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Nigeria: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
August 2005
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IV. Nigerian Trade Policy66

A. Introduction

128. This chapter provides an overview of trade policies in Nigeria, with a particular focus on changes in the policies since the staff’s last survey in 2002.67 In recent years, Nigeria has made little progress in liberalizing trade, and its trade policy regime is one of the most restrictive in the world. The trade regime’s strong anti-export bias is partially offset by a plethora of export promotion incentives. Although little is known about the specific effects of these incentives, the low level of non-oil exports suggests that they are largely ineffective.68

129. Nigeria’s homegrown strategy, NEEDS, adopted in 2004, recognizes the shortcomings of the current trade policy framework. Consistent with the trade policy reforms elaborated in NEEDS, the government is in the process of significantly lowering import barriers, initiatives the staff supports. The section concludes with suggestions as to how the trade reforms can be broadened and deepened.

B. Trade Policy Framework

130. Nigeria pursues an active trade policy agenda. Its import trade protection regime is characterized by high levels of protection in the form of both tariffs and import bans. On the export side, a wide range of specific policy measures are designed to promote non-oil exports. Nigeria’s multilateral and regional trade policies are framed by its membership in the World Trade Organization (WTO) and Economic Community of West African States (ECOWAS), respectively. Oil exports are also influenced by Nigeria’s membership in OPEC.

Import tariffs

131. Currently, the (unweighted) average level of tariffs is exceptionally high at almost 30 percent.69 Indeed, of the 181 Fund member countries for which information was available in 2004, only 5 countries—The Bahamas, Comoros, Nigeria, Tonga, and Tunisia — had average tariffs (including other duties and charges) of 30 percent or higher. Nigeria’s tariff schedule has 19 bands, ranging from 2.5 percent to 150 percent, with a modal rate of 15 percent. Despite the many bands, tariff dispersion is relatively moderate; for instance, for about one-fourth of all tariff lines, the tariff is set at the modal rate. Other positive features of the Nigerian tariff system, which ensure a given level of protection at lower costs to the economy, are that all tariffs are ad valorem and that no tariff-quotas are used.

132. Protection of agriculture is particularly high, with average applied tariffs of about 50 percent, twice the level of protection of other sectors. The last major tariff revision took place in March 2003, but had little effect on the overall level of protection. Average unweighted duty rates fell marginally, but the effective level of protection did not fall concomitantly, and the spread between duties on finished goods and duties on raw materials widened. Duties were cut on raw materials, base metals, and capital equipment and raised on various intermediate and final products, such as plastics and aluminum articles. Tariffs on corn, rice, and other agricultural products were also increased. In late 2004, minor amendments to the tariff schedule were introduced: they involved increasing the tariff rates on various packing materials from a range of 5-25 percent to a uniform rate of 60 percent and increasing the tariff rates on various types of natural starches from a range of 15-45 percent to a uniform rate of 75 percent.

133. All agricultural tariff lines and 7 percent of other tariff lines are bound, resulting in the binding of about 20 percent of all tariff lines. The average bound rate of 118 percent reflects relatively higher bindings on agricultural products. The large share of tariff lines without bindings and the large spread between bound and applied tariff rates do not make for a tariff system in which economic agents can have confidence that current actual tariffs rates will not increase. This, in turn, may affect private investment decisions negatively.

Table 1.Nigeria: Import Prohibitions as of November 2004
ProductHarmonized System Code
Effective as of September 2003
Wheat flour1001.0000
Sorghum1007.0000
Mosquito repellent coils3808.1000
Rethreaded/used tires4012.1000-4012.9000
Motor vehiclesa8701-8705
Gaming machines9504.1000-9504.3000
Cement in bags2523.2910
Vegetable oil in bulk1507.1100-1516.2000
Used refrigerators8418.2100
Used air-conditioners8415.1000
Used compressors8414.8000 and 8415.3000
Printed fabricsbChapters 52-55
Frozen poultry and poultry products0207.0000-0207.3600
Cassava and cassava productsc0714.1000, 1106.2000, 1108.1400 and 1903.000
Toothpicks
Bottled water (sparking and non-sparking)2201.0000-2202.0000
Biscuits1905.3000
Noodles (including spaghetti)1902.1100-1902.4000
Fruit juice in retail packsd2009.1100-2009.9000
Barite, bentonite, and attapulgite2508.1000.11 and 2508.1000.19
Sugar confectioneries (sweets and chocolate)1704.1000-1704.9000 and 1806.1000-1806.9000
Exercise books4820.2000
Envelopes4817.1000
Beer (bottled and canned)2203
Toilet rolls4803
Introduced in January 2004
Textiles, excluding the followingChapters 50-63
Nylon tire cord5902.1000-5902.9000
Multifilament nylon chafer fabric and tracing cloth5111.2000, 5112.2000 and 5901.9000
Mattress tickings5903.1000-5903.9000
Narrow fabrics5806.1000-5806.4000
Trimmings and linings5909.000, 6117.9000, 5808.9000, 6003.000, 6307.9000
Made-up fishing nets5608.1100
Mosquito netting materials5608.1900 and 5609.9000
Gloves for industrial use6116.1000-6116.9900
Canvas fabrics for manufacture of fan belts5907.000-5908.0000
Moulding cups6212.9000
Elastic bands5604.9000
Motifs5810.1000-5810.9000
Textile fabrics and articles for technical use5911.1000-5911.9000
Transmission or conveyor belts or belting of textile materials5910.9000
Polypropylene primary backing material5512.1100-5512.9900
Fibre rope5607.1000-5607.9000
Mutilated rags6310.1100
Sacks and bags6305.1000-6305.2000
Men’s footwear and bags of leather and plastic3926.2000, 6401.1000-6405.9000, 4202.1100-4202.9900
Soaps and detergents3401.1100-3402.9000
Furniture9401.1000-9401.9000 and 9403.1000-9406.0000
Assembled bicycles (excluding CKD)8712.0000
Flowers (plastic and fresh)0603.1000-0603.9000 and 6702.1000-6702.9000
Fresh fruit0801.1100-0814.0000
Cutlasses, axes, pickaxes, spades, and shovels8201.1000-8201.9000
Wheelbarrows8716.8000
Pork and pork products, beef and beef products, mutton, lamb, and0210.1900, 1602.4900, 0202.2000, 1602.5000, 1602.9000, 0204.1000,
goat meat0204.2200, 0304.3000, 0204.4200, 0204.4300, 0210.7900, 0204.5000,
0208.9000, 0210.9900, and 1602.9000
Toothpaste3306.1000
Pencils9609.1000-9609.9000
Ballpoint pens9608.1000
Plastic plates, knives, spoons, forks, cups, buckets, bowls, bins,3924.9000
Corrugated boards and cartons4808.1000 and 4819.1000-4819.6000
Live or dead birds0106.3100-0106.9000, 0208.9000, and 0210.9900
Source: WTO.

Above eight years old and excluding tractors, trucks, trailers/trailer heads, and buses. In addition, the importation of any vehicle through land borders is prohibited.

All other textiles must be imported through Apapa and Tin Can Island ports in 20ft containers in the following range: (i) other textiles (non-printed) 110,000-140,000 meters; (ii) brocade/damask 120,000-130,000 meters; (iii) and, lace/embroidery 70,000 80,000 meters. A minimum import price of $0.40/meter shall apply to all textiles under HS Chapters 50-63. The importation of all textiles through land borders is prohibited.

The importation of all cassava and cassava products through land borders is prohibited.

Fruit juice may be imported in concentrates or drums only.

Drugs and pharmaceutical raw materials may only be imported through Calabar and Apapa ports, and Lagos and Kano airports.

Source: WTO.

Above eight years old and excluding tractors, trucks, trailers/trailer heads, and buses. In addition, the importation of any vehicle through land borders is prohibited.

All other textiles must be imported through Apapa and Tin Can Island ports in 20ft containers in the following range: (i) other textiles (non-printed) 110,000-140,000 meters; (ii) brocade/damask 120,000-130,000 meters; (iii) and, lace/embroidery 70,000 80,000 meters. A minimum import price of $0.40/meter shall apply to all textiles under HS Chapters 50-63. The importation of all textiles through land borders is prohibited.

The importation of all cassava and cassava products through land borders is prohibited.

Fruit juice may be imported in concentrates or drums only.

Drugs and pharmaceutical raw materials may only be imported through Calabar and Apapa ports, and Lagos and Kano airports.

Import bans

134. Nigeria has a long history of banning imports of a broad range of products. After heavy use of such bans in the 1980s and early 1990s, their importance waned in the mid-1990s, as protection began to take the form of tariffs, among other forms, in line with Nigeria’s WTO commitments.

135. In recent years, the use of import bans has once again become more prevalent, with major expansions in the list of prohibited products taking place in 2001, 2003, and 2004. In January 2004, bans were introduced on most types of textiles, men’s footwear, plastic and leather bags, soaps and detergents, furniture, bicycles, flowers (plastic and fresh), fresh fruit, wheelbarrows, various meat products, toothpaste, pencils, and corrugated boards and cartons. In late 2004, Nigeria banned imports of cocoa powder and cake in order to encourage the use of locally processed cocoa. To offset the potentially negative effects of higher input costs on downstream producers, the government also launched a publicity campaign to encourage the consumption of chocolate drinks, including in schools. In early 2005 bans on various pharmaceutical products were introduced, but the government decided concurrently to lift the import ban on used cars because it had proved to be ineffective.70

136. Import bans have proved to be difficult to enforce and many banned products are readily available in Nigeria. Exemptions are also provided on a case-by-case basis, and some import bans are partially lifted from time to time.71 For example, at times specific companies have been permitted to import fruit juices even though the importation of such juices is banned, and the import ban on wheat flour has been suspended on occasion in line with developments in local market conditions. A particular objective in the latter case has been to encourage the use of cassava flour.72

137. Most import bans are introduced at the behest of local manufacturing interests and serve defensive protectionist purposes. However, the prohibition on imports of barites and bentonites is officially maintained for balance of payments reasons.73 Nigeria has also notified the WTO that the import bans on wheat flour, sorghum, millet, and kaolin were put in place for safeguard reasons. Nigeria has not imposed any antidumping and countervailing duties since 1998, opting instead to use import bans pending the integration of the WTO Agreement on Safeguards into domestic legislation.

138. Import bans are also used to encourage the production of goods deemed to benefit economic development objectives. For instance, to ensure a larger domestic share of value added in the booming cellular phone industry, an import ban on recharge cards was to have gone into effect at the end of 2004; the deadline, however, was extended because local companies were not yet ready to commence production. The government is also encouraging rice production by strengthening agricultural extension services and improving the availability of fertilizer and new types of seeds. In support of these initiatives, the government has announced the introduction of an import ban on rice starting in January 2006.

139. Imports of various products are also banned owing to security, health, or morality concerns. Examples are weapons, textile materials containing hazardous chemicals, and secondhand clothing. Finally, there are certain restrictions on products that can be imported across land borders (for example, cement, and medicine), and minimum shipment volumes for others (for example, cement imports cannot be less than 10,000 tons, and textile products must be imported in 20-foot containers containing not less than 130,000 meters of fabric).

Other import barriers

140. Among other import barriers are discriminatory government procurement policies, the use of the tax code and other legislation to promote domestic production, inappropriate customs clearance procedures, and heavy-handed administration of standards and certification policies. It is difficult to gauge the extent to which such barriers hamper trade, but the prominent discussion such practices garner in the local press as well as among trading partners suggests that informal trade barriers are a significant problem. Specific examples of trade barriers are the requirement that uniforms of public officers be sourced locally, value added tax (VAT) exemption for locally produced fertilizer, and tax incentives under the investment act for companies that use domestic sources. However significant such specific policies are in particular sectors, it is probably the informal and more intractable barriers that distort trade the most.

