The Federal Republic of Nigeria: the Country With Rich Natural Resources - Research Paper Example

 Introduction The Federal Republic of Nigeria in West Africa is a very populous country endowed with rich natural resources. The laws practiced in the country are English law inherited from British rule, Common law developed post independence from British rule, Law based on customs and practices and Sharia, an Islamic legal system use by Muslims and the highest court of the country is Supreme Court of Nigeria. Nigeria is a member of the Organization of the Petroleum Exporting Countries (OPEC). Nigeria’s stock exchange is the second largest in Africa. Nigeria’s telecommunication market is a fast growing one. The countries financial services sector, manufacturing and media industries are well developed. Agricultural exports play a dominant role in the economy. The country offers excellent scope for growth in the international trade and in the tourism development sector. The rapid growth of the modern tourism industry which, in 2005 registered approximately 800 million international tourist arrivals worldwide has made the tourism industry one of the most important industries of the world.1 Though there are hundreds of languages spoken in the country, English has been adopted as the official language. This is advantageous to the international trade. --------------------------------------------------------------- 1 Government of the Federal Republic of Nigeria, Nigeria Tourism Master plan, Institutional Capacity Strengthening to the Tourism Sector in Negeria, 2006, http://www.nacd.gov.ng/Tourism%20Master%20Plan.pdf International Institutions on commercial law United Nations Commission on International Trade Law of which Nigeria are members has established provisions in relation to international trade such as electronic commerce, online dispute resolution, insolvency laws and arbitration. 2 WTO has also issued several guidelines with regard to restrictive trade practices such as subsidies and anti-dumping. Similarly, International Chamber of Commerce issue guidelines on international trade and laid down rules for International Arbitration.3 Adhering to these provisions which aims to provide uniform principles in the international trade avoids disputes, and the member countries adopt them by way of prudence, though implementation of these standards in different countries depends upon the internal factors and the governments’ will. However, as this process is an embodiment of the existing commercial practices successfully adopted in various countries, adhering to these policies minimizes risk in international trade. International Accounting Standards Board IASB is an international accounting standards institution and developed International Financial Reporting Standards and the International Accounting Standards, covering all aspects relating to financial reporting and accounting including Leases, Insurance, employment benefits and various financial instruments. Many countries in the world --------------------------------------------------------------- 2 United Nations Commission on International Trade Law (UNCITRAL), Report of the United Nations Commission on International Trade Law, Forty-third session, (2010), http://www.uncitral.org/uncitral/en/index.html 3 International Court of Arbitration, ICC Dispute Resolution Rules, http://www.iccwbo.org/court/arbitration/id4199/index.html have adopted or in the process of adopting IFRS. Therefore, it is imperative it is in the best interest of the business to adopt IFRS voluntarily for the purpose of international trade to be in the same wavelength with their counterparts in the other countries. On 28 July 2010, the Nigerian Federal Executive Council approved 1 January 2012 as the effective date for convergence of accounting standards in Nigeria with International Financial Reporting Standards (IFRS).4 Intellectual property rights and WTO Harmonization of rules related to IPRs has gathered momentum especially during the past two decades, and the companies need to equip themselves to face the issues arising out of IPRs, because it imposes certain cross-border disciplines. Agreement reached on Trade Related Intellectual Property Rights (TRIPs) makes it obligatory for the member countries to follow certain uniform minimum standards in protecting IPRs covering patents, trademarks and copyrights. The companies should be familiar with the trade rules under TRIPs Agreement/WTO related to the products dealt with, because Nigerian legislation on patent(s) may be inconsistent with the rules under TRIPs in certain cases. --------------------------------------------------- 4 Deloitte (2010) Financial Reporting Framework in