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Nigeria: June 1998

“ Extensive programme for private sector-led growth, encompassing the liberalization of foreign investment and a reform of the capital market. Development remained uneven and social indicators were not improving.”

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First press release
Summary of Secretariat report
  > Summary of Government report

25 June 1998

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The Trade Policy Review of the World Trade Organization (WTO) concluded its second review of Nigeria's trade policies on 23 and 24 June 1998. The text of the Chairperson's concluding remarks is attached as a summary of the salient points which emerged during the discussion.

The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including: its domestic laws and regulations; the institutional framework; bilateral, regional and other preferential agreements; the wider economic needs and the external environment.

A record of the discussions and the Chairperson's summing-up, together with these two reports, will be published in due course as the complete trade policy review of Nigerai and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Botswana (1998), Brazil (1992 & 1996), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile (1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995), C˘te d'Ivoire (1995), Cyprus (1997), the Czech Republic (1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993 & 1998), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992, 1995 & 1998), Kenya (1993), Korea, Rep. of (1992 & 1996), Lesotho (1998), Macau (1994), Malaysia (1993 & 1997), Mauritius (1995), Mexico (1993 & 1997), Morocco (1989 & 1996), New Zealand (1990 & 1996), Namibia (1998), Nigeria (1991 & 1998), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South Africa (1993 & 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992, 1994 & 1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

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Over the past two days the TPRB has conducted the second review of Nigeria's trade policies and practices.  These remarks, prepared on my own responsibility, are intended to summarize the main points of the discussion, and they do not constitute a full report.  Details of the discussion will be reflected in the minutes of the meeting, and you will recall that the Nigerian delegation provided written replies in the context of this meeting.

The discussion developed under three themes:  (i) economic performance and institutional framework;  (ii) trade measures;  and (iii) sectoral issues.

Economic performance and institutional framework

Members welcomed the progress made since 1995 in restoring macro-economic stability, under an extensive programme for private sector-led growth, encompassing the liberalization of foreign investment and a reform of the capital market. However, they noted that development remained uneven and social indicators were not improving.  Noting that the economy remained dependent on oil export revenues, members asked about future economic prospects in the context of weak oil prices.  They emphasized that  integration of the informal sector into the economy could increase tax revenue and provide a more stable basis for trade.

Some Members stressed that the Nigerian economy had suffered from persistent political and institutional uncertainty.  They emphasized that democracy, good governance and the rule of law were fundamental to economic development and urged the new Government to continue the reform programme, including the transition to democratic civilian rule. Members stressed the need for clarification regarding the new Government's plans to adopt well-defined constitutional arrangements.

Participants asked how the Government intended to address the problem of foreign public debt, which was a serious burden on the economy.  It was also noted that the use of a dual exchange rate system distorted public sector accounts and was an obstacle to resumption of multilateral credits and debt rescheduling.

Participants urged Nigeria to pass domestic legislation implementing the WTO Agreements and, where necessary, to seek assistance from the relevant WTO Committees to bring its legislation into conformity. Some members urged Nigeria to establish a consistent follow-up mechanism which would provide a framework to measure achievements, implement further legislative amendments and define technical assistance needs. Some Members asked how the ECOWAS trade liberalization scheme had reinforced trading links among countries in the region, and what benefits it had brought to Nigeria.

In response, the representative of Nigeria observed that the uneven distribution of growth had resulted from the lagged response of some sectors to the economic reforms undertaken in recent years.  The Government was making efforts to address these problems, particularly in manufacturing and services. He recognized that the economy remained dependent on oil revenue, and that weak oil prices would affect the Budget outcome.  However, foreign exchange reserves of over US$8 billion, prudent fiscal policies and budget adjustments would ensure the effective implementation of the 1998 Budget.
The representative also pointed out that the stock of external debt had been reduced to US$28 billion as of December 1996.  The Government intended to achieve sustainability of external debt service and debt stock by the turn of the century.  Reconciliation of the various debt estimates continued;  Nigeria's total debt to the Paris Club members had fallen to just under US$19 billion on 31 December 1997.  On the dual exchange rate he noted that the use of the official rate was strictly limited to settling public foreign debt payments and transfers to Nigerian missions abroad.

The representative of Nigeria stated that a new constitution would be promulgated on 1 October 1998.  All laws that inhibited competition and reduced transparency were being reviewed.  An interministerial committee had been established to advise on changes required to bring domestic legislation into conformity with the WTO Agreements.  Gaps had already been identified in areas such as intellectual property, government procurement, anti-dumping, safeguards and customs valuation.

The representative noted that Nigeria's bilateral agreements did not include preferential trade arrangements.  Nigeria was participating actively in the ECOWAS scheme, which however had been hampered by the volume of informal trade within the region and by the failure of some members to meet their commitments.

Steps were being taken to integrate the informal sector into the mainstream economy, including setting up border markets, which the authorities expected would help reduce smuggling.

The representative of Nigeria indicated that technical assistance was required to study the informal sector and develop the ECOWAS scheme.  Assistance was also needed to realign domestic regulations with multilateral rules and develop the institutional capacity to implement the WTO Agreements, notably on customs valuation.

Trade measures

While welcoming the reduction in tariff levels and dispersion since 1995, participants noted that duties on consumer products remained high and that Nigeria's tariffs were subject to frequent changes; they called for a simplification of the system by removal of annual duty rebates and import surcharges. Predictability would also be enhanced by increasing tariff bindings on industrial products, and closing the gap between applied and bound rates.

Members noted that import procedures were cumbersome and lengthy; reference prices were still in use;  the preshipment inspection scheme appeared to be expensive, discriminatory and inefficient;  and Customs frequently re-evaluated upwards payable duty as assessed by the PSI companies.  In this context, some Members asked about the Government's plans to introduce the ASYCUDA scheme for customs data processing and how the Government intended to comply with the provisions of the WTO Customs Valuation Agreement by the end of the transitional period.