Export-promotion policies

141. A broad range of policies have been put in place to encourage exports, such as lowering the cost of production (either by cutting red tape, lowering tax liabilities, lowering the costs of inputs, and improving the availability of financing).

142. The Nigerian Export Processing Zone Authority (NEPZA) was established in 1992, and it created Five Zones. Having had little success in attracting companies, the NEPZA converted the export-processing zones into free trade zones in 2001.74 Currently, only the zones in Calabar and Onne are operational. The companies located in the Calabar free trade zone mostly market their products locally, but also in part within the West African sub-region, whereas the Onne zone is being used mainly to facilitate the export of liquefied natural gas. Incentives include tax holidays and fewer restrictions on foreign ownerships. In 2004, 22 firms in Calabar employed some 2,000 workers, and in Onne about 100 firms employed some 7,000 workers. Exports from Calabar amounted to $50 million in 2003. Some states have also established export-processing zones, but it is unclear whether these zones are operational.

143. Companies registered with the Nigerian Export Promotion Council (NEPC) may benefit from various export incentives. An export-expansion grant scheme entitles eligible firms to a 4 percent grant on their export receipts. The scheme was introduced in 2002, but suspended in mid-2004 owing to concerns about fraudulent claims by companies. With stricter safeguards and eligibility rules in place, the scheme was re-launched in January 2005. Other incentives are a duty-drawback scheme providing a 60 percent refund to qualified importers, an export-adjustment fund scheme compensating companies for the cost disadvantages of infrastructural deficiencies and other factors beyond the control of the companies, and an export development fund providing financial assistance to private sector export companies to cover part of their initial expenses related to export promotion.

144. The manufactures-in-bond scheme allows for the duty-free import of raw materials—whether prohibited or not—for the production of export goods by companies posting bonds to guarantee the payment of duties in case the exports do not materialize. The scheme has proved difficult to administer and is under review. In November 2004, the import ban on certain U.S. textile and yarn products was lifted to encourage their use in a special manufactures-in-bond scheme.

145. Although highly underused, the Nigerian Export-Import Bank offers commercial bank guarantees and direct lending to facilitate exports. The Foreign Input Facility provides normal commercial terms of three to five years (or longer) for the importation of machinery and raw materials used for generating exports, and the Industrial Export Stimulation Facility provides exporters of manufactured goods with credits to import capital equipment and packaging and raw materials.

146. Besides the granting of tax holidays to companies located in free trade zones, tax relief is also provided to manufacturers exporting at least 50 percent of their production. Another tax incentive is tax relief for commercial banks that lend to exporters (a tax exemption is granted on interest earned from loans for export activities).

Export bans and taxes

147. Nigeria bans the exports of a few products in accordance with the provisions in Nigeria’s Export Prohibition Act. Currently, the products that cannot be exported are raw hides and skin, timber (rough and sawn), scrap metals, unprocessed rubber latex and rubber lumps, rice, yams, corn, beans, artifacts, and antiquities. Whereas the bans on hides, timber, metals, and rubber serve the purpose of ensuring lower-cost inputs for the manufacturing industry, the bans on rice, corn, and other food items are imposed on food-security grounds.

148. Export taxes are permitted under the 1992 Export Amendment Decree, which prescribes that all raw materials and unprocessed commodities (mineral or agricultural) may be subject to export levies as determined by the Nigerian Export Promotion Council. Currently, a levy of $5 per ton is imposed on cocoa exports and a levy of $3 per ton on other raw materials.

C. Trade Performance

149. The current trade policy framework combines high general barriers to trade and a plethora of derogations granted thereto by administrative fiat. The high import barriers entail an antiexport bias to the economy that is partly mitigated by various export incentive schemes. Much like a tax system with high tax rates and a widespread use of tax credits, the Nigerian trade policy framework allows the government to guide productive activities in directions of its choosing.

150. Nigeria’s trade policy framework is significantly more restrictive than that found in most other countries, and it has become increasingly restrictive in recent years. In its 2005 trade policy review, the WTO concluded that Nigeria’s trade policy regime had become more protectionist since its 1998 trade policy review. Over that same period, an array of developed, developing, and transition countries have pursued significant trade liberalization policies.

151. That Nigeria’s trade policies are not aligned with those found elsewhere is not in itself a problem, but it is an issue that the restrictive policy framework is associated with a very weak export performance. Nigeria—with more than 2 percent of the world’s population—has a share of the world’s exports of about 1/3 of 1 percent, of which more than 90 percent is oil and gas exports (Table 2). Over the past decade, Nigeria’s non-oil and gas exports on a per capita basis amounted to only 1 percent of the world’s average—the fourth-lowest share in the world.75 Over a decade in which the world economy became significantly more integrated, Nigeria’s non-oil and gas exports remained stuck at about 3 percent of GDP (6 percent of non-oil and gas GDP).

Table 2.Nigeria: Trade, Foreign Investment, and Growth, 1994-2004
1994199519961997199819992000200120022003Prel.

2004
(In percent of world total)
Exports of goods and services0.20.20.20.20.20.20.30.30.20.30.3
Of which: Non-oil/gas sector0.020.020.030.030.020.020.020.020.020.020.02
Imports of goods and services0.20.20.20.20.20.20.20.20.20.30.2
Of which: Non-oil/gas sector0.10.10.10.10.10.10.10.10.10.10.1
FDI0.20.20.30.40.20.10.10.30.40.50.6
Of which: Non-oil/gas sector0.070.070.080.140.060.040.040.140.110.050.09
GDP
Nominal0.10.10.20.10.10.10.10.20.10.20.2
Purchasing power parity0.30.30.30.30.30.30.30.30.30.30.3
(In percent of world total on a per capita basis)
Exports of goods and services10101212891512111415
Of which: Non-oil/gas sector11111111111
Imports of goods and services9101010910910111111
Of which: Non-oil/gas sector67676757676
FDI1210161895412162328
Of which: Non-oil/gas sector44473227524
GDP
Nominal66865677678
Purchasing power parity1414141413131313121314
Memorandum items:
(In units indicated)
Trade balance 1/2188-5-22190917
Exports of goods and services3434364733375443415055
Of which: Non-oil/gas sector34455433433
Imports of goods and services3233283938403334414137
Of which: Non-oil/gas sector2223182624282023252421
Non-oil/gas trade balance 2/-30-31-26-35-27-36-33-36-35-38-36
Exports of goods and services67787676666
Imports of goods and services3638334334423941414442
World exports 3/2022222323232524242527
Developing countries’ exports 3/2325252525273130323437
Sub-saharan African countries’ exports 3/2829303028293533323335
Oil export price ($/barrel)1617212013182824252938
Sources: IMF Balance of Payments Yearbook, WEO; and staff estimates.

In percent of GDP.

In percent of non-oil/gas GDP.

Exports of goods and services in percent of GDP.

Sources: IMF Balance of Payments Yearbook, WEO; and staff estimates.

In percent of GDP.

In percent of non-oil/gas GDP.

Exports of goods and services in percent of GDP.

152. Trade policies also influence the broader policy framework that determines private sector choices of when and how to consume, invest, save, and trade with the outside world. In that regard, it is worth noting that Nigeria’s poor export performance is also associated with low levels of foreign direct investment and weak economic growth. Except for investment in the oil and gas sectors, foreign investors have been largely absent from Nigeria, and little progress has been made toward closing the income gap with other countries.

153. Nigeria’s export performance is also relatively weaker than that of two other control groups: fuel exporters and ECOWAS member countries. Whereas growth in Nigerian exports of goods, other than gas and oil, and services over the past decade was broadly in line with the exports of other countries in these two groups, exports other than oil and gas relative to output remained significantly lower in Nigeria than in most other countries.

D. Where To Go From Here?

154. As noted in the introduction, the NEEDS takes into account that Nigeria’s current trade policies are largely failing to achieve any reasonable objectives and makes a strong case for adopting significantly more liberal policies in support of the government’s growth and poverty-reduction objectives. The inefficiencies of pre-NEEDS trade policies are succinctly described as follows: “The old development models of import substitution industrialization and statism, in which government assumed the dominant role as producer and controller in the economy, created perverse incentives, inefficiencies, and wastes.”76 In the NEEDS, trade policy reform is appropriately considered an integral component of broader structural policies aimed at improving the business environment. Furthermore, the NEEDS recognizes that, without further trade reforms—in particular, a lowering of import tariffs—progress in regional economic integration will prove elusive. Although the NEEDS is short on the specifics of what a more rational trade policy should look like, it makes clear that such a policy framework will have to be more predictable than the existing one and provide a lower and more uniform level of protection.

Figure 1.ECOWAS Export Indices, 1994-2004

Figure 2.ECOWAS Export to GDP Ratios, 1994-2004

Tariff reform

155. The first NEEDS-inspired trade reform is scheduled to go into effect on July 1, 2005. With this tariff reform, Nigeria will adopt the ECOWAS common external tariff (CET) (with tariff bands of 0, 5, 10, and 20 percent). An additional temporary 50 percent tariff band will be applied to selected import-competing goods. The maximum rate will decrease from 150 percent to 50 percent, while the average unweighted tariff rate will fall from about 30 percent to less than 20 percent.77 The next steps in the authorities’ reform program are the elimination of all import bans by end-2006 and the elimination of the 50 percent tariff band by end-2007.

Reduction of non-tariff barriers

156. While the government goes a long way toward establishing a less distortionary trade policy framework, it could consider accelerating the timetable for eliminating the import bans and the 50 percent tariff ban. Both of these measures hamper the development of free trade within ECOWAS. Furthermore, the import bans may be inconsistent with Nigeria’s commitments to the WTO and are a constant source of friction between Nigeria and its trading partners. In the period leading up to the abolition of import bans, it is also advisable not to introduce any new bans; in particular, one can question the purpose of introducing a ban on rice in January 2006 if all import bans are to be abolished by year-end.

Export promotion policies

157. The rationalization of the import-protection policies will promote exports, but Nigeria would be well served by also encouraging exports directly by abolishing all export taxes and bans. Recent efforts to strengthen prudential oversight in the administration of the export-expansion grant scheme is welcome, but a broader strategic review of all export incentive schemes may suggest additional ways to streamline and rationalize the incentive system. Insofar as a case can be made for maintaining any particular incentive scheme, efforts should be directed toward delivering more targeted and effective assistance in a manner that minimizes the risk for abuse. The tax and investment codes should also be pruned of export incentives, and the Value-added Tax code should be amended to make exports zero-rated rather than exempted. Finally, consideration should be given to centralizing export-promotion policies at the federal level so as to prevent companies from shopping around from state to state for the highest possible subsidies and concessions.

Regional cooperation

158. Stronger regional trade links are critical in establishing a competitive, integrated, but also open West African economic space. The ECOWAS customs union project is an important part of fostering stronger trade links, and, given Nigeria’s dominant position in ECOWAS, Nigerian leadership is essential for that project to succeed. With the recent implementation of tariff reforms in Guinea, all but three of ECOWAS’ 15 member countries have now broadly adopted the tariff schedule included in the proposed CET. In the 12 CET countries complying with the common external tariff, average unweighted tariff rates are 15 percent (including other duties and charges), with Liberia’s and Cape Verde’s tariffs being slightly lower and Nigeria’s tariffs being more than double this average (Table 3). With regard to fostering the internal ECOWAS market, a lack of implementation of agreed measures has been an issue in several countries, but Nigeria has lagged behind other countries in implementing ECOWAS’ Trade Liberalization Program.78 Looking forward, Nigeria needs to take on a more proactive role in assuring that the trade integration program remains on track. Otherwise, the establishment of a fully functioning customs union by January 2008 will be jeopardized.