Nigeria, http://www.iasplus.com/country/nigeria.htm World trade law - Precautionary principle In international trade with a country, the important aspects to be considered are, trade in domestically prohibited goods, dangerous substances, standards relating to health, and environmental issues in conflict with the international trade laws by way of precautionary principle. For instance, as the trend towards the export of more and more processed foods is increasing, sanitary and phytosanitary measures become more relevant. The WTO Agreement on Sanitary and Phytosanitary Standards (SPS Agreement) is the most significant international trade treaty in this regard. SPS measures are used for many health threats and the SPS Agreement applies to these measures”.5 Customs Duty The duty imposed on imports and exports vary from country to country. Proper classification with reference to the nomenclature, specification and standards of the goods/products is very important in the international trade. Any misclassification may result in higher duty or lower duty liable to penalty, if it is discovered subsequently. The WTO Agreement on Technical Barriers to Trade tries to ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles.6 -------------------------------------------------- 5 M. W. Gehrin, M. C. Segger, Precaution in World Trade Law: The Precautionary Principle and its Implications for the World Trade Organization, http://www.cisdl.org/pdf/brief_precaution_trade.pdf 6 World Trade Organization, Technical barriers to trade, http://www.wto.org/english/tratop_e/tbt_e/tbt_e.htm#notifications The WTO website now offers sophisticated options for researching members’ customs duty rates and in many cases imports.7 Balance of trade: Many countries encourage exports to improve their balance of trade with the other countries by offering various incentives which may involve subsidies and export benefits such as duty drawbacks on exports from the country and loans at concessional rates of interest. The declining role of the agricultural export sector in Nigeria economy in the 1970s was the beginning of the country’s later economic problems.8 The Nigerian Export Promotion Council is taking steps for the growth in exports. Double taxation avoidance agreement Double taxation avoidance agreement between the countries encourages growth in international trade. Therefore, trade through a country with which Nigeria has entered into double taxation avoidance agreement can be considered for better growth. Nigeria has a number of tax treaties referred to as “Double Taxation” Agreements with a number of countries.9 7 World Trade Organization, Get Tariff data, 2010, p. 83 http://www.wto.org/english/tratop_e/tariffs_e/tariff_data_e.htm 8 B. C. Opara, Export Marketing: Catalyst for Nigeria Economic Paradigm Shift, Research Journal of Internatıonal Studıes - Issue 13, 2010. http://www.eurojournals.com/rjis_13_07.pdf 9 Nigerian Investment Promotion Commission, Nigeria, Investors Guide to Nigeria – Taxation, http://nipc.gov.ng/guide.html Establishment of facilities for operations in Nigeria For establishing manufacturing and marketing facilities or opening offices in the country, the investor has to make an analysis about the country with reference to the local laws related to employment, taxation, business laws and company law and other country specific issues related to the business. Development Gateway of Nigeria provides information on projects, opportunities and other statistics.10 There are various ethnic groups and languages spoken in Nigeria, but the country is united by the official language English which would be advantageous in understanding and overcoming cultural or ethical issues. Licensing procedures have been simplified on liberalization which encourages foreign direct investments. Expertise in the fields of marketing, advertisement, public relations, taxation, etc available in the country are good and the media industry is well developed. Nigerians have migrated to various parts of the world such as USA, Europe and Australia, who have influenced the native culture greatly for integration into the world community. Therefore, business opportunities could be explored easily through this Non-resident Nigerian community also for effective liaison with the government of Nigeria. The port city of Lagos is large and well developed. -------------------------------------------------- 10 Development Gateway Foundation, Nigeria, http://www.developmentgateway.org/cg/country-gateways/country.do~country=ng~iso3=NGA The problem with Nigeria is that the system lacks checks and balances (or mechanisms) to control the autocratic tendencies in government and to hold political actors accountable for their actions. Also, the politicians do not practice ethical politics and their actions do not add values to the system. Lack of ‘ethical politics and values’ (Dike, January 15, 2007) and politics of hate and destruction contribute to the economic and political hiccups in the society.11. The results of the financial sector reforms undertaken in the country have been disappointing. Huge fiscal deficits, persistent depreciation of the exchange rate and tight credit policies may create or worsen an existing inflationary situation. 