Treasury Today Country Profiles in association with Citi

Doing business in Nigeria

Nigeria is a country undergoing economic and financial reform. Looking to reduce its dependence on oil production, Nigeria is aiming to attract foreign direct investment through initiatives such as the creation of an international finance centre. This Country Profile looks at the requirements for doing business in Nigeria, as well as the country’s treasury landscape.

Map showing Nigeria

Key facts

Geography and society
Population growth rate:
Capital city:
Time zone:
Land boundaries:
Benin (773 km), Niger (1497 km), Chad (87 km) and Cameroon (1690 km)
853 km
naira (NGN)
GDP per capita:
FX regime:
managed float
Member of:
Fiscal year:
calendar year
Financial capital:
Government type:
Federal republic
Head of state:
President Umaru Yar’Adua
Vice President:
Goodluck Jonathan
Country credit rating
Trading partners
Top import partners:
China, The Netherlands, US, South Korea, UK
Top export destinations:
US, Brazil, Spain

One of Africa’s leading economies

With the largest population of any African country, Nigeria is the second major economy in sub-Saharan Africa and one of the world’s principal producers of crude oil. In 2007, when oil accounted for around 90% of the country’s export earnings and 78% of total gross revenue, Nigeria was producing oil at a rate of 2.3m barrels per day.

In the first half of 2008, Nigeria’s oil production dropped to 2.02m barrels per day, falling subsequently to below 2m, due to a large extent to unrest in the Niger Delta, Nigeria’s chief oil-producing region.

The country has undertaken numerous initiatives over the past decade to lessen the economy’s dependence on oil-producing sectors, as well as Nigeria’s international debt.

In 2000, the country entered into a $1 billion credit deal with the IMF and a debt restructuring programme with the Paris Club – a group of 19 international lenders, including the UK, German and Russian governments – to which Nigeria owed a total of $37 billion.

In 2005 debt relief was granted by the Paris Club and the country had almost $18m of debts written off in exchange for a payment of approximately $12.4m. The debt repayment was part of a plan to restructure the country’s economy. Nigeria has continued to work towards this objective in conjunction with the IMF.

The Financial Services Strategy (FSS 2020) is a proposal outlining the transformation of Nigeria into a major financial centre, and one of the top 20 economic powers of the world, by the year 2020.

The strategy was borne out of the identification of Nigeria by Goldman Sachs as one of the N-11, the next eleven breakthrough economies after the BRICs (Brazil, Russia, India and China), as well as the need for economic reform.

The main objectives of the strategy include strengthening domestic financial markets, enhancing integration with external financial markets and building an international finance centre.

Under this plan the country intends to attract $600 billion in foreign direct investment (FDI) over the next decade – compared to the estimated annual $9 billion that it attracts today.

An instrumental figure in the country’s financial reform has been Lamido Sanusi, who was appointed as the new governor of the Central Bank of Nigeria in June 2009. Vowing to crack down on banks with poor lending records, Sanusi began conducting an audit of all 24 of Nigeria’s banks.

So far five banks have failed Sanusi’s stress tests and the top executives of five troubled Nigerian banks have been sacked. The five banks in question were close to insolvency when the Central Bank of Nigeria stepped in, injecting capital in the form of a NGN 400 billion ($2.6 billion) rescue package in order to help the struggling institutions.

The move is a positive sign that Nigeria is actively managing its economy and addressing the increased systemic risk in troubled times.

  • The banking sector is regulated by the Central Bank of Nigeria (CBN), which was established in 1959. The four key roles of the CBN are: to preserve the value of Nigeria’s currency through the maintenance of the country’s external reserves, to safeguard Nigeria’s financial stability, to offer advice to the federal government on financial matters, and to operate as a lender of last resort to Nigerian banks.

  • In terms of central bank reporting requirements, banks are obliged by the CBN to report on matters relating to capital inflow and foreign exchange, as well as net open positions and interbank purchases and sales.

  • Other regulatory bodies include the Federal Ministry of Finance (FMF), the Nigeria Deposit Insurance Corporation (NDIC), the Securities and Exchange Commission (SEC), and the National Insurance Commission (NAICOM).

  • Banks must pay an insurance premium of 0.9375% of their deposit taking liabilities to the NDIC. The maximum claim a depositor may make in the event of a bank failure has recently been reviewed upward from NGN 50,000 to NGN 200,000.

  • Any new business must be registered with the Corporate Affairs Commission (CAC), which regulates the formation and management of companies in Nigeria, and the Nigerian Investment Promotion Commission (NIPC), which co-ordinates and monitors all investments in the country. The NIPC Decree of 1995 allows total foreign ownership of firms outside the oil sector and industries related to national security.

