1 The term "foreign" investment (FI) is used in the sense that capital utilized for production is imported from abroad. The reason for importing capital from other nations is tied to two things: firstly, the inability of the State in question to finance production on its own, and secondly, the lack of the requisite technology to carry out the production process. A State could also decide to utilize FI even when it has technology and capital at its disposal. 2 See Section 41 of The Foreign Exchange (Monitoring and Other Miscellaneous) Provisions Act (FEMMP) of 1995, which defines capital for the purposes of the Act. Generally, though, investment is called capital when it is reckoned as a factor of production. Capital could be in the form of finance or machines and can be described as the means by which production of goods is facilitated. 3 This is the basis on which the World Bank and its affiliate organizations recommend FI to their client States. 4 Economic restructuring of the nation involved passing a new investment code with liberal investor-friendly procedures. The financial sector has also been sanitized to a large extent. The required paid up capital of banks has also been increased to two billion nnirn for new banks. This is to bring them up to par with foreign banks. Foreign financial enterprises are now also welcome into the nation's financial sector with the result that some foreign banks have set up in the country, either alone or in partnership with local banks. In fact the whole financial services sector has been positioned to play a key role in the deregulated economic environment. In addition, the government- owned insurance companies arc in the process of being privatized, while the capital/futures market has also been positioned to play a leading role in the reform of the economy. To this end, the Nigerian Stock Exchange in Lagos has modernized its operations and is now operating an automated system of share administration, the computerized Stock Exchange Management System, which is operated by the Central Securities Clearing System.
5 Initially, post-independence economic policies permitted capital importation. Later on there was a shift to the mixed economic mode, where aspects of capital-oriented production and development were alternated with socialist modes of economic development, such as State ownership of means of production and State control of the economy concurrent with the indigenisation policy. These divergent economic orientations were enunciated in the development plans of the nation. The policy varied from year to year and from administration to administration, resulting in difficulty to discern the exact economic development orientation of the nation. h The nation had approached the International Monetary Fund in 1983, but was only able to commence economic reform in 1996, due to resistance by the population to the prescribed "adjustment". 7 Third World States with balance of payment difficulties have often resorted to the international financial institutions-the World Bank, including the International Bank for Reconstruction and Development (IBRD), and the International Monetary Fund (IMF). The Structural Adjustment Programme (SAP) is then prescribed as a remedy. The Programme recommends fiscal discipline of the State, deregulation of the economy, devaluation of the national currency and liberalization of trade, coupled with the importation of foreign capital as a means of improving the economy. All these measures are intended to encourage the growth of the economy by making the government less involved in the active economic life of the State and, in addition, increase the country's competitiveness in international trade. I It has been asserted that, when internal markets are opened up, the per capita income of the nation increases proportionately. See observations by the EU President G. Vcrhofstadt, in The Nigerian Guardian, 29 September 2001, at page 57.
I Transnational corporations are business enterprises which transcend State boundaries. The major ones in Nigeria mostly originate from the imperialist era. They were founded on the exploitation of natural resources such as coal, palm oil and groundnuts. They have access to a large capital base and have been in the business of exploitation of resources for centuries in areas that were dominated by their home governments. Their current business ethics could be described as reflecting a slight outward change to accommodate the prevailing sensibilities of the time, without much change in the inner core. 11 The TNcs are sources of capital and technology and employers of labour in developing States desperate for these. It is only to be expected that some States are willing to extend favourable conditions to enable the TNCS to establish operations in their States. �� The National Investment Promotion Commission (Nipc), FEMMP and Sec: Acts all have provisions pertaining to these issues. In particular, the Investments and Securities Act (1999) empowered the Securities and Exchange Commission (SEC) to regulate the Nigerian capital market. Section 8(a) of the Act allows the Commission to regulate the investments and securities environment in Nigeria, and Section 8(1) gives the Commission the power to protect all investors in the market. The intention is to provide sufficient protection to foreign investments in the sector, thereby encouraging foreign capital inflow through share purchase. 12 This would cover the liberalization of shareholders' right of representation in companies, minimum shareholding, maximum foreign investor shareholding, voting procedure, accessible information on market trends and import/export of foreign exchange used for share purchase and dividends. " According to available information, the percentage returns on investments in the Nigerian capital market are consistently higher than those in other capital markets; see George A. Akamiokhor, GuidingForeiqnInvestorsthronghtheNigerianCapitalMarket, a paper presented at a Workshop by Alpha Juris Chambers in 1996. rr It is unfortunate, however, that it is virtually impossible to persuade TNCS who are the owners of capital and technology that they should invest in an ailing economy. They would prefer to wait until the economy recovers fully so as not to risk their capital in an uncertain economic environment.
