The Good Intentions of the Nigerian Government, how Reliable are They?

Nigeria is America’s 6th largest oil provider (1).  In 2004, the United States imported over 16 billion dollars’ worth of goods from Nigeria (2).  In January 2005, Nigeria’s imports to the United States are up from $882.2 million to $1.6 billion, an almost 50% increase (2).  In some ways, this is unsurprising.  While Nigerian economic progress has been far from smooth, their setback including a revolution or two, failure to meet “spending and exchange rate targets” and debt default, they do appear to be moving closer to becoming a country with serious investment opportunities (3).  Within the last several years, Nigeria has privatized their 4 largest oil refineries (3) and began serious planning to privatize their ports (4) and encourage greater investment in their banking system at the International Conference on Mergers and Acquisitions, scheduled for Geneva, Switzerland, from April 7-8, 2005 (5). 

Clearly, the Nigerian government (which has been around for a little over 5 years) has been taking moves to encourage foreign businesses and investors to enter the Nigerian market.  There’s a pattern of privatization of major government owned industries.  The oil refineries were privatized several years ago (3).  The privatization of Nigerian ports is a more recent, not yet complete, development.  As with the oil refineries, the reasoning behind privatization is to increase efficiency, decrease prices, and eliminate bribery (4).  This is especially good news for US businesses, as the US’s long arm statute against bribery prohibits them from bribing public officials abroad, and oil (Nigeria’s greatest export to the US) is shipped by water, through Nigerian ports.  Furthermore, the Nigerian Government’s plans regarding international trade conferences such as the International Conference on Mergers and Acquisitions exemplifies the government’s interest in being involved in international trade.  Currently, they plan to discuss and present their plans to consolidate Nigerian banks (5).  The Nigerian Government is hoping that larger, more powerful banks will draw greater investments from abroad (5). 

While the current Nigerian legal climate may look favorable, it is best not to forget that the Nigerian government is fairly new, and the country does not have a long history of stability.  Clearly, the current government encourages and supports foreign investment and international trade.  It is less certain that the current government will remain in power.  Nigeria is a nation split down the middle, with a 50% Muslim, 40% Christian population (the remaining 10% follow various indigenous religions) (3).  While the current Government’s favorable outlook on international relations is fairly consistent, the current government itself is not.  Short term investments in the Nigerian economy may be safe, but long term investments remain a risky proposition. 

Citations

1. http://usembassy.state.gov/nigeria/wwwhcf02.html (last viewed on March 17, 2005).

2. http://www.census.gov/foreign-trade/balance/c7530.html#2005 (last viewed on March 17, 2005).

3. http://www.cia.gov/cia/publications/factbook/geos/ni.html (last viewed on March 17, 2005).

4. Akabogu, Emeka.  “Legal Considerations for Nigerian Port Concession Contracts”
http://allafrica.com/stories/200503080232.html (last viewed on March 15, 2005).

5. Aminu, Ayodele.  “Geneva Forum to Showcase Nigerian Banks' Potentials” http://allafrica.com/stories/200503170521.html (last viewed on March 17, 2005).
 
6. “NDIC Wants Deposit Premiums Reduced” http://allafrica.com /stories/200503141343.html (last viewed on March 17, 2005)

Comments

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