12 One of the main areas for concern in Nigeria is the country’s banking sector. A large degree of fraudulent activities have occurred in this sector.13 -------------------------------------------------- 11 V.E. Dike, Governance And Challenges Facing the Nigerian Economy: Is Jonathan The Answer? Nigerian Village Square, 2010. http://www.nigeriavillagesquare.com/articles/victor-dike/governance-and-challenges-facing-the-nigerian-economy-is-jonathan-the-answer.html 12 S. I. Ikhide, and A. A. Alawode, African Economic Research Consortium, Nairobi, 2001. http://www.aercafrica.org/documents/rp112.pdf 13 MBendi, Nigeria – An Overview, 2010. http://www.mbendi.com/land/af/ng/p0005.htm#Directories Conclusion Liberalization of economies and the concept of globalization in the market place forced the commercial undertakings/countries to integrate their activities into the international practices for expanding their business in international trade. In developing countries such as Nigeria, there are also causes for concern. Although corruption is a global scourge, Nigeria appears to suffer the most from it because the leaders are pathologically corrupt…Nigeria could become an economic power-house and command the attention of the international community only if it can give proper attention to education and technological development, learn to reward hard work and creativity, and ensure constant power supply and produce high quality goods and services.14 Clear understanding of the international laws, the local laws in relation to international trade and the cultural background and values of the society is every important for successful operations. -------------------------------------------------- 14 V.E. Dike, op. cit. References Deloitte (2010) Financial Reporting Framework in Nigeria. http://www.iasplus.com/country/nigeria.htm Development Gateway Foundation, Nigeria. http://www.developmentgateway.org/cg/country-gateways/country.do~country=ng~iso3=NGA Dike, V. E. (2010), Governance And Challenges Facing the Nigerian Economy: Is Jonathan The Answer? Nigerian Village Square, 1 Jul 2010. http://www.nigeriavillagesquare.com/articles/victor-dike/governance-and-challenges-facing-the-nigerian-economy-is-jonathan-the-answer.html Gehrin, M. W. and Segger, M. C., Precaution in World Trade Law: The Precautionary Principle and its Implications for the World Trade Organization. http://www.cisdl.org/pdf/brief_precaution_trade.pdf Government of the Federal Republic of Nigeria, Nigeria Tourism Master plan Institutional Capacity Strenthening to the Tourism Sector in Negeria. http://www.nacd.gov.ng/Tourism%20Master%20Plan.pdf Ikhide, S. I. and Alawode, A. A. (2001), African Economic Research Consortium, Nairobi, http://www.aercafrica.org/documents/rp112.pdf International Court of Arbitration, ICC Dispute Resolution Rules. http://www.iccwbo.org/court/arbitration/id4199/index.html Opara, B. C. (2010), Export Marketing: Catalyst for Nigeria Economic Paradigm Shift, Research Journal of Internatıonal Studıes - Issue 13 (March, 2010). http://www.eurojournals.com/rjis_13_07.pdf United Nations Commission on International Trade Law (UNCITRAL), Report of the United Nations Commission on International Trade Law, Forty-third session, (21 June-9 July 2010)., http://www.uncitral.org/uncitral/en/index.html MBendi, (2010) Nigeria – An Overview. http://www.mbendi.com/land/af/ng/p0005.htm#Directories Nigerian Investment Promotion Commission, Nigeria, Investors Guide to Nigeria – Taxation. http://nipc.gov.ng/guide.html World Trade Organization (2010), Get Tariff data. http://www.wto.org/english/tratop_e/tariffs_e/tariff_data_e.htm World Trade Organization, Technical barriers to trade. http://www.wto.org/english/tratop_e/tbt_e/tbt_e.htm#notifications -------------------------------------------------- 10 V. E Dike, Governance And Challenges Facing the Nigerian Economy: Is Jonathan The Answer? Nigerian Village Square, 2010. http://www.nigeriavillagesquare.com/articles/victor-dike/governance-and-challenges-facing-the-nigerian-economy-is-jonathan-the-answer.html 11 S. I. Ikhide, and A. A. Alawode, African Economic Research Consortium, Nairobi, 2001. http://www.aercafrica.org/documents/rp112.pdf 13 V. E Dike, Ibid. Read More