11 That is, applying to a single investor. '6 An example would be in the extractive industry, where there is a collective agreement called the pro formal draft contract which sets out the general conditions for investment in that sector. " In this case, the incentives would apply to all investors in the particular sector. For example, the investment provisions contained in the Solid Minerals Act applies to all investors in that sector. 1H An example is the export-processing zone where a general package of investment incentives is applicable to all investors in thc Evz. 'y The Nipc Act is in this category. 211 Examples of these are the World Trade Organization Agreement and investment treaties. 21 Yinka Omorogbe, InvestmentGuaranteesandIncentivesintheNigerianGasIndustry, Journal of Finance and Investment Law, Vol. 2, No. 4, 1998, pp. 142-153.
== A Technical Committee headed by Senator L. Imoke worked hard to ensure that the stipulated deadline of one year in which to revamp NEPA was kept to. n The Transportation Committee of Nigeria's National Assembly is, however, working on a transportation policy which should be ready before the end of 2002.
=^ The "advanced fee fraud" involves a request by the fraudster that the victim make a deposit of a sum of money (the "advanced fee") to facilitate an illegal deal that is purported to yield fantastic returns, typically in respect of oil supplies or stolen funds. This is known in local parlance as "419" after the Chapter of the same name in the Nigerian Criminal Code which spells out the offence, i.e. "obtaining by false pretences". The Advanced Fee Fraud and Other Related Offences Act (1995) was promulgated at the height of the notorious activities of the 419ers as a means of curbing the problem.
25 Many laws were promulgated under the erstwhile military governments. However, under Section 315 of Nigeria's 1999 Constitution, these are deemed to be valid laws passed by the incumbent National Assembly. In addition, a major codification of laws was published as Lawsof theFederationof Nigeria(LFN)1990. This means that laws promulgated before 1990 were codified in the LFN while decrees issued thereafter could be dated and/or attributed to the National Assembly as an Act.
26 It should be noted that, although this law was enacted during military rule, its operation was hampered by extraneous circumstances, such as political considerations, in terms of its implementation. 27 Specific policies/laws for this purpose include the Indigenisation Acts, exchange control laws, expatriate quotas, provisions on company registration, etc. 21 There was a focus on import substitution industries. These were also import dependent, as their machines and raw materials had to be imported. This resulted in capital flight of large proportions as earned foreign exchange was used mainly to service importation of capital goods and inputs for these industries, with the result that the end products were unaffordable by most Nigerians, therefore negating the intention of the policy.
29 The issue of the government's resolve to withhold some "golden" shares in privatized banks during the erstwhile military era is a case in point. In recent times, too, there have been accusations that the privatization of the NAL Merchant Bank was subject to some manipulation which resulted in shares being reserved and then sold to sonic state governments, purportedly in trust for their indigenes. This is instead of all the shares being sold to the subscribing public. 3" The apparent transparency in the recent Gsrvt auction in the nation's telecommunications sector is being lauded as an example of the government's commitment to the deregulation of the economy. 31 NIPC Section 30( repeals the moribund Industrial Development Coordination Committee Decree of 1988 to encourage a vibrant investment climate. ;z Ibid., Part n, Section 4. 33 The petroleum industry is, however, exempt from this provision. This is presumably to maintain the statusquo in that sector, where the government, in association with some foreign operators, is in control of the industry. It can be argued that, since this is the most strategic industry in Nigeria today, any guarantees and opening up of the economy should apply to it. On the other hand, its strategic nature could in this case have determined the government's approach. In addition to this is the fact that investments in this sector are already subject to some specific guarantees.
14 FEMMP, Section 12(1) and (2); see also Section 15(1). 35 Ibid., Section 3(1) and (2). 36 Ibid., Section 13; see also Section 15(4). 31 Ibid., Section 17. 3x In fact, Section 37(1) states that provisions of earlier laws, such as the Bill of Exchange Act, The Central Bank of Nigeria Act, The Banks and other Financial Institutions Act, and the National Economic Intelligence Committee (Establishment) Law should be read with such modifications as will bring them into conformity with this Act.
3y To this end, Section 38 of the Act repeals The Exchange Control Decree (1984), the Foreign Currency (Domiciliary Account) Decree (1985) and the Second-Tier Foreign Exchange Market Decree (1986). 4° Only two of the five subsections arc reproduced here. The Indigenisation Acts (the Nigerian Enterprises Promotion Act) were used to reserve the local economy for Nigerians. 4= It was, in fact, regarded as creeping nationalization by the host States of the erstwhile foreign investors and set the stage for economic confrontations between these States and Nigeria which the nation eventually lost, as it has had to reverse these policies.
4; Privatization docs not preclude indigenous investor participation. There should be more vigorous attempts to encourage local investors to become more involved in the privatization exercise. 44 See also Section 32 of the Nme Act for prohibitions on foreign ownership of businesses in Nigeria. ^5 Commercial technology is owned mainly by the TNCS, to whom it is a tradable commodity. 46 Technology agreements are also foreign investment agreements, i.e. licensing of patents and trademarks, establishment of an industry with the consequent know-how training, turnkey agreements, etc. 47 Technology that is offered to the Third World through this means is usually stale. Consequently it can only encourage a situation of dependence on the developed States and the TNCS. °H International protection includes the various Conventions administered by the World Intellectual Property Organization (Wmo) and some of the W ro Agreements, while the local ones include trademarks, patents/designs and copyright laws.
