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Doing Business in Nigeria

Prospects for U.S. business in Nigeria are especially promising in the following sectors: oil and gas equipment, healthcare services and medical equipment, electrical power generating equipment, computer hardware/software, telecommunications equipment, automobile parts and accessories, construction, and earth moving equipment, agricultural products and equipment, and franchising. Please read the Country Commercial Guide for Nigeria 2013. Chapter 4 of the document outlines the leading sectors for U.S. trade and investment.

U.S. companies should be assured that many genuine business opportunities exist in Nigeria, even if the business climate seems difficult and certain extra screening steps must be taken with potential business partners. Fitch Ratings report of 2013 affirmed Nigeria's long-term foreign and local currency IDRs and senior unsecured bond ratings at 'BB-' and 'BB' respectively. It also stated that the country’s outlook remains stable. According to the report, although Nigeria’s Gross Domestic Product (GDP) growth slowed to 6.4 percent in the first half of 2013, the country’s economic indicators showed resilience in the face of exogenous shocks from the severe flood in 2012 which hit agricultural output; security problems especially in the north earlier this year; and increased oil theft and vandalism; and the consequent repair shutdown which caused oil output to contract for the second year in a row.

Nigeria’s non-oil sector slowed, but still grew by 7.9 per cent in 2012 and 7.6 per cent in the first half of 2013. Fitch predicted that: “Non-oil growth should pick up in H213 (second half of 2013) as normal weather has resumed and the authorities have responded to security problems. “Reforms to the electricity and agriculture sectors could start to boost potential growth. Inflation has been in single digits all year, the lowest in five years and the longest stretch of single digit inflation since 2008. Policy rates are unchanged.” Fitch estimates a general government deficit of around 1.8 per cent of GDP this year and next. Both oil and non-oil revenues are under-budget and the Excess Crude Account (ECA) has been tapped to compensate.

Furthermore, the report says capital spending also remains under budget. “The draft 2014 budget plans ambitious fiscal consolidation, with lower oil production and benchmark oil prices and lower spending than the 2013 budget. “However, Fitch expects that oil production will likely fall short again, and the final budget that emerges from the National Assembly (NA) is likely to be more expansionary,” the global rating agency declared. Nevertheless, Fitch expected that general government debt would remain stable at just over 20 per cent of GDP, barely half that of the country's peers. It also said that Nigeria's sovereign and overall external balance sheets, current account surplus, debt service ratio and external liquidity are all stronger than 'BB' category medians. Foreign reserves rose steadily in early 2013 but have been falling since May due to reduced oil output, prompting ECA draw-down, and global market turbulence, which has reduced foreign appetite for Nigerian paper (though net inflows have continued). However, the Petroleum Industry Bill (PIB) remains stalled in the National Assembly. Strong vested interests will make structural reform a continual struggle, especially with elections in 2015.

Some U.S. companies are excluding Nigeria from their African commercial strategy based on alarmist, misleading and often incorrect information, and may miss out on excellent emerging market opportunities as a consequence. If U.S. business travelers prepare prudently, a business trip to Nigeria can be an enjoyable and rewarding experience.