Legal Regime Under The Nigerian Investment Promotion Commission Act

Introduction: Prior to 1995 , when the N.I.P.C. Decree ushered in a new statutory framework for foreign investments, Nigeria was yet to join the market for foreign investments by introducing investor friendly legislation. The move from indigenisation was slow in coming, much slower than those of more progressive developing countries. In recognition of the vast potential of foreign investment, a new Investment Law was passed in 1995. The Decree entrenched a legal regime intended to attract foreign investors. In so doing, it dismantled the old legal order that provided for stringent controls on foreign investors. Background to the Nigerian Investment Promotion Commission Act Prior to the promulgation of the Nigerian Investment Promotion Commission Decree No.16 of 1995 (N.I.P.C. Decree), there was in place, the Nigerian Enterprises Promotion Act of 1989 (N.E.P.Act). Among other things, it reserved most enterprises for the exclusive participation of Nigerians. Foreigners were only permitted limited participation, subject to cumbersome restrictions, such as participation only where the foreign controlled enterprise had a minimum share capital of N20, 000,000.00 More irksome to foreign investors, still, were the bureaucratic barriers. Typically, an investor would, for instance, go through diverse government departments and parastatals in order to obtain a Business Permit. The rationale behind the old NEP Act was to encourage the participation of Nigeria in industrial activity and thus increase the prospects for local technology take-off. The New Dispensation and Foreign Participation The current legal regime and regulatory framework, under the N.I.P.C. Decree (now Act), aims at encouraging foreign participation as the engine for growth. This statute achieved this by enabling foreign nationals and enterprises to freely invest in the operation of any enterprise in Nigeria, except for a few enterprises such as the Production and Dealing in Drugs, Arms Manufacture, etc. The foreign investor may operate alone or in joint venture with Nigerians by means of a company, which must first be registered with the Corporate Affairs Commission (C.A.C),a body charged with the responsibility of, regulating company affairs in accordance with the Companies and Allied Matters Act of 1990. Thereafter, the foreign investor would be required to also register with the N.I.P.C.

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Alternatively, a foreigner not wishing to establish a business may buy shares in any Nigerian company with convertible currency. In either of these, investments will be effected with foreign currency freely imported into Nigeria through an Authorized Dealer and converted into the “Naira” at the Autonomous foreign Exchange Market: Foreign Exchange Monitoring and Miscellaneous Provisions Act No. 17 of 1995. This allows for future repatriation of profits.

The law setting up the N.I.P.C. established the N.I.P.C. as the successor to the Industrial Development Coordination Committee and the N.I.P.C. has, amongst other things, the following powers: (a) to coordinate, monitor, encourage and provide necessary assistance for the establishment and operation of any enterprise in Nigeria; (b) to initiate and support any measures which shall enhance the investment climate in Nigeria for both Nigerian and non-Nigerian investors; (c) to promote investment in and outside Nigeria through effective promotional means; (d) to maintain liaison between investors and Ministries, Government Departments and Agencies, Institutional Lenders and other Authorities concerned with investments. Statutory Guarantees In a rather unprecedented manner, section 25 (1) of the N.I.P.C. Act provides that, (subject to subsections (2) and (3): (a) no enterprise shall be nationalized or expropriated by any Government of the Federation; and (b) 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 another person. Subsection (2) provides that: …There shall be no compulsory 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 : (a) payment of fair and adequate compensation; and (b) a 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. Subsection (3) provides that: …Any compensation payable under this section shall be paid without undue delay and authorization for its repatriation in convertible currency shall, where applicable, be issued.

Conclusion The N.I.P.C. law marks the start of a new dispensation in Nigeria’s policy towards foreign investment. The removal of restrictions in areas of foreign participation is certainly welcome. The statutory guarantees against nationalisation and expropriation are to be applauded as well. It is certainly a step in the right direction.

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