A Critical Analysis Of The Framework For Investor Protection In Nigeria - TheNigeriaLawyer (2024)

By Oyetola Muyiwa Atoyebi, SAN

INTRODUCTION

Investors, foreign or local, are integral to the economic development of any nation and adequate measures should be put in place to protect their interests. This highlights the importance of understanding the framework for investor protection in Nigeria, as investors are an important component of the economic development of a country like Nigeria. This is because Nigeria relies heavily on investments, and foreign investors make up the majority of investment in its economy, of which their protection should be ensured to encourage increased investments.

Furthermore, the principle of International Investment Law provides that every investor must be protected from oppression or unfair treatment in the host country. To this effect, various countries are subject to varying treaties and domestic legislations, of which all must conform to this minimum standard of investor protection recognized internationally.

This article will make a critical analysis of the legal and institutional framework for investor protection in Nigeria.

WHO IS AN INVESTOR?

An investor is anyone who gives resources in exchange for interest or equity with the view of making profit or receiving returns.

THE LEGAL FRAMEWORK FOR INVESTOR PROTECTION IN NIGERIA

1. THE 1999 CONSTITUTION OF THE FEDERAL REPUBLIC OF NIGERIA

The Constitution is the grundnorm and the fons et origo of all laws in the Federal Republic of Nigeria. The protection guaranteed by the Constitution, particularly Chapter 4, unarguably extends to investors and they are therefore entitled to equal, fair and humane treatment. It can be agreed that the guarantee of the welfare of an investor, especially one engaging in Foreign Direct Investment which might require his/her physical presence, is not just essential but mandatory.

The Constitutional safeguards are geared towards ensuring that investors, especially those domiciled in Nigeria or who frequently visit the country, feel safe enough to conduct business. These include the right to dignity of the human person, freedom from discrimination, right to form assembly, freedom of expression and freedom of speech. Notable amongst these is also the right to own property[1].

2. NIGERIA INVESTMENT PROMOTION COMMISSION ACT (NIPC ACT) CAP N117 LFN 2004

This Act provides extensive protection for investors in Nigeria. It provides that foreign investors are allowed to freely invest in the economy either through Foreign Direct Investment or Foreign Portfolio Investment[2].

In an effort to protect investors and promote investment, shares can be made in convertible currency and the returns on these shares are made free of charges, also in the convertible currency where the investor so requires[3].

The Act further guarantees freedom from expropriation or nationalization. This is an essential protection as it ensures that the assets of an investor cannot be converted by the government into a public-owned property and by extension, precludes the government from assuming ownership of same.

An extension of this provision is that the investor cannot be mandated to surrender ownership of his assets to any governmental agency except where such request is made by the Federal government for overriding public interest and adequate compensation is made without unnecessary delay.

3. THE ARBITRATION AND MEDIATION ACT 2023

This is another legal framework for the protection of investors in Nigeria. Investors, particularly foreign investors, are granted the freedom to decide which mode of settlement of dispute should be explored as opposed to litigation which can be by arbitration or mediation. It goes further to provide a system that gives a unified method of arbitration and mediation arising from disputes that are commercial or transactional in nature. It further admits the enforcement of foreign arbitral award subject to the provisions of the Act.

4. FOREIGN EXCHANGE (MONITORING AND MISCELLANEOUS PROVISIONS) ACT CAP. F34 LFN 2004

This Act authorizes investment in foreign currency provided it is through an authorized dealer. The provision of authorized dealers and licensing of same is geared towards ensuring that investors do not get swindled. There is also the additional requirement of the issuance of a Capital Importation certificate to further authenticate the transaction.

The Act further guarantees the repatriation of profit in the same currency in relation to dividend or even the capital itself. This repatriation is 100% repatriation guarantee available at any time[4].

5. THE IMMIGRATION REGULATION 2017

The regulation introduces the issuance of Investor Visa which is open to all investors who invest within the threshold provided. The visa is valid for five years and can subsequently be renewed. This visa grants right of entry and domicile to the holder[5].

6. DOUBLE TAXATION AGREEMENTS

These are international treaties or legal arrangements that Nigeria is a signatory to. These agreements allow income and capital gains to be precluded from double taxation. A DTA is a form of tax relief to ensure that investors are protected from double taxation relating to their capital gains. However, the investor must be from a state party to the treaty.

7. THE ECOWAS TRADE LIBERATION SCHEME

Nigeria is a signatory to this treaty and is regulated by the contents and provisions of the said treaty. This treaty ensures the free movement of goods within the borders of West African member states, including Nigeria and exclusion from payment of custom duties on goods produced by or within the boundaries of member states.

8. INTERNATIONAL CONVENTIONS

Nigeria is a signatory to a host of International Conventions for the protection of investors within member states. Some of them include the Convention for Settlement of Investment Disputes, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, etc. These Conventions provide protection for investors in the event of a dispute arising from the investment or related commercial transactions, especially when the disputes involve the government as the neutrality of the dispute resolution must not be in question.

INSTITUTIONAL FRAMEWORK FOR THE PROTECTION OF INVESTORS

1. The Nigeria Investment Promotion Commission: This is the body responsible for the regulation of investment in Nigeria, with a major focus on foreign investment. The Commission is saddled with the responsibility of promoting investment in the Nigerian economy and formulating policies necessary to ensure a conducive environment for the promotion of investment in Nigeria.
2. The Central Bank of Nigeria: Being the apex financial body in Nigeria, it is responsible for monetary and fiscal policies as well as the management of foreign exchange in Nigeria. They are also responsible for the issuance of capital importation certificates, after the importation of capital through a dealer authorized by it.
3. National Office for Technology Acquisition and Promotion: Investments regarding foreign technology are regulated by this agency. They review contracts that relate to foreign technology and this is done not only with the aim of protecting investors but also ensuring that the investment is not a hoax.
4. Securities Exchange Commission: Created and regulated by the Investment and Securities Act of 2007, the commission is saddled with the responsibility of monitoring investments and keeping a register of Foreign Portfolio Investment. This ensures that investors who invest in the economy through portfolio investment are properly recorded.

CONCLUSION

Nigeria has various domestic safety measures for the protection of investors in Nigeria all geared towards encouraging investment into the Country. These measures have been argued over the years to be inadequate, mainly owing to their lackadaisical implementation by institutions and agencies saddled with investor protection.

The domestic framework and the various international treaties to which Nigeria is signatory have provided an adequate foundation which appear to be fairly effective. However, without the full cooperation of these agencies, the laws are themselves crippled.

SNIPPET: It is pertinent to adequately understand the framework for the protection of investors in Nigeria as they form a key component of the economic development of a country such as Nigeria, which places heavy reliance on investment.

KEYWORDS:

investor protection, Nigerian economy, regulatory framework for investor protection, double taxation agreements.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN

Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of Corporate and Commercial Practice and this has seen him advise and represent his vast clientele in a myriad of high-level transactions. He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Tobenna Mogbo

Tobenna is a member of the Dispute Resolution Team at OMAPLEX Law Firm. He also holds commendable legal expertise in Commercial Practice.

He can be reached at tobenna.mogbo@omaplex.com.ng

[1] Section 43 of the Constitution of the Federal Republic of Nigeria 1999 (as amended)

[2] Section 18 of the NIPC Act.

[3] Section 21 of the NIPC Act.

[4] Section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act

[5] Section 5(7) of the Immigration Regulation 2017; New Visa Policy 2020.