AN ANALYSIS OF THE REGULATORY LEGAL FRAME WORK FOR FOREIGN INVESTMENT IN NIGERIA: ISSUES AND CHALLENGES

ABSTRACT
What provoked this research is the visibilly wanning national Sovereignty and Jurisdiction of developing Countries to make choice from options in economic, social and cultural policies due to globalization. The need to unravel the challenges the regulatory Legal Frame Work for Foreign investment in Nigeria faces, its impact on our national policies and policy making mechanisms and finding solutions. The methodology employed in this research is the doctrinal research. Primary and secondary materials sourced are analyzed. Foreign investment involves the transfer of a package of resources including capital, technology, management and marketing expertise. This can generally be divided into, Foreign Direct Investment (FDI) and Portfolio Investment (PI) although loans to government (i.e. foreign debts) have also been seen as a third category. The purpose of FDI is to acquire a lasting interest and effective control in the management of an enterprise without necessarily having majority shareholding. Portfolio Investments on the other hand, are directed at earning dividends, interests, capital gains and so on without participating in management.
The Multinational Corporations (MNCs) are major sources of foreign direct investment (FDI).
The regulatory Legal Frame Work is the power of host country through its law and regulatory bodies, authorities, and agencies to control investment activities by providing conditions that affect the behaviour of investors and development of investment to ensure fair and beneficial operations. These agencies including the Nigerian Investment Promotion Commission (NIPC), National Office for Technology Acquisition and Promotion (NOTAP) and Nigeria Oil and Gas Industry Content Development. The regulatory Legal Frame Work for foreign investment in Nigeria is confronted with many issues and challenges which make it impossible to achieve the objectives of government to regulate foreign investment, such as globalization of policy-making which has led to the erosion of national sovereignty, narrowed the ability of governments and people to make choices from options in economic, social and cultural policies; negative influence of the multinational corporations (MNCs) over government policies, lack of commitment on the part of government, non enforcement of penalties and inadequate penalty regimes, ineffective administrative systems and blind adoption of economic terms “dictated” by global markets and international institutions amongst others.
Considering that the regulatory legal frame work plays a crucial role in the economic life of the nation, government should pay adequate attention to it. Consequently, investment policies and regulations should be backed by law to enhance enforcement. The findings indentified in this work show that the penalties in Nigerian Investment Regulatory Frame Work such as Section 55 CAMA and Section 15 (1)(2) NOTAP are inadequate and do not have the force of deterrence. Procedure for exemption of Foreign Company from registration in Nigeria under Section 56 (1)(a)-(d) to the effect that such application should be made to the Council of Ministers through the Secretary to the Government of the Federation. The procedure is unnecessarily cumbersome and time wasting and will discourage donor international organizations and countries willing to undertake specialist projects under contract with any of the Governments in the Federation or their agencies. The National Office for technology Acquirsion and promotion (NOTAP) Act provides for the agency to vet agreements to be submitted to it by Nigerian Companies after negotiating and concluding with the Foreign technical partners and leaves much to be desired in the quest for maximum benefit from technology transfer and Foreign Investment in Nigeria.
TABLE OF CONTENTS PAGE
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Abstract vi
Table of Contents vii
Table of Cases xi
Table of Statutes xii
List of Abbreviations xv
CHAPTER ONE 1
GENERAL INTRODUCTION
1 Background of the Study 1
The Concept and Definition of Foreign
Investment and Regulatory Legal Frame Work 4
1.1.1 Regulatory Legal Frame Work 6
Statement of the Problem 7