Table 3.Average Tariffs in ECOWAS Countries, end-2004 1/
CountryPercent
Benin15
Burkina Faso15
Cape Verde11
Côte d’lvoire15
Gambia, The14
Ghana15
Guinea16
Guinea-Bissau15
Liberia12
Mali15
Niger15
Nigeria33
Senegal15
Sierra Leone15
Togo15
Unweighted average16
Source: Trade Policy Information Database, IMF.

Unweighted averages including other charges and fees.

Source: Trade Policy Information Database, IMF.

Unweighted averages including other charges and fees.

Multilateral cooperation

159. In the Doha Round negotiations, Nigeria should seize the opportunity to commit to binding all tariffs and lowering bindings significantly to approximate applied levels, steps that would enhance the predictability of the tariff system. Consideration could also be given to coordinating offers on new tariff bindings with other ECOWAS countries so as to minimize differences in tariff bindings at the regional level.

E. Conclusions

160. Nigeria’s current trade protection regime is in dire need of reform. Although its high barriers to import have had the predictable consequence of stifling exports other than gas and oil, it has done little to encourage the development of either the agriculture or manufacturing sectors. The current system’s reliance on administrative fiat rather than legislation to implement policies makes the system more flexible and therefore more adaptable to changing circumstances; unfortunately, the same flexibility has made the system prone to abuse as special interest groups’ clamor for more protection has tended to prevail over general interest groups’ call for lower protection. Over time, rent-seeking activities have become entrenched and the system progressively more restrictive.

161. The authorities’ intention to break with past practices in the trade policy area is welcome. The tariff reforms to be implemented on July 1, 2005, represent a significant first step toward a more rational trade protection regime, but other reforms should follow soon after. The cumulative benefits from opening up the trade system are not necessarily front-loaded, and, although the trade system is being liberalized, economic agents who are negatively affected will engage in end runs to roll back the reforms. Momentum is thus of the essence if the trade reforms are to succeed.

References

    Nigeria’s Export Promotion PolicyGovernment of Nigeria: mimeograph.

    Meeting Everyone’s Needs:National Economic Empowerment and Development Strategy, Nigerian National Planning Commission, 2004.

    Trade Policy Review of NigeriaWTO Secretariat, (WT/TPR/S/147,13April2005).

    2005 Report on Foreign Trade Barriers.United States Trade Representative.

Statistical Appendix
Table 1.Nigeria: Revised Gross Domestic Product by Sector of Origin at Current Prices, 2000-04
20002001200220032004
(In millions of naira)
Primary sector3,384,1863,813,9873,795,6955,225,444
Agricultural activities1,192,9101,584,3121,700,4511,940,587
Agriculture1,000,0691,328,7331,411,0481,628,349
Livestock116,393153,453175,838189,247
Forestry22,43727,46329,11131,146
Fishing54,01074,66484,45491,845
Mining and quarrying2,191,2762,229,6752,095,2453,284,857
Of which: crude petroleum and gas2,186,6822,223,6712,089,4703,278,767
Secondary sector200,841244,586293,612342,988
Manufacturing168,037201,393250,187293,083
Utilities2,2002,4384,2345,153
Building and construction30,60440,75539,19144,753
Tertiary sector952,6101,119,5981,364,8581,779,358
Transport129,092145,661179,365239,378
Communication1,6382,1143,0273,637
Wholesale and retail trade527,485642,860772,7211,041,209
Hotel and restaurants6,4557,2528,2919,719
Finance and insurance43,77554,38379,44970,113
Real estate165,070171,768206,626276,583
Other private services44,07755,38566,40587,907
Government services35,01740,17648,97450,812
Gross domestic product at factor cost4,537,6375,178,1715,454,1657,347,7909,376,155
Oil2,186,6822,223,6712,089,4703,278,7674,521,655
Non-oil2,350,9552,954,5003,364,6964,069,0234,854,500
Total indirect taxes (net)140,663163,392180,643187,625201,570
Subsidies-1,906-2,500-2,500-2,500-2,686
Gross domestic product at market prices4,676,3945,339,0635,632,3087,532,9159,575,040
Memorandum items:
Oil GDP48.242.938.344.648.2
Non-oil GDP51.857.161.755.451.8
Agricultural activities26.430.731.326.5
Secondary4.44.75.44.7
Tertiary sectors21.021.625.024.2
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 2a.Nigeria: Revised Gross Domestic Product by Sector of Origin at Constant 1990 Prices, 2000-04(In millions of naira)
20002001200220032004
Prel.
Primary sector232,466239,052230,615263,299
Agricultural activities117,110121,605126,763131,977
Agriculture98,179101,988105,189110,742
Livestock11,42711,77813,10812,870
Forestry2,2032,1082,1702,118
Fishing5,3025,7316,2966,246
Mining and quarrying115,356117,447103,852131,322
Of which: crude petroleum and gas114,507116,130102,627129,870
Secondary sector21,96323,48425,79127,305
Manufacturing18,37519,33721,97723,332
Utilities241234372410
Building and construction3,3473,9133,4433,563
Tertiary sector81,59484,54695,56796,681
Transport12,69812,65314,87015,737
Communication161184251239
Wholesale and retail trade39,77743,13346,47848,154
Hotel and restaurants635630687639
Finance and insurance4,3064,7246,5864,609
Real estate16,23714,92117,13018,183
Housing4,3364,8115,5055,779
Community and other services0000
Government services3,4443,4904,0603,341
Gross domestic product at factor cost336,858347,998352,941391,300415,332
Oil114,507116,130102,627129,870134,470
Non-oil222,351231,868250,314261,430280,862
Total indirect taxes (net)9,8009,3809,99410,43810,438
Subsidies133163186194209
Gross domestic product at market prices346,525357,216362,749401,544425,561
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 3a.Nigeria: Revised Gross Domestic Product by Expenditure Category at Current Prices, 2000-04(In millions of naira)
20002001200220032004
Prel.
External balance1,031,950575,369-48,571619,3741,648,357
Exports of goods and nonfactor services2,537,7582,310,7242,296,2863,746,5005,231,686
Goods2,429,3882,194,3592,159,5683,566,0465,007,385
Nonfactor services108,370116,365136,718180,454224,301
Imports of goods and nonfactor services1,505,8081,735,3562,344,8573,127,1263,583,329
Goods1,011,6141,184,5001,665,7882,249,8942,568,561
Nonfactor services494,194550,856679,069877,2321,014,768
Domestic demand3,644,4444,763,6945,680,8796,913,5407,926,683
Consumption2,696,8893,477,4974,203,8515,116,0205,786,478
Government978,6681,445,7371,364,9031,787,6102,117,953
Private1,718,2212,031,7602,838,9483,328,4103,668,526
Gross investment947,5551,286,1981,477,0291,797,5212,140,204
Stock changes
Gross fixed investment947,5551,286,1981,477,0291,797,5212,140,204
Government fixed investment447,984737,590564,590727,045874,120
Private fixed investment499,572548,607912,4391,070,4761,266,085
Gross domestic product at market prices4,676,3945,339,0635,632,3087,532,9159,575,040
Net factor income from abroad-644,978-476,732-782,164-1,097,634-1,574,475
Gross national product at market prices4,031,4164,862,3314,850,1446,435,2818,000,566
Net transfers from abroad160,339143,074170,897273,033369,374
National disposable income4,191,7565,005,4055,021,0416,708,3148,369,939
National savings 1/1,494,8671,527,908817,1901,592,2942,583,461
Gross domestic savings 2/1,979,5061,861,5661,428,4572,416,8953,788,562
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.

National disposable income less aggregate consumption.

Domestic disposable income less aggregate consumption.

Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.

National disposable income less aggregate consumption.

Domestic disposable income less aggregate consumption.

Table 4.Nigeria: Revised Gross Domestic Product by Expenditure at Constant 1990 Prices, 2000-04(In millions of naira)
20002001200220032004
Prel.
External balance150,755125,18958,978120,733127,073
Exports of goods and nonfactor services303,880291,955259,450342,328353,085
Goods290,903277,253244,003325,839337,947
Nonfactor services12,97714,70315,44716,48915,138
Imports of goods and nonfactor services153,125166,766200,473221,595226,013
Goods102,870113,829142,416159,432162,008
Nonfactor services50,25452,93758,05762,16364,005
Domestic demand195,770232,027303,771280,811298,489
Consumption152,701180,981224,791207,800217,897
Government79,907100,00983,05495,39898,272
Private72,79480,972141,736112,402119,625
Gross investment43,06951,04678,98173,01180,592
Stock changes20000
Gross fixed investment43,06951,04678,98173,01180,592
Government19,57723,20330,37728,08129,849
Private23,49227,84336,45333,69735,819
Gross domestic product at market prices346,525357,216362,749401,544425,561
Net factor income from abroad-65,587-45,814-66,871-77,781-99,308
Gross national product at market prices280,938311,402295,878323,763326,254
Net transfers from abroad16,30513,74914,61119,34823,298
National disposable income297,243325,152310,489343,111349,551
National savings 1/144,542144,17185,698135,311131,655
Gross domestic savings 2/193,824176,235137,958193,744207,664
Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.

National disposable income less aggregate consumption.

Domestic disposable income less aggeragate consumption.

Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.

National disposable income less aggregate consumption.

Domestic disposable income less aggeragate consumption.

Table 5.Nigeria: Selected Petroleum Statistics, 2000-04
20002001200220032004
Production and exports(Millions of barrels per day)
Production 1/2.2612.2381.9602.4532.492
Domestic allocation0.3020.3890.4470.4310.418
Exports 2/1.9521.8491.5132.0222.075
(U.S. dollars per barrel)
Average price of Nigerian crude28.0024.4825.0529.0238.28
U.K. Brent, average price 3/28.3124.4125.0028.8538.28
Export values 2/20,15116,57413,83421,41528,993
(in Naira per liter, unless otherwise indicated)
Domestic petroleum product prices 4/
Crude oil (naira per barrel) 5/950.00950.001980.002,487.005,141.65
Premium motor spirits22.0022.0026.0031.50
Kerosene17.0017.0024.0029.08
Gas oil/diesel21.0021.0026.0031.50
Domestic consumption of petroleum products(In thousands of metric tons)
Premium motor spirits4,799.65,397.66,928.96,294.1
Kerosene1,217.01,744.41,281.9906.3
Gas oil/diesel2,195.32,179.21,910.01,886.1
Fuel oil (high and low “pour”)174.4220.91,287.6
Liquefied petroleum gas13.8
Aviation spirits
Sources: Central Bank of Nigeria; Nigerian National Petroleum Corporation; and Fund staff estimates.

Includes condensates.

Balance of payments basis, including exports of condensate.

U.K. Brent, light-blend 38 API, f.o.b. United Kingdom.

For 2003, simple averages for the year.

Price at which the NNPC buys government equity crude for domestic refining.

Sources: Central Bank of Nigeria; Nigerian National Petroleum Corporation; and Fund staff estimates.

Includes condensates.

Balance of payments basis, including exports of condensate.

U.K. Brent, light-blend 38 API, f.o.b. United Kingdom.

For 2003, simple averages for the year.

Price at which the NNPC buys government equity crude for domestic refining.