Members welcomed proposals submitted to the Nigerian Government to phase out all remaining import prohibitions by the year 2000.  Meanwhile, some Members regretted the maintenance of import prohibitions and sought clarification on their WTO justification in the absence of WTO-consistent domestic legislation on safeguard measures.

Members also questioned the coherence of Nigeria's export policies.  They noted that several prohibitions continued to restrict potential export diversification while administrative export requirements, designed primarily to ensure repatriation of export proceeds, also acted as a constraint to export. In contrast, a wide array of export assistance instruments remained in place.

Public sector companies continued to dominate large segments of the economy and trade, accounting for 30-40% of fixed capital investment. Participants deplored the lack of transparency in public procurement.  While welcoming the announcement of the privatization of several public entities, including that of the telecommunications operator before the end of 1998, Members emphasized the need for a competition policy to ensure market efficiency.

Some participants noted the need for improved enforcement of intellectual property rights, and asked for the Government's plans to bring its intellectual property legislation into conformity with the provisions of the TRIPS Agreement.

The representative of Nigeria replied that Nigeria's import and export regimes had undergone several reforms since 1991 to establish a more stable framework for trade.  The overall objective of the Nigerian tariff structure was to encourage efficiency by reducing tariffs on consumer goods relative to those on raw materials and intermediate products.

Customs clearance procedures were being reformed to implement fully the Kyoto Convention.  Preshipment inspection was being applied across-the-board without discrimination.  Documentation requirements had been drastically reduced through the introduction of a Single Goods Declaration, which was a first step towards implementation of the ASYCUDA scheme.  The objective was to allow importers to clear goods within 48 hours.  Nigeria had also produced a draft Customs code that was already approved by the World Customs Organization;  this code, and answers to the WTO customs valuation questionnaire, would be forwarded to the Secretariat for comment.

The representative restated that prohibitions falling under balance-of-payments provisions would be phased out by 1 January 2000:  and in this regard, a notification would be submitted very soon.  In addition, his Government was studying a proposal to address all remaining items on the Import Prohibition List with a view to their eventual phase out.  Licensing had been abolished except for prohibited items allowed as part of foreign investment contracts, on which a 100% duty was imposed.

Anti-dumping duties were not incorporated into the tariff structure.  Nigeria did not yet have the capacity to investigate dumping claims, but plans to establish an investigating authority were under consideration.

Nigeria provided export incentives but no subsidies to trade.  The Government was reviewing those incentives to ensure their WTO consistency.  There were no state-trading companies in Nigeria and no import privileges were granted, except for those awarded to the national oil company as an emergency measure following the breakdown of the country's refineries.  There was no express policy giving preference to local goods in government procurement.

The representative noted that a full description of Nigeria's technical regulations was already available in WTO documents, and that Nigeria had complied with all its notification obligations under the TBT and SPS Agreements.

Nigeria was reviewing its laws on intellectual property to make them WTO consistent.  Certain legislative gaps and enforcement problems had been identified, and would be addressed in collaboration with WIPO and WTO.  The authorities were also aware of the need to ensure that appropriate competition rules were put in place.

Sectoral issues

Members raised questions on various sectoral issues, including:
- The performance of the agricultural sector, which was inhibited by certain import and export prohibitions, despite recent liberalization of fertilizer imports and cassava exports;

- Structural and environmental issues relating to oil and gas production, which represented 95% of export earnings and three-quarters of government revenue, including fuel shortages resulting from a breakdown of refinery capacity;

- The need for a reform of the mining law to encourage development of the solid mineral sector;

- Obstacles to industrial development stemming from the complexity of import and export policies and the high level of Government intervention, and the prospects for reform;

- Obstacles stemming from infrastructural inadequacies in ports, transport, power and telecommunications, and the prospects for improvements through privatization and other measures to enhance efficiency.

In response, the representative indicated that agricultural trade had been further liberalized.  He emphasized that there was no import ban on meat and meat products.  Measures to enhance competition in the provision of infrastructure and foreign exchange were expected to improve prospects for industry.

Nigeria had begun a review of the Minerals Act to encourage foreign investment in the solid minerals sector, while the capital gains tax had already been abolished.  Nigeria recognized the adverse environmental consequences associated with gas flaring and was providing incentives for producers to decrease such practices.

Recognizing the problems associated with the operation of ports, the representative indicated that the Government had already started a reform programme in that area.  The privatization of NITEL would begin before end 1998, while the electricity utility NEPA was being reorganized in view of privatization.  Nigeria's shipping policy was also under review with a view to liberalization.  A number of other activities were already open to private investment, including banking, air and road transport.

In conclusion, let me say that in this review, most Members have recognized the progress made by Nigeria in macroeconomic and trade policies in recent years.  However, at the same time, Members have pinpointed, in a clear and frank manner, a large number of governance, structural and policy-related issues that still inhibit the development of Nigeria's economy and trade.
 As Chairman, I welcome the frankness of the discussion and of the replies made by the Nigerian delegation.  I hope that Nigeria's transition to a democratic regime – clearly signalled by the Delegation – will resolve many of the serious concerns expressed in this meeting regarding governance, stability and predictability of policies.  I welcome Nigeria's identification of technical assistance needs, the indications that have been given as to where such assistance can be found, and hope that the dialogue initiated in the last two days can be continued.  I also trust that the questions and points raised by delegations will be taken seriously into consideration by the new administration in Abuja, and translated into a positive programme of ongoing economic reform that can enable Nigeria and all its people in all economic sectors to fulfil their considerable potential as a major economic power in Africa.
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