Justification/Significance of the study 7
The Aim and Objectives of the Study 9
Limitations/Scope of Study 9
Literature Review 9
Methodology of Research 15
Organizational Layout 16
CHAPTER TWO 17
HISTORICAL PERSPECTIVE OF REGULATORY LEGAL FRAME WORK FOR FOREIGN INVESTMENT IN NIGERIA
Introduction 17
The Colonial Period 18
The Post Colonial Period 20
The Indigenization Period 23
The Structural Adjustment Programme (SAP) Period Till Date 27
CHAPTER THREE 29
CONTEMPORARY LAWS ON FOREIGN PARTICIPATION IN BUSINESS IN NIGERIA
Introduction 29
Companies and Allied Matters Act, 2004 31
Alliens to Form Companies in Nigeria 32
Consequences of Carrying on Business without Registration 32
Incorporation of a Foreign Company in Nigeria 33
Foreign Companies Exempted from Registration in Nigeria 35
Procedure for Company Exemption from Registration 36
Status of Exempted Companies 37
The Regulation of Foreign Companies 37
The Nigerian Investment Promotion Commission Act 39
Registration and Obtaining of License 40
Guarantee of Investment 40
Settlement of Investment Disputes 41
Immigration Act 42
Basic Permits Required by an Alien to
Enter Nigeria (or enter) and work in Nigeria 43
Entry Permit/Visa 44
Ordinary Visa –Transit 44
Ordinary Visa – Single Journey Visit 45
The short Visit Visa 45
STR Visa (Subject to Regulation) 45
Registration of Aliens 47
Temporary Work permit (T.W.P) 47
Multiple Journey Visa 48
Gratis Courtesy 49
Expatriate Quota 49
Investment and Securities Act (ISA) 52
Foreign Exchange (Monitoring and
Miscellaneous Provisions) Act 53
Industrial Inspectorate Act 54
National Office for Technology Acquisition and Promotion Act 55
Registration of Contracts and Agreements 55
Effect of Registration of Contracts and Agreements 56
Incentives and Reliefs Available to Investors in
Nigerian Economy 56
Import and Export Incentives under Customs and
Excise Management Act 56
Fiscal Reliefs 58
The Time Factor in Incentives 60
Protectionism in Regulatory Policies 61
Arguments for Protectionism 62
Nigeria Oil and Gas Industry Content Development Act 67
First consideration for Nigerian Operators 67
Nigerian Local Content Monitoring Board 68
Content Plan 68
Technology Transfer Plan and Support for Technology Transfer in Nigeria 69
Professional Services 69
Offences and Penalties 69
CHAPTER FOUR
ISSUES AND CHALLENGES OF GLOBALIZATION
Introduction 71
Present Challenges of Globalization on the 72
Nigerian Regulatory Legal Frame Work
The Liberalization of Trade, Finance and Investment 72
The Globalization of Policy-making 78
Rising inequality and the effects of globalization 83
Weaknesses of the Developing nations in facing the globalization challenge 87
The Repeal of Indigenisation Laws 90
The introduction of privatization, commercialization,
Deregulation (Liberalization) in the Nigerian economy 94
Future Challenges of Globalization on Nigerian Regulatory Legal Frame Work 96
Job loss in Nigeria 97
Impact of job loss on national Security 97
Costs and benefits of Foreign Investment to the Nigerian economy 98
Use of Multilateral Framework for Foreign Investment 103
General View 103
Lack of Realization of Anticipated Benefits for Developing Countries
from the Uruguay Round 105
Implementation challenges Faced by Developing Countries from
the Uruguay Round 108
Moves for New Issues in WTO 115
The Approach Needed 116
CHAPTER FIVE 119
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 119
5.2 Conclusion 122
5.3 Recommendations 124
Bibliography 126
TABLE OF CASES PAGE
E.I.I.A. V C.I.E Ltd (2006) 4 NWLR 114 at 127
33
Kehinde V Registrar of Companies (1979) 3LRN 213 at 220 – 221
25
Oil Field Supply Centre Ltd V Johnson No. 2 (1987) 2LWLR 625
49
Unipetrol Nigeria PLC V Agip Nigeria PLC (2002) 4 NWLR 312 at 330 – 331
32,33
TABLE OF STATUTES PAGE
Aid to Pioneer Industries Ordinance 1952 19
Banking Act 1969 24
Companies Act 1968 24, 31
Companies Act Cap. 37 LFN 1958 31
Company and Allied Matters Decree (No 1) 1990 32
Company and Allied Matters Act Cap. C. 20 LFN 32,40
S. 20 (4) 32,40
S. 54 (1) 32,33
S.55 33,38
S. 56 (1) 33
S. 56 (2) 37
S. 56 (3) 37
S. 58 37
S. 60 (a) 37
S. 57 (a) 37
Companies Ordinance 1922 31
Customs and Excise Management Act Cap. C. 45 LFN 2004. 56
S. 56 56
S. 57 57
Customs Duties (Dumping and Subsidized Goods) Act 1958 19
Custom Drawback Regulations Act 1959 19