Table 6.Nigeria: Selected Indicators of Agricultural Production and Prices, 2000-03
2000200120022003
Food crops
Millet6,7657,0887,2317,377
Sorghum8,8549,4089,6879,974
Maize6,4916,5926,6986,806
Rice (paddy)3,8653,9894,0854,183
Yams26,45127,58928,97930,439
Cassava36,79537,94939,41040,927
Export crops
Cocoa170171172173
Groundnuts2,3902,3612,3752,389
Palm kernels629632645658
Cotton353359379400
Sheanuts448455463471
Rubber275279284289
Average prices for food crops
Millet21,26433,528
Sorghum19,28434,945
Maize20,71937,351
Rice46,99751,003
Yams20,97556,333
Cassava10,96920,613
Average prices for export crops
Cocoa90,000100,744
Groundnuts44,11044,843
Palm kernels21,26023,379
Cotton35,00033,204
Rubber59,40069,800
Sources: Federal Office of Statistics; Federal Ministry of Agriculture; and Central Bank of Nigeria.
Sources: Federal Office of Statistics; Federal Ministry of Agriculture; and Central Bank of Nigeria.
Table 7.Nigeria: Index of Industrial Production, 2000-03
2000200120022003
(1985 = 100)
Total industrial production134.6145.3145.2
Manufacturing136.9146.3146.3
Sugar confectionary56.847.552.8
Soft drinks164.8194.0208.3
Beer and stout120.6125.7128.3
Cotton textiles98.593.795.0
Synthetic fabrics717.3665.6718.1
Footwear46.144.946.2
Paints114.0114.4121.0
Refined petroleum114.0133.0133.9
Cement88.793.594.5
Roofing sheets30.927.630.4
Vehicle assembly13.715.017.6
Soap and detergent189.1210.1214.0
Radio and televisions3.93.33.8
Mineral production137.5144.9133.7
Petroleum138.8146.3134.9
Gas191.5225.0240.3
Cassiterite26.124.525.0
Columbite98.297.798.3
Coal10.811.311.4
Limestone5.96.46.5
Electricity production136.1144.6146.7
(In thousands of megawatts)
Electricity consumption8,6899,0358,894
Industrial2,2002,2002,200
Commercial and street lighting2,0832,0832,083
Residential4,4064,7524,611
Source: Central Bank of Nigeria.
Source: Central Bank of Nigeria.
Table 8.Nigeria: National Consumer Price Indices, 2000-04(May 2003 = 100)
All itemsFoodBeverages, tobacco, and kolaClothing and footwearAccommodation, fuel, and

light
Household goodsMedical care and healthTransportRecreation and education servicesOther services
Weights1,000.0637.620.632.118138.213.642.48.93.0
200069.366.753.891.675.189.6100.270.866.253.1
March64.664.252.289.659.988.697.967.665.751.0
June70.968.153.490.678.892.0100.370.865.952.9
September73.167.754.792.891.389.9100.873.266.954.9
December72.968.561.094.384.291.1102.375.169.156.1
200182.385.374.491.474.792.695.475.975.260.8
March76.374.764.893.079.693.698.778.571.455.2
June82.288.879.386.861.595.494.868.475.768.3
September87.194.577.787.571.590.991.571.982.264.4
December84.988.38..39100.772.095.484.685.079.365.2
200292.996.592.491.587.395.298.579.182.871.9
March89.693.492.192.982.389.298.273.476.567.2
June92.398.095.684.189.190.789.375.570.567.8
September95.899.996.597.685.996.2107.180.296.777.4
December95.296.491.9100.892.1106.9119.288.892.591.3
2003
March94.893.5101.6100.394.1100.3113.382.992.8133.6
June105.2104.1100.6103.1110.2103.9107.6100.6105.2106.0
September113.4106.2105.3120.1138.2108.4125.3108.7111.0114.4
December117.9111.3106.1133.5137.1113.1134.9115.4148.6142.4
2004
March116.1108.0109.2135.7136.1113.2150.5128.9148.0140.0
June120.0119.3110.6109.1131.8110.0111.6118.3114.6118.2
September123.8121.6113.7113.7142.9113.5114.0115.5114.9125.6
December129.7124.8124.S111.4156.4114.8111.3115.5116.7132.8
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 9.Nigeria: Urban Consumer Price Indices, 2000-04(May 2003 = 100)
All itemsFoodBeverages, tobacco, and kolaClothing and footwearHousing fuel, and lightHousehold goodsMedical care and healthTransportRecreation and education servicesOther services
Weights1000626.513.136.2172.844.68.750.313.32.9
2000 average72.087.280.283.587.672.368.0
2001 average81.686.172.692.873.888.285.772.772.893.9
2002 average92.097.491.896.680.696.788.583.480.695.6
March95.198.479.084.683.278.4100.583.486.993.3
June99.489.382.690.779.681.095.565.861.091.8
September101.2101.581.399.797.685.792.183.9101.175.0
December96.8112.087.6110.0122.189.795.585.7107.879.3
2003
March98.296.988.095.0122.775.984.987.9111.497.1
June106.2107.699.999.1113.1101.897.8100.2102.5103.1
September117.2106.8107.5119.5143.2106.3108.9106.5106.1101.9
December117.6110.1107.1148.4139.0122.1117.0117.799.9122.5
2004
March123.4115.6109.6161.2142.1118.2175.4136.4100.4121.1
June123.8121.4112.6109.6138.8115.5106.9123.0111.1121.2
September127.5123.5116.9111.9151.5119.8115.7110.2111.5134.3
December131.3125.5115.5113.0159.1115.5112.6115.0120.7141.1
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 10.Nigeria: Rural Consumer Price Indices, 2000-04(May 2003 = 100)
All itemsFoodBeverages, tobacco, and kolaClothing and footwearHousing fuel, and lightHousehold goodsMedical care and healthTransportRecreation and education servicesOther services
Weights1000640.123.930.4184.535.515.7397.13.0
200069.566.953.792.675.391.6103.874.466.545.9
200182.485.274.891.174.893.498.576.476.652.9
March76.073.766.893.380.295.0100.983.573.145.7
June82.388.680.685.861.995.399.562.775.362.9
September86.893.877.187.870.792.595.569.284.057.4
December84.888.183.1101.373.194.786.880.480.056.4
200293.196.392.590.588.795.0104.170.683.966.2
March89.693.092.891.883.090.1102.954.372.760.9
June92.297.795.383.090.490.792.366.073.160.1
September95.999.696.496.886.895.6110.170.5103.771.8
December95.396.491.398.493.0106.3118.284.195.191.3
2003
March95.092.6101.6101.095.3101.3110.487.795.5137.5
June104.8103.5101.2107.4107.2105.1115.4101.3107.0108.2
September111.8105.9102.8120.8133.1109.7138.3112.7114.3123.7
December118.1111.7105.0117.9135.1107.7149.1111.2180.9157.1
2004
March113.0105.6100.5108.9130.0110.2130.8115.6179.7154.1
June118.3118.3108.3108.5124.5106.7115.3109.1117.0115.1
September122.2121.0110.3115.3134.1109.7112.7124.3117.2119.2
December129.1124.2112.3109.7153.7114.4110.3116.6117.3125.5
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 11.Nigeria: Consolidated Government Revenue, 2000-04 1/(in millions of naira)
Prel.
20002001200220032004
Total revenue1,986,9492,247,8842,052,8252,794,7674,123,586
Tax revenue636,082876,376732,7101,072,5591,535,766
Taxes on net income, profits, and capital gains436,442560,110422,701701,3631,126,268
Petroleum profits tax332,542405,941223,999437,964825,843
Company income tax 2/51,14768,72689,104114,770130,129
Education tax7,44416,2149,5709,70417,430
Personal income tax 3/45,30869,230100,028138,925152,865
Domestic taxes on goods and services83,937121,522108,601136,402157,345
Value-added tax58,47091,789108,601136,402157,345
Taxes on petroleum products25,46729,733000
Taxes on international trade and transactions115,703194,744201,408234,793252,154
Import duties, excises, and fees 4/101,521170,549181,408195,462217,154
Customs levies 5/14,18224,19520,00039,33135,000
Nontax revenue1,350,8671,371,5081,320,1151,722,2092,587,819
Oil crude export proceeds1,001,068954,816719,287966,7161,440,377
Royalty192,531206,593169,234245,517357,666
Domestic crude 6/96,430134,037304,238386,356635,424
Federal government independent revenue 7/37,82844,33568,13454,16458,894
Upstream gas proceeds/Other oil23,01031,72759,22369,45595,457
Memorandum item:
Privatization proceeds18,10485,80019,69800
Sources: Federal Ministry of Finance; and staff estimates.

Includes the Federal, state and local governments.

Mainly company income tax collected by the Federal Inland Revenue Service Revenue.

Consists of personal income tax, other taxes and fees collected by state governments. The Federal Inland Revenue Service also collects a small amount of personal income tax from armed forces personnel and inhabitants of the Federal Capital Territory.

Consists of import duties, excise duties, and fees that go directly to the Federation account.

Consists mainly of earmarked import levies of a 5 percent port development surcharge, a 1 percent Nigerian Shippers Council surcharge, and a 1 percent Raw Materials Research and Development Council surcharge.

Proceeds fom the sale of crude oil to domestic refineries.

Consists of dividends from public enterprises, directors’ fees and loan recoveries.

Sources: Federal Ministry of Finance; and staff estimates.

Includes the Federal, state and local governments.

Mainly company income tax collected by the Federal Inland Revenue Service Revenue.

Consists of personal income tax, other taxes and fees collected by state governments. The Federal Inland Revenue Service also collects a small amount of personal income tax from armed forces personnel and inhabitants of the Federal Capital Territory.

Consists of import duties, excise duties, and fees that go directly to the Federation account.

Consists mainly of earmarked import levies of a 5 percent port development surcharge, a 1 percent Nigerian Shippers Council surcharge, and a 1 percent Raw Materials Research and Development Council surcharge.

Proceeds fom the sale of crude oil to domestic refineries.

Consists of dividends from public enterprises, directors’ fees and loan recoveries.

Table 12.Nigeria: Consolidated Government Expenditure, 2000-04 1/(in millions of naira)
20002001200220032004
Total expenditure1,706,5622,509,9652,290,4342,889,6583,388,731
Recurrent expenditure651,615770,120868,107906,651967,770
Goods and services350,078403,073477,596514,371570,640
Federal government personnel costs278,701285,169368,484367,950442,562
Federal government overhead71,377117,904109,112146,422128,078
Customs levies14,18224,19520,00039,33135,000
Education Fund7,44416,2149,5709,70417,430
Interest payments due279,911326,638360,941343,245344,700
Domestic interest104,165154,796170,635169,725188,822
Foreign interest175,747171,842190,306173,520155,877
Capital expenditure250,506440,955264,002240,896318,833
Domestically-financed budgetary233,762433,070251,078230,886288,900
Foreign financed16,7447,88512,92410,01029,933
NNPC operations289,856429,754351,451451,062454,879
JVC cash calls267,736391,680345,604451,062454,879
NNPC priority projects22,11938,0745,84800
Extrabudgetary outlays/Other/NDDC010,00022,17154,95855,865
Judiciary9,64115,00015,41526,18628,146
Net lending007,40000
State and local governments504,945844,137761,8871,209,9061,563,239
Sources: Federal Ministry of Finance and staff estimates.

Consists of the Federal, state and local governments.

Sources: Federal Ministry of Finance and staff estimates.

Consists of the Federal, state and local governments.