49 Sce J.C. Onyido, Intellectual PropertyProtectioninNigeria, Finance and Investment Law Journal, Vol. 5, No. 2, April 2()()1, pp. 254-267; and Stephen Kola-Balogun, TrademarksandParallelImports, Finance and Investment Law Journal, Vol. 5, No. 2, April 2001, pp. 268-273. so These have also been imported into the laws of most of these States to guarantee observance. 51 See generally the National Office for Technology Acquisition and Promotion Act, in LFN1990,supra, footnote 25. 52 The Nenzn is the government agency in charge of the CEPZ. 53 President O. Obasanjo commissioned the CEPZ for full operations in November 2001 as a sign of the present administration's commitment to foreign investment as a tool of development. Although the Zone was conceived as a processing zone, it has metamorphosed into a free trade zone.
5^ See generally Sections 12 and 18 of the Nepz Act. S5 Due to the fact that Nigeria is the biggest market in the sub-region, the operator is allowed to sell between 50 and 100 percent of the goods produced in the Zone in the local market, subject, however, to payment of the requisite customs duties.
ó(, Subject, however, to any contrary provisions of this or any other law. the additional two years of tax relief granted under Section 22 is not automatic. 58 Section 23(1) of the Act stipulates that Sections 24 and 25(1) and (2) of the Nil'C "shall apply to any foreign investment made by any company granted a mining lease under this decree." Section 23(2) further imports Section 15 of the FEMMP Law. 5y These provisions guarantee transferability of capital and fair and adequate compensation for nationalization. 611 It is the acknowledged sovereign right of the State to nationalize property. However, the investment- friendly position of Nigeria makes it imperative to give some kind of assurance to foreign investors who arc being courted to assist in the development of the nation's latent resources. See also O.A. Odiase-Alcgimenlcn, NewRegime forSolidMineralDevelopmentinNigeria, 19 J.E.N.R.L. 4, November 2001, pp. 344-363, at 352-354. �r E. Akpata, TheNigerianArbitrationLawinFocus, West African Book Publishers Ltd., Nigeria, 1997 pp. 4-10.
r'2 However, it is recognized that the parties must have first exhausted local remedies; see Article 26 of the ICSID Convention. Note that the Convention attempts to level the field for the foreign investor vis-d-vis the host government and that the parties may also decide to settle the matter exaequoetbono. 6.\ A company granted pioneer status is conferred tax advantages, as are agro-allied industries, mining industries and technologically complex industries; see also Section 24 of the NlPC Act.
�4 This sector enjoys a five-to-seven-year tax holiday, capital allowance of 95 percent for equipment and tax deductions applicable to other sectors of the economy on items such as research. ss See supra, footnote 57. �6 Nigerian LNG (Fiscal Incentives, Guarantees and Assurances) Law (1990). 67 Associated Gas Fiscal Agreement (1992).
6H Some agreements cover both investment promotion and guarantees, see footnote 69, infra. 61 These agreements, called investment promotion and protection agreements, cover such aspects of investment as compensation, dispute settlement and repatriation of capital. �° LegalMeasures fordrePromotionandProtectionofForeignInvestmentinNigeria, paper presented by Chief Kola Daisi, Chairman, NIPC, at the Annual Conference of the Nigerian Society of International Law, held October 2001, in Benin City, Nigeria. 71 Foreign investment is an aspects of international trade. The connection here is that TNCS are the owners of both capital and technology, the basic ingredients of both international trade and foreign investment. 72 Unfair trade practices are generally defined as those measures which have the effect of limiting international trade.
7.1 Article VIII of the General Agreement on Trade in Services enjoins Members to ensure that their operation of monopoly institutions is not inconsistent with Article n. It is therefore not surprising that the nation's monopoly institutions (defined in Article xxvm(h) of Gnrs) are being privatized in accordance with this requirement. 74 The Nmc Act (1995), and the FEmmi) Act (1995). 75 See Part v of the Nipc Act. 76 The government-owned insurance companies arc up for privatization, and the capital market has been positioned to play a leading role in the reform of the whole economy. To this end, the Nigerian Stock Exchange in Lagos is now complemented by the new Commodities Market at Abuja. �� The government has announced that preshipment inspection will be replaced by destination inspection from July 2002. It is therefore working hard to meet this implementation date so that a situation like that which occurred during the preceding year does not recur.
11 See O.A. Odiase-Alegimenlen, ConfiictintheNigerianNation,ConsequencesofanUnbalancedSocio-PoliticalSystem, 2001, unpublished paper available from the author upon request.