Companies Income Tax Act Cap. C. 21 LFN 2004 59
S. 29 59
S. 33 59
SS. 34 – 35 59
S. 9 (1) 59
S. 9 (7) 59
S. 28 (c) (3) 59
S. 22 (3) 59
S. 28 (b) 59
Copy Right Act 1970 24
Exchange Control Act 1962 22
S. 7 22
Export (Incentives and Miscellaneous Provisions Act Cap. E. 19 30
Laws of the Federal Republic of Nigeria 2004
Foreign Exchange (Monitoring and Miscellaneous Provisions)
Act Cap. F.34 Laws of the Federal Republic of Nigeria, 2004 53
S. 15 (1) 53
S. 15 (2) 53
S. 15 (4) 53
S. 17 (1) 54
S. 12 54
S. 13 54
Foreign Exchange (Monitoring and Miscellaneous Act 1995
S. 26 (1) 91
S. 15 (1) 22
Immigration Act 1963 53
Immigration Act Cap. I.I Laws of the Federal Republic of Nigeria 2004
S. 8 (1) (a) (b) 42,45
S. 8 (2) (a) (b) 43
S. 10 (2) (a) (b) 43
S. 33 46
Income Tax (Amendment) Ordinance 1952 19
Income Tax (Amendment) Act 1959 19
Industrial Development (Import Duties Relief) Act 1957 19
Industrial Development (Income Tax Relief) Act 1958 19,20
Industrial Development (Income Tax Relief) Act Cap. 1.7 Laws of the Federal Republic of Nigeria 2004
59
S. 10 59
Industrial Development Coordinating Committee Act No. 36 of 1988 39
Industrial Inspectorate Act Cap. 1.8 Laws of the Federal Republic of Nigeria 2004 54
S.3 54
S. 3 (3) 54
Investments and Securities Act 2007 No. 29 52
S. 13 (L) 52
Minerals Act Cap. M. 12 Laws of the Federal Republic of Nigeria, 2004 59
National Office for Technology Acquisition and Promotion Act Cap. N. 62 55
Laws of the Federal Republic of Nigeria 2004 55
S. 4 (d) 55
S. 5 (1) – (3) 55
S. 7 56
Nigerian Enterprises Promotion Acts, 1972 and 1977 24
Nigerian Enterprises Promotion (Issues of Non-Voting Equity Shares) Act 1987 24
Nigerian Investment Promotion Commission Act Cap. N 1. 17 Laws
of the Federal Republic of Nigeria 2004 39
S. 17 39
S. 18 39
S. 31 39
S. 20 40
S. 24 (1) (2) (3) 40, 54
S. 26 (1) (2) (3) 42
Nigerian Investment Promotion Commission Act No. 16 of 1995 39
Nigerian Liquified Natural Gas (Fiscal Incentives Guarantees and
Assurances) Act Cap. N. 87 Laws of the Federal Republic of Nigeria 2004 60
S. 2
Patents and Designs Act, 1990 24
Petroleum Act 1969 24
Petroleum Profits Tax Act Cap.P. 13 Laws of
the Federal Republic of Nigeria 2004 58
African Growth and Opportunities Act (AGOA), 2000
S. 106 60
S. 114 60
LIST OF ABBREVIATIONS
ABU – Ahmadu Bello University AGOA – African Growth Opportunity Act
AHFE – Association of Head of Federal Establishments BPO – Business Process Outsourcing
CAC – Corporate Affairs Commission CAMA – Companies and Allied Matters Act CAP – Common Agricultural Policy CBN – Central Bank of Nigeria
C of O – Certificate of Occupancy
ECOWAS – Economic Community of West African States EPZ – Export Processing Zone
FAO – Food and Agricultural Organization
FEMMA – Foreign Exchange (Monitoring and Miscellaneous) Act FDI – Foreign Direct Investment
FPI – Foreign Private Investment
GATT – General Agreement Tariffs and Trade GDP – Gross Domestic Product
HDP – Human Development Report
IDDC – Industrial Development Coordination Committee IMM – Immigration
IMF – International Monetary Fund
IPRs – Intellectual Property Rights
IR – Immigration Responsibility
ISA – Investments and Securities Act
JCA – Justice of the Court of Appeal LDCs – Least Developing Countries LRN – Law Report of Nigeria
MIA – Multilateral Investment Agreement MNCs – Multinational Corporations
MPJFIL – Modern Practice Journal of Finance and Investment Law NEP – Nigerian Enterprises Promotion
NEPB – Nigerian Enterprises Promotion Board NGOS – Non – Governmental Organizations NEPC – Nigerian Enterprises Promotion Act
NIPC – Nigeria Investment Promotion Commission NIPCA – Nigerian Investment Promotion Commission Act NWLR – Nigeria Weekly Law Report
NOTAP – National Office for Technology Acquisition and Promotion OECD – Organization for Economic Cooperation and Development
P.I. – Portfolio Investment
PUR – Permanent Until Reviewed
SAP – Structural Adjustment Programme STR – Subject to Regularization
TDR – Trade and Development Report
TRIPS – Trade – Related Aspects of Intellectual Property Rights TRIMS – Trade – Related Investment Measures
TNCs – Transnational Corporations TWP – Temporary Work Permit
UNCTAD – United Nations Conference on Trade and Development USA – United States of America
WTO – World Trade Organization