Table 13.Nigeria: Federation Account Operations, 2000-04(In millions of naira)
20002001200220032004
Total revenue1,007,5851,096,4181,171,4471,450,6031,993,740
Petroleum revenue855,051857,201900,9351,140,3701,646,458
Foreign-generated oil and gas revenue (net)740,384735,656596,697754,0141,011,033
Gross government export proceeds947,163934,284778,5101,036,1721,535,835
Royalty and petroleum profit tax525,073639,234393,232683,4811,183,510
First charges / Deductions-731,852-837,862-575,045-965,638-1,708,311
Domestically-generated oil revenue (net)114,667121,545304,238386,356635,424
Petroleum naira revenue114,667121,545304,238386,356635,424
Transfer to Petroleum Special Trust Fund00000
Nonpetroleum revenue152,534239,217270,512310,233347,283
Company income tax51,02868,66089,104114,770130,129
Customs and excise101,506170,557181,408195,462217,154
Total expenditure1,020,9541,212,1011,167,3311,471,8161,987,352
Federation account distribution 1/1,020,9541,212,1011,167,3311,471,8161,987,352
Federal government514,969530,658543,818616,948878,468
State government256,501391,327321,422419,845582,222
Local government213,751245,487269,446346,866448,868
Special funds35,73344,62932,64488,15777,794
Federal Capital Territory10,21012,7805,53920,17018,239
Ecology / Derivation and Ecology20,41925,4918,94519,43318,749
Statutory stabilization5,1056,3584,4719,7119,326
Derivation / Development of Natural Resources0013,69038,84331,479
Mineral-producing areas00000
Overall balance-13,369-115,6834,116-21,2136,389
Financing13,369115,683-4,11621,213-6,389
Memorandum items:
First charges / Deductions731,852837,862575,045965,6381,708,311
JVC cash calls260,000391,990345,604451,062454,879
NNPC priority projects24,75038,0745,84800
External debt service175,034232,192143,063235,657235,027
National priority projects00000
Special reserve/excess proceeds227,00397,2250141,724758,561
13% natural resource derivation45,06678,38180,530137,195259,844
Sources: Federal Ministry of Finance; and staff estimates.

The current allocation formula of Federation account revenue is 48.5 percent for the Federal government, 24.9 percent for state government 20.6 percent for local governments, and 6 percent for special funds.

Sources: Federal Ministry of Finance; and staff estimates.

The current allocation formula of Federation account revenue is 48.5 percent for the Federal government, 24.9 percent for state government 20.6 percent for local governments, and 6 percent for special funds.

Table 14.Nigeria: Summary Federal Government Fiscal Operations, 2000-04 1/(in millions of naira, unless otherwise indicated)
20002001200220032004
Total revenue1,291,0421,322,2291,122,2151,420,8191,944,226
Distribution from Federation account514,969530,658543,818616,948878,468
Drawdown of Federation stabilization account064000
Federal government share of value-added tax8,77013,35915,74719,77822,815
Independent revenue 2/38,05744,40568,13454,16458,894
Autonomous foreign exchange market profit00000
Education Trust Fund8,30216,2149,5709,70417,430
Customs levies14,18224,19520,00039,33135,000
First charges/deductions729,246680,070494,515729,929984,049
External debt service175,034232,192143,063210,130197,307
National priority projects42,45918,124000
JVC cash calls and NNPC priority projects284,750429,754351,451451,062454,879
Excess proceeds227,00368,736331,863
Judiciary9,641
13 percent derivation grant45,066000
Transfer for Petroleum Special Trust Fund (PSTF)00000
PSTF independent revenue 3/00000
Other053,737000
Total expenditure1,220,7441,625,2551,389,1701,510,0361,559,326
Recurrent expenditure684,850762,016719,956791,656843,615
Goods and services350,078403,107477,596514,371570,640
Personnel costs278,701285,118368,484367,950442,562
Overhead71,377117,989109,112146,422128,078
PSTF00000
Interest payments due312,288358,909213,061242,055230,829
Domestic interest104,168154,796170,635169,725188,822
Foreign interest208,121204,11342,42672,33042,007
Local contractors00000
Other22,484029,29935,23042,146
Capital expenditure246,098433,486317,762267,317260,833
Domestically financed233,843425,601304,838257,308230,900
Budgetary176,825403,567304,838257,308230,900
National priority projects42,45918,124000
PSTF14,5593,910000
Foreign financed12,2547,88512,92410,01029,933
Net lending 4/00000
JVC cash calls and NNPC priority projects284,750429,754351,451451,062454,879
Other/Extra budgetary expenditure5,0460000
Overall balance (commitment basis)70,299-303,027-266,955-89,217384,900
Balancing item13,3000000
Overall balance (cash basis)56,999-303,027-266,955-89,217384,900
Financing-56,999303,027266,95589,217-384,900
Privatization18,1040000
External loans (net)45,341-26,290-105,352-127,791-125,368
Borrowings12,2547,88512,92410,01029,933
Amortization due-135,513-34,174-100,637-137,800-155,300
Change in arrears (acc. +, red. -)00000
Rescheduling168,6000-17,63900
Domestic-102,340329,316372,307217,008-259,532
Banking system (net) 5/-99,615118,724398,848298,567-418,819
Nonbank-2,725-30,216-26,541-81,560159,287
Memorandum items:
Primary balance 6/382,58755,882-53,894152,838615,729
Primary balance (in percent of GDP)8.21.0-1.02.06.4
GDP at market prices4,676,3945,339,0635,632,3087,532,9159,575,040
Source: Federal Ministry of Finance; and staff estimates.

Consists of the Federal government and the Petroleum Special Trust Fund (PSTF).

Consists of dividends from public enterprises, directors’ fees and loan recoveries from public enterprises.

Miscellaneous revenues.

Consists of interest earned on PSTF balances held as deposits and treasury bills.

To state governments.

Includes adjustment for PSTF deposits held in the commercial and merchant banking system, which are classified as private deposits.

Primary balance is defined as total revenue less total expenditure, excluding interest payments due.

Source: Federal Ministry of Finance; and staff estimates.

Consists of the Federal government and the Petroleum Special Trust Fund (PSTF).

Consists of dividends from public enterprises, directors’ fees and loan recoveries from public enterprises.

Miscellaneous revenues.

Consists of interest earned on PSTF balances held as deposits and treasury bills.

To state governments.

Includes adjustment for PSTF deposits held in the commercial and merchant banking system, which are classified as private deposits.

Primary balance is defined as total revenue less total expenditure, excluding interest payments due.

Table 15.Nigeria: Total Expenditure of the Federal Government by Functional Classification, 2000-03 1/
2000200120022003
(In millions of naira)
Administration174,578230,065405,313395,807
General administration95,882103,112183,379232,764
National Assembly6,65519,81321,63524,395
Defense37,49063,472108,14861,723
Internal security34,55143,66992,15276,925
Economic services130,222307,960273,648145,431
Agriculture and natural services13,60964,94444,80416,045
Road and construction18,48728,64245,12634,704
Manufacturing, mining, and quarrying10,5147,28439,663584
Transport and communications9,60553,17653,66329,309
Housing056,35644,4799,496
National priority projects40,37718,12400
JVC cash calls/NNPC priority projects0000
Petroleum Trust Fund14,5593,910200
Counterpart funding7,02800411
Niger Delta Development Commission94410,00009,045
Others15,09865,52445,89445,838
Social and community services86,768189,326266,378167,798
Education49,56359,745109,45579,436
Health20,44544,65263,17139,686
Housing056,35644,4799,496
Other16,75928,57449,27339,181
Transfers469,815433,032437,297377,405
Outstanding domestic liabilities0000
Interest due279,911326,638360,941343,244
Domestic104,165154,796170,635169,724
External175,747171,842190,306173,520
Other recurrent tranfers 1/143,20630,04676,35534,150
Other capital transfers46,69876,348011
Total861,3831,160,3841,382,6361,086,441
(In percent of total)
Administration20.319.829.336.4
General administration11.18.913.321.4
National Assembly0.81.71.62.2
Defense4.45.57.85.7
Internal security4.03.86.77.1
0.00.00.00.0
Economic services15.126.519.813.4
Agriculture and water services1.65.63.21.5
Construction2.12.53.33.2
Manufacturing, mining, and quarrying1.20.62.90.1
Transport and communications1.14.63.92.7
Housing0.04.93.20.9
National priority projects4.71.60.00.0
JVC cash calls/NNPC priority projects0.00.00.00.0
Petroleum Trust Fund1.70.30.00.0
Counterpart funding0.80.00.00.0
Niger Delta Development Commission0.10.90.00.8
Others1.85.63.34.2
Social and community services10.116.319.315.4
Education5.85.17.97.3
Health2.43.84.63.7
Housing0.04.93.20.9
Other1.92.53.63.6
Transfers54.537.331.634.7
Outstanding domestic liabilities0.00.00.00.0
Interest due32.528.126.131.6
Domestic12.113.312.315.6
External20.414.813.816.0
Other recurrent transfers 2/16.62.65.53.1
Other capital transfers15.215.215.216.2
Total100100100100
Sources: Annual reports of the Central Bank of Nigeria and staff estimates of the interest due.

Includes pensions, gratuities and contingencies.

Sources: Annual reports of the Central Bank of Nigeria and staff estimates of the interest due.

Includes pensions, gratuities and contingencies.

Table 16.Nigeria: Recurrent Expenditure of the Federal Government by Functional Classification, 2000-03
2000200120022003
(In millions of naira)
Administration121,299180,810331,736307,849
General administration59,33275,080146,807166,058
National Assembly4,76619,80420,16322,395
Defense31,04647,07286,05451,044
Internal security26,15438,85578,71368,352
Economic services29,81653,01165,91196,032
Agriculture4,8067,06512,4397,534
Road and construction11,4807,2029,27616,945
Transport and communications2,42833,93536,57922,670
Others11,1024,8097,61648,883
Social and community services58,80279,634189,432102,566
Education39,03439,885100,24064,756
Health11,58024,52450,56333,255
Others8,18915,22638,6284,556
Transfers423,117356,684437,297377,394
Interest due279,911326,638360,941343,244
Domestic104,165154,796170,635169,724
External175,747171,842190,306173,520
Others 2/143,20630,04676,35534,150
Total633,035670,1401,024,375883,840
(In percent of total)
Administration19.227.032.434.8
General administration9.411.214.318.8
National Assembly0.83.02.02.5
Defense4.97.08.45.8
Internal security4.15.87.77.7
Economic services4.77.96.410.9
Agriculture and water0.81.11.20.9
Construction1.81.10.91.9
Transport and communications0.45.13.62.6
Others1.80.70.75.5
Social and community services9.311.918.511.6
Education6.26.09.87.3
Health1.83.74.93.8
Others1.32.33.80.5
Transfers66.853.242.742.7
Interest due44.248.735.238.8
Domestic16.523.116.719.2
External27.825.618.619.6
Others 1/22.64.57.53.9
Total100.0100.0100.0100.0
Sources: Annual reports of the Central Bank of Nigeria, except for interest due estimated by the staff.

Includes pensions, gratuities and contingencies.

Sources: Annual reports of the Central Bank of Nigeria, except for interest due estimated by the staff.

Includes pensions, gratuities and contingencies.

