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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