Table 17.Nigeria: Capital Expenditure of the Federal Government by Functional Classification, 2000-03 1/
2000200120022003
(In millions of naira)
Administration53,28049,25573,57787,959
General administration36,55028,03236,57266,706
National Assembly1,88991,4722,000
Defense6,44416,40022,09410,680
Internal security8,3974,81413,4408,573
Economic services111,508259,758215,35398,282
Agriculture and natural resources8,80357,87932,3648,511
Road and construction7,00621,44035,85017,759
Manufacuring, mining, and quarrying10,5147,28439,663584
Transport and communications7,17719,24117,0836,640
Housing056,35644,4799,496
National priority projects40,37718,12400
JVC cash calls/NNPC priority projects0000
PTF14,5593,910200
Counterpart funding7,02800411
Niger Delta Development Commission94410,00009,045
Others15,09865,52445,89445,838
Social and community services27,96553,33632,46755,736
Education10,52919,8609,21514,680
Health8,86620,12812,6086,431
Others8,57013,34810,64434,625
Transfers46,69876,348011
Outstanding domestic liabilities0000
Other46,69876,348011
Total239,451438,697321,398241,989
(In percent of total)
Administration22.311.222.936.3
General administration15.36.411.427.6
National Assembly0.80.00.50.8
Defense2.73.76.94.4
Internal security3.51.14.23.5
Economic services46.659.267.040.6
Agriculture and water resources3.713.210.13.5
Road and construction2.94.911.27.3
Manufacuring, mining, and quarrying4.41.712.30.2
Transport and communications3.04.45.32.7
Housing0.012.813.83.9
National priority projects16.94.10.00.0
JVC cash calls/NNPC priority projects0.00.00.00.0
PTF6.10.90.00.0
Counterpart funding2.90.00.00.2
Niger Delta Development Commission0.42.30.03.7
Others6.314.914.318.9
Social and community services11.712.210.123.0
Education4.44.52.96.1
Health3.74.63.92.7
Others3.63.03.314.3
Transfers19.517.40.00.0
Outstanding domestic liabilities0.00.00.00.0
Other19.517.40.00.0
Total100.0100.0100.0100.0
Source: Annual reports of the Central Bank of Nigeria.

The figures are based on budgetary data and exclude extrabudgetary expenditure.

Source: Annual reports of the Central Bank of Nigeria.

The figures are based on budgetary data and exclude extrabudgetary expenditure.

Table 18.Nigeria: Federal Government Outstanding Domestic Debt, 2000-04
20002001200220032004
(end of period, in millions of naira)
By Instruments898,2531,016,9741,166,0001,329,7221,433,521
Treasury bills465,535584,536733,762825,100929,119
Treasury bonds430,608430,608430,608503,152503,152
Development stock2,1101,8301,6301,4701,250
By Holders898,2531,016,9741,166,0001,329,7221,433,521
Banking sector855,925937,847992,6831,132,0681,220,438
Central bank713,933738,585532,453607,216654,616
Commercial banks132,682199,262460,230524,852565,822
Merchant banks9,3110000
Nonbank sector42,32979,128173,318197,654213,083
(in percent of total; unless otherwise indicated)
Holders100.0100.0100.0100.0100.0
Banking sector95.392.285.185.185.1
Central bank79.572.645.745.745.7
Commercial banks14.819.639.539.539.5
Merchant banks1.00.00.00.00.0
Nonbank sector4.77.814.914.914.9
Memorandum items:
Total domestic debt in percent of GDP19.219.020.717.715.0
Average rate of interest in percent
Sources: Annual reports of the Central Bank of Nigeria; and staff estimates.
Sources: Annual reports of the Central Bank of Nigeria; and staff estimates.
Table 19.Nigeria: Summary of Budgetary Operations of State and Local Governments and special funds, 2000-03 1/
2000200120022003
(In millions of naira)
Revenue501,953727,557832,0721,220,541
Statutory share of Federation account revenue 2/368,544523,470518,864828,696
Statutory share of Federation stabilization
account revenue5,7817,0619,570996
Share of value-added tax44,19764,23371,359105,535
State allocation0000
Independent revenue 3/45,30869,230100,028138,925
Other38,12363,563132,252146,389
Expenditure 4/355,680529,930894,3571,282,921
Recurrent196,784294,710565,765808,772
Capital158,896235,220328,592474,149
Balance (deficit -)146,273197,627-62,286-62,380
Financing-146,273-197,62762,28662,380
Foreign loans156015,87914,680
Domestic loans3,835032,45271,030
Other (Residual) 5/-150,264-197,62713,955-23,330
Source: Central Bank of Nigeria (Annual reports).

These data, obtained through annual surveys undertaken by the Central Bank of Nigeria, are only illustrative.

This revenue is on gross basis (ie. before deductions for payments of various commitments made by the sub national gover

Mainly personal income tax collected by state governments.

Total spending is underestimated because only a sample of local governments are covered and deductions at source may no have been included.

Reflects an underestimation of expenditure.

Source: Central Bank of Nigeria (Annual reports).

These data, obtained through annual surveys undertaken by the Central Bank of Nigeria, are only illustrative.

This revenue is on gross basis (ie. before deductions for payments of various commitments made by the sub national gover

Mainly personal income tax collected by state governments.

Total spending is underestimated because only a sample of local governments are covered and deductions at source may no have been included.

Reflects an underestimation of expenditure.

Table 20.Nigeria: Liquidity of Commercial Banks, 2000-04
20002001200220032004
(In millions of naira)
Total liquid assets398,254477,317747,621600,539820,726
Cash in vault (currency)34,97664,83576,21190,09987,217
Reserves with central bank 1/127,787239,605223,126227,998214,897
Of which:
Reserve requirements77,782125,258139,702152,276165,303
Current accounts54,87294,359105,320120,025111,673
Net interbank positions-39,748368-11,232-55,289-52,805
Balances held with other banks (net)37,08654,87251,37742,88182,470
Interbank placements (net)11,7863,2394,9339,836-11,411
Money at call (net)-1,086-5,305-10,547-10,8801,012
Uncleared effects-87,534-52,438-56,996-97,126-124,876
Treasury bills275,774173,107460,229338,116572,426
Treasury certificates0007500
Other liquid assets 2/-534-598-712-1,135-1,009
Certificate deposits (net)-572-627-877-1,138-1,044
Bills discounted3830165436
Free liquid assets320,472352,059607,919448,264655,423
Total deposit liabilities702,105947,1831,157,1121,337,2961,661,482
Demand deposits345,001448,021503,870577,664728,552
Time, savings, and foreign currency deposits357,103499,162653,241759,633932,930
(In percent)
Liquidity reserve ratios 3/
Actual45.637.252.533.539.4
Required30.040.040.042.042.0
Cash reserves (deposits at the CBN)
In percent of demand deposits37.053.544.339.529.5
In percent of total deposit liabilities18.225.319.317.012.9
Required 4/10.012.512.514.514.5
Source: Central Bank of Nigeria.

As reported by the commercial banks.

Comprising certificates of deposit, and bills discounted.

Total liquid assets less penalty and cash reserve requirements as a percent of total deposit liabilities.

The base to calculate the reserve requirement comprises banks’ total deposit liabilities (i.e., demand, savings, and time deposits) except foreign currency deposits; certificate of deposits; promissory notes held by the non-bank public; bankers’ acceptances and since January 2002, VAT and customs dutires collected by banks on behalf of the federal government held more than for seven days. Starting in 2002, the CRR’s maintenance period was changed from 30 to 15 days. Cash must be held in a separate account with the CBN. Vault cash is not an eligible asset.

Source: Central Bank of Nigeria.

As reported by the commercial banks.

Comprising certificates of deposit, and bills discounted.

Total liquid assets less penalty and cash reserve requirements as a percent of total deposit liabilities.

The base to calculate the reserve requirement comprises banks’ total deposit liabilities (i.e., demand, savings, and time deposits) except foreign currency deposits; certificate of deposits; promissory notes held by the non-bank public; bankers’ acceptances and since January 2002, VAT and customs dutires collected by banks on behalf of the federal government held more than for seven days. Starting in 2002, the CRR’s maintenance period was changed from 30 to 15 days. Cash must be held in a separate account with the CBN. Vault cash is not an eligible asset.

Table 21.Nigeria: Selected Interest Rates, 2000-04(In percent; end of period)
2004
2000200120022003Q1Q2Q3Q4
Minimum rediscount rate14.020.516.515.015.015.015.015.0
Treasury bill rate (stop rate)13.020.313.814.914.014.314.414.3
Seven-day Nibor15.925.315.120.816.917.615.216.3
Savings deposit rate 1/4.95.03.73.25.73.34.44.4
Prime lending rate 1/19.526.020.619.619.519.219.018.9
Source: Central Bank of Nigeria.

At commercial banks.

Source: Central Bank of Nigeria.

At commercial banks.

Table 22.Nigeria: Imports, 2000-03 1/
2000200120022003
(In millions of U.S. dollars)
Imports from the world5,8237,9268,72714,936
Industrial countries3,9034,9045,1147,849
United States6608161,1212,315
Japan284360432364
France325372363480
Germany5947815311,088
Italy272201260636
Netherlands252392278320
United Kingdom7551,0701,0951,420
Africa244712398747
Of which
Côte d’Ivoire1757511
Ghana14121822
Niger1011
South Africa68231189291
Asia (excluding Japan)1,0031,6482,5222,759
China, P.R.: Mainland2535277391,067
China, P.R.: Hong Kong8896108153
India199316310377
Indonesia45108108123
Korea127223311434
Singapore6110449879
Thailand114116174139
Other6736636943,580
Russia19511691145
Turkey19212824
Ukraine16494188
Brazil179175180183
(In percent of total)
Industrial Countries67.061.958.652.6
Africa4.29.04.65.0
Asia17.220.828.918.5
Other11.68.48.024.0
(In millions of U.S. dollars)
Memorandum items:
Total merchandise imports in BoP-671-738-735-877
Sources: IMF, Direction of Trade statistics, and staff estimates.

c.i.f. basis, based on partner-country data.

Sources: IMF, Direction of Trade statistics, and staff estimates.

c.i.f. basis, based on partner-country data.

Table 23.Nigeria: Exports, 2000-03 1/
2000200120022003
(In millions of U.S. dollars)
World27,04218,04518,34024,061
Industrial countries18,43112,19611,03716,276
Of which:
United States11,4957,3205,8199,205
Canada615357229753
Japan109173549965
Austria0000
France1,6571,1429971,359
Germany112244365505
Netherlands253365288535
Portugal686461491589
Spain2,3451,1751,0191,483
Switzerland01027
United Kingdom7451196
Africa1,9011,1461,7322,010
Of which:
Cameroon246125113313
Côte d’Ivoire842341270360
Ghana262271379454
Senegal247175119254
South Africa266198388589
Asia5,2543,0673,5253,634
Of which:
China, P.R.: Mainland14012773123
India3,9192,0832,1572,392
Indonesia606537961770
Korea2317541100
Other1,4561,6352,0462,141
Of which:
Turkey0000
Brazil6671,0511,5381,636
Chile28111014186
(In percent of total)
Industrial Countries68686068
Africa7698
Asia19171915
Other59119
(In millions of U.S. dollars)
Memorandum items:
Total merchandise exports in BoP23,76119,59817,67227,250
of which: oil exports23,09318,92716,93526,515
Source: IMF, Direction of Trade statistics, and staff estimates.

f.o.b. basis, based on partner country data.

Source: IMF, Direction of Trade statistics, and staff estimates.

f.o.b. basis, based on partner country data.

Table 24.Nigeria: External Public Debt Stock, 2000-03 1/
2000200120022003
(In millions of U.S. dollars)
Multilateral3,3423,0372,9613,042
World Bank2,1491,9581,9511,988
African Development Bank990909838873
Other (including arrears)203170172181
Bilateral23,29623,21125,38427,472
Paris Club 2/23,27223,19925,38127,470
Medium- and long-term debt23,27222,83122,96623,897
Pre-cutoff21,73121,058
Post cutoff1,5411,774
Arrears (pre- and post cut-off)03682,4153,573
Other bilateral241132
Commercial3,5963,4382,6482,403
Par bonds (London Club debt)2,0432,0431,4421,442
Promissory notes1,4461,2921,153911
Other (including arrears)1071035350
Total30,23429,68630,99332,917
(In percent of total)
Multilateral11.110.29.69.2
World Bank7.16.66.36.0
African Development Bank3.33.12.72.7
Other0.70.60.60.5
Bilateral77.178.281.983.5
Paris Club 2/77.078.181.983.5
Other bilateral0.10.00.00.0
Commercial11.911.68.57.3
Par bonds6.86.94.74.4
Promissory notes4.84.43.72.8
Sources: Nigerian authorities; Paris Club; and Fund staff estimates.

In 2000-03, as reported by creditors. These figures are tentative pending the reconciliation of Nigeria’s obligations with Paris Club creditors. In 2004, as reported by DMO.

In 2000, including late interest as reported by the Paris Club and capitalized moratorium interest as estimated by Fund staff.

Sources: Nigerian authorities; Paris Club; and Fund staff estimates.

In 2000-03, as reported by creditors. These figures are tentative pending the reconciliation of Nigeria’s obligations with Paris Club creditors. In 2004, as reported by DMO.

In 2000, including late interest as reported by the Paris Club and capitalized moratorium interest as estimated by Fund staff.

Table 25.Nigeria: External Debt Service 2000-03
2000200120022003
Total debt service due3,4343,2482,9312,936
Interest payments due before rescheduling1,7191,5351,5571,569
Multilateral187132143142
Bilateral1,3451,2041,2241,285
Commercial187199191142
Amortization payments before rescheduling1,7151,7131,3731,368
Multilateral423364331367
Bilateral1,1661,225914876
Commercial126124129124
Rescheduling (principal, interest)22,102746
current maturities247149
arrears21,3620
capitalized moratorium interest493597
Flow accumulation of arrears-20,3813751,9001,127
Cash Debt Service Payments:1,7142,1271,0311,809
Multilaterals610497474509
Bilaterals7901,3082371,034
Paris Club7251,2741621,021
Other bilaterals66357613
Commercial banks313322320267
Brady bonds12913412890
Promisory notes185188192176
Debt conversion program58272218
Cash interest paid8151,823350548
Cash principal paid8983046801,262
Sources: Central Bank of Nigeria; Debt Management Office; Creditors; and Fund staff estimates.
Sources: Central Bank of Nigeria; Debt Management Office; Creditors; and Fund staff estimates.
Nigeria: Tax Summary(As of February 2005)
TaxesTax BaseExemptions, Allowances, and DeductionsTax Rates
1. Tax on net income and profits
1.1 Company income tax (Companies Income Tax Act of 1979, as amended to date); (Industrial Development Income Tax Relief Act)Taxable persons



Annual tax on profits of companies, except those engaged in exploration, drilling, and extraction of petroleum. Gas operations are subject to companies income tax, though upstream gas investment can be deducted against oil income.
Exemptions



  • nonprofit organizations, including religious and educational institutions where the profit is not derived from trade or business;
  • companies with pioneer status, which have a tax holiday of between three to five years;
  • statutory corporations established by states or local governments;
  • state purchasing authorities established to acquire any commodity for exports;
  • enterprises operating in an export processing zone will have a tax holiday of three years;
  • profits from export activities that are used for the purchase of raw materials, plant, equipment and spare parts;
  • three-year tax holiday for enterprises whose supplies are exclusively inputs to the manufacturing of products for exports;
  • three-year tax holiday for enterprises engaged in mining of solid minerals;
  • interest on public loans; and
  • dividends paid by unit trusts, between related companies and by companies with pioneer status.
General tax rates





30 percent of taxable income;

20 percent if engaged in manufacturing, mining, exports or agricultural production, and the turnover is N1 million or less for the first 3-5 years of operation.
Total profits are defined as assessable profits from all sources after adjusting for balancing charges, losses, investment, and capital allowances. Losses may be carried forward against future profits for four years.Tax must be deducted at source from construction-related activities at the rate of 5 percent from payments. The tax is credited against the final tax assessment





The profit of an export-oriented undertaking within or outside an Export Free Zone benefits from a 3 year tax holiday, provided that exports are not less than 75 percent of the turnover.
Profits of a non-resident corporation are taxable if attributable to operations carried out in Nigeria. This includes contracts awarded in Nigeria on surveys, deliveries, installation or construction (whether or not executed in Nigeria).Minimum tax



There is a minimum tax base, for turnover of N500,000 or less, of

  • 0.5 percent of gross profits, or
  • 0.5 percent of net assets, or
  • 0.25 percent of paid-up capital, or
  • 0.25 percent of turnover,
Dividends received from investments in export-oriented companies, from small companies in the manufacturing sectors in the first five years of operation, and from unit trusts are exempt. Dividends received by resident companies are recorded as franked income and are excluded from taxable income.whichever is the highest. For turnover of more than N500,000, the minimum tax on turnover up to N500,000 plus 0.125 percent of the turnover in excess of N500,000 is applied.
Deductible expenses



Deductions include expenditure incurred in the earning of income. Apart from the usual expenses, those include contributions to pension funds, Industrial Training Fund contributions, donations out of profits to a maximum of 10 percent of total profits, and reserves made out of profits for research and development, up to a maximum of 10 percent of total profits.
Depreciation allowances



Instead of a depreciation provision, there is a system of capital allowances for prescribed assets (effectively amounting to depreciation allowances). These allowances are calculated on a straight-line basis by spreading annual allowances over the specified period of write-off. The annual claim for capital allowances by companies (except manufacturing,
agro-allied and agricultural trade or business) may not exceed 66 2/3 percent of profits in any year.
The following rates apply for capital allowances:
(i) buildings10%
(ii) plant and machinery in
agricultural productionnil
(iii) other plant and machinery25%
(iv) ranching and plantation
expenditure50%
(v) motor vehicles25%
(vi) housing estate25%
(vii) furniture and fittings20%
Other allowances

(a) Initial allowance

An additional initial allowance is granted for certain expenditure items at the following rates:
(i) buildings15%
(ii) plant and machinery in
agricultural production95%
(iii) plant and machinery
replacing oil manufacturing95%
plant and machinery
(iv) other plant and machinery50%
(v) ranching and plantation
expenditure30%
(vi) motor vehicle expenditure50%
(vii) motor vehicles for public
transportation95%
(viii) housing estate
expenditure50%
(ix) furniture and fittings25%
(x) research and development95%
(xi) plantation equipment95%
Export-processing companies in an Export Processing Zone will be entitled to 100 percent first-year capital allowance on their qualifying expenditure.
Agro-allied, companies receive in addition an investment allowance of 10 percent.
(b) Investment allowance

An investment allowance at the rate of 10 percent will be given in addition to the annual and initial allowances where a company incurs expenditure on plant and machinery.
(c) Rural investment allowance

Graduated allowances at a rate of 5-100 percent for infrastructure expenditure in remote areas.
(d) Investment tax credit

There is an investment tax credit for research and development (20 percent), capital expenditure for the acquisition of tools (25 percent), locally manufactured machinery and equipment (15 percent), and for replacement of obsolete plant and machinery (15 percent).
Incentives to gas development
Any company engaged in gas utilization will benefit from a three-year tax holiday (renewable for an additional 2 years) or an additional investment allowance of 35 percent.
In addition, there are accelerated capital allowances following the tax holiday period (an annual allowance of 90 percent for plant and machinery), and an additional investment allowance of 15 percent.
1.2 Petroleum profit tax and royalties (Petroleum Profit Tax Act of 1959, as amended in 1979 and 1990)Annual tax on profits of companies engaged in exploration, drilling, and extraction of petroleum and natural gas. Income generated by a petroleum company not related to its petroleum operations is subject to the company income tax. Tax payments are spread over 12 monthly installments. In determining profits, exports of crude oil are valued at a posted price, which is determined by the government, while domestic sales are valued at the actual price.Deductible expenses



Deductions include any current expenditure (incl. interest) incurred in the earning of income, and royalties and duties to the federal government or local authorities.



Profits in the form of dividends derived from manufacturing companies in petrochemical and liquefied natural gas are tax exempt for the first 3-5 years.
In general, a tax rate of 85 percent applies. However, for new operations which have not yet commenced sales, a reduced rate of 65.75 percent applies until pre-production costs are fully amortized.



Under the 2000 MOU, producers are guaranteed a profit margin of US$2.5 or US$2.7 per barrel (depending on capital costs) when oil prices are between US$15-19 per barrel.
Projects operating under a Memorandum of Understanding (MOU) fiscal regime are subject to the fiscal terms specified in these. Currently, between 96 and 98 percent of total crude is produced under the MOU fiscal terms.









Projects operating under a Production Sharing Contract (PSC) regimes are subject to the fiscal terms specified in these contracts and the Deep Offshore and Inland Basin Production Sharing Contract Decree, 1999. The share of projects producing under PSCs is expected to increase over the medium term.
Depreciation allowances



Qualifying expenditure in respect of petroleum operations, benefit from the following petroleum investment allowances:
  • operations onshore, 5 percent;
  • operations in offshore areas of water depth up to 100 meters, 10 percent;
  • operations in offshore areas of water depth between 100 and 200 meters, 15 percent; and
  • operations on offshore areas of water depth beyond 200 meters, 20 percent.
The royalty rate is graduated as follows:
  • onshore operations, 20 percent;
  • offshore operations between 0-19 percent depending on water depth (the rate is gradually reduced by water depth)
Under the PSC fiscal terms, the profit oil after deduction of cost oil is split between the NNPC and the Contractor at a progressive split depending on cumulative production in the contract area. Under the 1993 Deep Water model the profit oil is split between the NNPC and the Contractor at progressive rates reaching a maximum of 60:40 percent whereas more recent PSC terms have split profit oil at the progressive rates reaching 70:30 percent.
In addition, the following annual capital allowances are granted for five years:
1st year—20 percent
2nd year—20 percent
3rd year—20 percent
4th year—20 percent
5th year—19 percent
The capital allowances are restricted so that tax payable is not less than 15 percent of the tax that would have been payable without any allowances.Royalty oil is a first call on production at variable rates between 0-12 percent depending on location (deep water blocks in excess of 1000 meters water depth face a zero percent royalty rate).
Other allowances



Qualifying capital expenditure incurred for the purpose of petroleum operations carried out under the terms of a PSC benefit from a 50 percent investment tax credit for all PSCs executed before July 1998, and a 50 percent investment tax allowance for PSCs executed after July 1998).
Petroleum profit tax is applied at a rate of 50 percent for projects operating under PSC terms.
The following incentives are provided to the gas industry:
  • All development gas projects, including those engaged in power generation, liquid plants, fertilizer plants, gas transmission, and distribution pipelines, are to be taxed under the company income tax instead of the petroleum profit tax;
  • Capital investment for associated and non-associated gas may be treated as part of the capital investment for oil development (and therefore be deductible at the 85 percent PPT rate).
1.3. Personal Income Tax (Decree no. 104 of 1993)Taxable personsGeneral tax rates
For resident individuals, taxable income include both domestically and foreign sourced income. Individuals pay tax to the state of residence. However, persons employed in the armed forces, the foreign service, residents of the Federal Capital Territory, and residents outside Nigeria who derives income in Nigeria pay taxes to the Federal Board of Inland Revenue (FBIR).



Non-residents are liable to tax on income from sources in Nigeria. Only the personal allowance is available to non-residents.
Deductible expenses

The following deductions and allowances are provided:
  • personal allowance of N 5,000, plus 20 percent of earned income;
  • N 2,500 per annum per unmarried child (maximum of 4 children);
  • N 2,000 each for two dependent relatives;
  • for disabled persons, N 3,000 or 20 percent of his/her earned income, whichever is higher; and
  • alimony deductions, not exceeding N 1,000.
Annual incomeIn percent
0 – 30,0005
30,000 – 60,00010
60,000 – 110,00015
110,000 – 160,00020
Over 160,00025
A minimum tax of 0.5 percent of total income applies.
For employment sourced income, tax is deducted at source and is paid under the PAYE system each month.





Concept of income



Progressive tax on income arrived at after deducting personal allowances and exempted categories of income. Taxes on rents, dividends, royalties, and interest are withheld at source at a rate of 2.5-10 percent depending on the activity. For nonresidents, the withholding constitutes the final tax.



Income includes:

(i) gains from trade, profession or vocation

(ii) salary, wages and other benefits

(iii) property gains and profits

(iv) dividends and interest

(v) pension or annuity

(vi) any other personal gain or profit



Benefits in kind are included in taxable income, with the exception of reimbursement of expenses, medical costs, and cost of passage to or from Nigeria.



Exempted salary income include:

(a) housing allowance paid by the employer not exceeding N 150,000 per year;

(b) transport allowance not exceeding N 20,000 per year;

(c) meal subsidy not exceeding N 5,000 per year;

(d) utility allowance of N 10,000 per year;

(e) entertainment allowance of N 6,000 per year; and

(f) leave grant not exceeding 10 percent of basic salary.
Exemptions

The following exemptions apply to individuals:
  • official emoluments of the President and Vice President, and State Governors and Deputy Governors;
  • investment income of any pension fund;
  • death gratuity and compensation for death, or injuries;
  • retirement gratuities;
  • gratuities paid to public officers;
  • compensation for loss of office;
  • proceeds of foreign earnings that are repatriated into Nigeria in convertible currencies, to which concessional tax rates apply;
  • all salaries, dividends, interest, rent, royalties, fees, commissions, etc., earned from abroad and brought into Nigeria by Nigerian residents, provided the income is received in convertible currency that is paid into a domiciliary account in a bank approved by the government;
  • interest paid by the Nigerian Post Office Savings Bank or in respect of Nigerian Savings Certificates and on specific government bonds; and
  • income earned by non-residents under a technical assistance agreement.
  • all life assurance premiums subject to N5,000 limit;
  • interest on loans for owner-occupied house;
  • contributions to pension, provident, or other retirement benefit funds;
  • losses incurred in trade or business, profession, or vocations;
  • equity shareholding in company floated exclusively for research and development on 25 percent of chargeable income in year of assessment; and
  • dividends for three years if (a) company is incorporated in Nigeria, (b) equity participation was imported into the country between January 1, 1987 and December 31, 1992, and (c) the recipient’s equity in company constitutes at least 10 percent of the company’s share capital.


Dividend income for resident individuals is grossed up by the withholding tax and the grossed-up amount is subject to tax as other income. The withholding tax is credited against the personal income tax.



Capital allowances



Personal income taxpayers can also benefit from capital allowances, albeit at different rates than corporate taxpayers:
InitialAnnual
Buildings510
Industrial buildings1510
Mining expenditure2010
Plant and machinery2010
Plant for manuf., agric.25
Furniture and fittings1510
Motor vehicles2520
Public motor vehicles30
Plantation equipment2033.33
Housing estate2010
Ranching and plantat.3015
Research and develop.2512.5
1.3 Taxation of capital gains

(Capital Gains Tax Act of 1967)
A tax levied on capital gains by individuals or companies accruing and derived from the sale, lease, or transfer of property rights in chargeable assets in or outside of Nigeria. Capital losses cannot be offset against capital gains. However, where two or more assets are disposed on in a single transaction, they are treated as a single disposal. Chargeable assets consist of loans, buildings, and movable assets (such as motor vehicles).Exempted institutions include charitable, religious, and educational organizations, pension funds, and trade unions, provided that the gain is not derived in connection with trade or business carried out by the institution. Exempted items include the main private residence of an individual, life insurance policies, Nigerian government securities, sale of stocks and shares, and unit trusts.10 percent
2. Other payroll taxes
2.1 Industrial Training levyAn obligatory contribution to the Industrial Training Fund by employers in industry and commerce.Employers with fewer than 10 employees are exempt.1 percent of annual payroll.
2.2 Contribution to the Nigeria Social Insurance Trust Fund (NSITF)An obligatory contribution to the NSITF.Employers with fewer than 5 employees are exempt.The current rate of contribution is 10 percent of a member’s gross insurable earning, subject to a maximum of N528,000 per annum. The member is expected to contribute 3.5 percent while the employer contributes 6.5 percent.
2.3 Education taxAn obligatory contribution to the Education Fund.Same exemptions apply as for company income tax.2 percent of assessable profits
3. Taxes on goods and services
3.1 Value added tax (VAT)

Decree no. 102 of 1993
Taxable transactions



VAT is payable on the supply of goods and services provided in Nigeria by a taxable person and on the importation of goods by any person, irrespective of whether they are taxable persons, unless explicitly exempted.



The deduction of input tax against output tax charged on sales is limited to the tax on goods purchased or imported directly for resale or as an input for production. However, input tax on (i) any overhead, service and general administration; and (ii) any capital item and asset is not allowed as a deduction from output tax.



The legislation does not specify a turnover threshold.
Exemptions



Exempted items (with no credit for VAT paid) include the following goods:
  • exported goods;
  • medical and pharmaceutical products;
  • basic food items—beans, yam tubers, cassava, maize, millet, rice, milk, meat, fish and infant food;
  • books and educational materials, including exercise books, laboratory equipment, school fees, PTA levies, etc.;
  • baby products, including feeding bottles, carriages, clothes, napkins, baby cream and powder, soap, toys, and baby dresses;
  • plant and machinery imported for use in an EPZ;
  • plant and machinery for gas utilization in downstream petroleum operations;
  • locally produced fertilizer; and
  • agricultural equipment and products, fertilizer, and veterinary medicine.
Tax rates



There is only one statutory rate of 5 percent.
The following services are exempt:
  • medical services;
  • services by community banks, peoples’ banks, and mortgage institutions;
  • exported services; and
  • plays and performances conducted by educational institutions as part of learning.
Educational goods and services incidental to education for an educational institution are also exempt.
Input tax on the following is not allowed as a deduction from output tax:

(a) on overhead, service, and general administration of any business which otherwise can be expended through the income tax; and

(b) on any item and asset which is to be capitalized along with cost of the capital asset.
3.2 Excise dutiesTax base

Excise duties are levied at ad valorem rates on selected goods manufactured or produced in Nigeria.
Tax rate
Excisable goodsIn percent
Beer20
Other alcoholic beverages40
Cigarettes and other40
tobacco products
4. Taxes on international transactions 4.1 Customs duties
Customs Tariff Consolidation Decree, 1995 as amended 1996-2002.Customs duties are levied on goods imported into Nigeria calculated on the c.i.f. value. Nigeria uses the Harmonized Tariff System.



Other levies on imports are:



Port surcharge - 7 percent of duty payable;

National automotive council - 2 percent tax on vehicles and parts;

Sugar levy of 5 percent of sugar imports;

ECOWAS community levy of 0.5 percent of c.i.f. value of imports; and Administrative charge of 1 percent on f.o.b. value of imports for pre-shipment inspection.
Exemptions include the following:
  • aircraft equipment used by foreign airlines;
  • films of educational, scientific, or cultural character imported by the United Nations or its agencies or an approved educational or scientific organization;
  • fuel, lubricants, etc., used exclusively for operation of military equipment or aircraft;
  • government imports by internationally recognized nonprofit organizations or by the Head of State, consular offices, or under diplomatic privilege, or for other technical assistance purposes;
  • life-saving appliances;
  • military hardware and uniforms imported for use of the Nigerian Army, Navy or Air Force; and,
  • arms and ammunition imported by the Nigerian Police Force.




There are various incentive schemes in place including a duty drawback scheme and a so-called Export Expansion Grant. The latter provide tax vouchers for 20 percent of non-traditional exports that can be used to offset other duty or tax payments, and is administered by the Ministry of Commerce.
A new tariff structure, which includes a narrower and lower range of customs duty rates, was effected in March 1995. The trade weighted statutory average tariff us 17.4 percent in 2002 (weighted by 2002 imports). The peak tariff was increased from 100 to 150 percent in 2002.
Rates (percent)
Raw materials2.5-25
Components5-50
Clothing55-75
Luxury consumer goods
(except automobiles)30-50
Paper products5-100
Vehicles5-50
Soy meal, soy cake,
and groundnut cake35
Refined petroleum
products10
Rice75
Wheat15
Machin. and elect, equip.5-20
Food5-100
Cigarettes and tobacco150
Alcoholic beverages100
There are various restrictions and/or bans including on vehicles older than 5 years, poultry, textile fabrics, used refrigerators and fridges, and ceramic tiles and products.
Duty concessions operate for specific manufacturing sectors, e.g., pharmaceuticals, telecommunications and specific ports, as well as for plants and machineries under chapter 84 of the Customs Tariff. Special duty concessions are granted to specific companies, e.g., tobacco companies.
5. Other taxes 3.1 Stamp duty

Stamp Duty Act
Stamp duty is levied on a number of instruments, including agreements, bills of exchange, leases and licenses, mortgages, and insurance policies.No stamp duty is payable on instruments executed by the government and on all forms of securities.Rates of stamp duty vary depending on the nature of the instrument and the value thereof.
Sources: Ministry of Finance, various tax legislation; Nigerian Tax Companion, 2001; and International Bureau of Fiscal Documentation.
Sources: Ministry of Finance, various tax legislation; Nigerian Tax Companion, 2001; and International Bureau of Fiscal Documentation.
66Prepared by Lynge Nielsen.
67Trade and Openness Policies in Nigeria, Selected Issues Paper, Country Report 03/50, IMF.
68The low level of non-oil/gas exports also suggests that Nigeria has not benefited appreciably from the plethora of preferential market access schemes provided by industrial countries.
69In addition, importers are charged a port development levy of 7 percent of duty payable (equivalent to 2 percent of the simple average tariff), a comprehensive import supervision scheme charge of 1 percent (for preshipment inspection), and an ECOWAS community levy of 0.5 percent. Product-specific levies a 2 percent tax on vehicles and parts, a 10 percent tax on sugar, and a 10 percent levy on rice imports.
70The ban was introduced in 2001. At the same time, imports of all vehicles across land borders were prohibited.
71Exemptions require the written approval of the president.
72Nigeria is the world’s largest cassava producer. Bread can be baked using a mixture of cassava and wheat flour, and the Ministry of Agriculture is encouraging local bread producers to use a flour mix containing 10 percent cassava.
73Nigeria notified the WTO in 1999 that the ban on barites and bentonites would be lifted in 2000, but as of end-2004 the ban was still in effect.
74The change from export-processing zones to free trade zones essentially consisted in abrogating the rule that companies located in the zone should export at least 75 percent of their production. (continued)
75Total exports of goods and services less oil exports for countries classified as fuel exporters in World Economic Outlook (WEO). Among 178 countries for which data are available, only Burundi, Ethiopia, and Rwanda had lower non-oil exports than Nigeria.
77Given the dominant role of oil-related revenues, import duties are not a significant source of fiscal revenues; it only amounted to 6 percent of total revenues in 2004. The negative revenue impact from the tariff reform is mitigated by an expected strong growth in recorded imports resulting partly from a lowering of unrecorded imports.
78The Trade Liberalization Programme was introduced in 1990 with the aim of gradually liberalizing intra-ECOWAS trade over 15 years. The program provides for duty- and quota-free intra-ECOWAS trade in unprocessed goods and traditional handicrafts, with industrial goods benefiting from tariff reductions. Implementation is behind schedule.

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