  • Foreign exchange flows into the country are regulated by means of the Certificate of Capital Importation (CCI), which must be obtained when importing funds for investment purposes. This document, issued by the bank receiving the funds, gives the investor the right eventually to repatriate those funds that have been imported into the country. All foreign exchange purchased must be for eligible transactions. For transactions exceeding $10,000, supporting documentation must be presented as evidence of eligibility.

  • Accounting standards in Nigeria are overseen by the Nigerian Accounting Standards Board (NASB). While most companies listed on the Nigerian Stock Exchange (NSE) conform to local accounting standards, some have now adopted IFRS to enable qualified disclosures.

  • Money laundering policies are enforced by the Economic and Financial Crimes Committee (EFCC). The Nigerian Financial Intelligence Unit (NFIU) is the branch of the EFCC that specifically handles crimes in the financial sector.

Taxation framework

  • The standard rate of corporation tax is 30%. This is the same for all entities in Nigeria, regardless of turnover.

  • Companies granted ‘pioneer status’ can benefit from a five-year tax exemption (seven years in economically disadvantaged areas). Pioneer status must be applied for within the first year of commencement of business. To qualify, a joint venture or foreign-owned company must have sustained a capital expenditure of at least NGN 5m. This figure must be at least NGN 150,000 for Nigerian companies.

  • Withholding tax (WHT) is deducted at a rate of 10% on dividends and interest. Interest on savings accounts is exempt, providing the deposit amount is less than NGN 50,000. A withholding tax of 10% is levied on royalty income.

  • The standard rate of VAT is 5%, although this is less for certain goods and services.

  • Nigeria has several double taxation treaties in place which offer the countries involved a 25% reduction in standard WHT rates.

  • By way of a tax incentive for investors, Nigeria has export processing zones, regulated by the Nigeria Export Processing Zones Authority (NEPZA), where approved enterprises operating within these zones are exempt from all federal, state and local government taxes, rates, customs duties and levies. More than 20 zones are currently either operational or under construction.

Treasury activities

Local banking sector

Prior to 2005, Nigeria’s financial system comprised 89 banks with 3,382 branches. As a result of the subsequent regulatory and market driven consolidation, however, there are currently 24 licensed banks in Nigeria. These institutions include:

  • Discount houses.

    There are currently five discount houses in Nigeria. The concept was launched by the CBN in the 1990s, on the premise that these discount houses were to act as intermediaries between the CBN and other financial institutions, channeling excess liquidity by facilitating the trading of government short-term securities, such as treasury bills.

  • Commercial and merchant banks.

    Commercial banks accept deposits, approve loans and manage the payment and settlement system. Merchant banks provide medium and long-term loan financing, equipment leasing, loan syndication and debt factoring.

  • Community banks.

    The National Board for Community Banks handles applications for the creation of community banks, the first of which was set up in 1990. Community banks are self-sufficient financial institutions that are owned and run by the community to which they provide financial services.

  • Development Finance Institutions (DFIs).

    DFIs were set up to encourage the development of specific sectors of the economy. Among these are the Bank of Industry, the Nigerian Agricultural Co-operative and Rural Development Bank, the Education Bank and the Urban Development Bank.

Case study

Nigerian Bottling Company (NBC) is the market-leading soft drinks manufacturer in Nigeria.

The challenge

NBC, a subsidiary of Coca-Cola Hellenic, the producer and distributor of Coca-Cola beverages worldwide, has a vast network of distributors across Nigeria. The company wanted a convenient, reliable and secure way of collecting receivables from its customers and an efficient method of managing its accounts receivables.

NBC also wanted to receive credit from distributors immediately and the ability to view distributors’ payments in real time. In order to achieve this, the company required reliable web-based access to detailed account information for control and reconciliation, together with real-time notification for credits made into its accounts.

The solution

Citi created two integrated solutions – determined by the size of distributors – to meet NBC’s requirement to eliminate cash payments and give it an effective accounts receivables process.

For large distributors, a mobile POS terminal supported by Interswitch was proposed. This solution offers the same certainty as cash payments, with sales reflected in NBC’s operating account immediately following a transaction between a salesman and merchant.

For around 150 smaller merchants that do not have the volume of business to warrant the POS terminal-based system, an innovative alternative was proposed. Working with three correspondent banks, which have over 600 branches nationwide, smaller merchants are issued with cheques that are pre-filled with NBC’s payment details. These are collected by NBC’s deliveryman. This solution gives NBC the security of payment it needs because cheques cannot be issued on accounts with insufficient funds. Moreover, by using a book transfer between the correspondent banks and Citi, NBC receives the value of cheques on a same-day basis.

The result

The mobile POS terminal solution for larger distributors, which have been designated key account buyers, was implemented in 2008. The solution for smaller merchants using correspondent banks and cheques is being progressively rolled out with the ultimate objective of completing the implementation across NBC’s 13 plants in Nigeria, each of which manages a local dealer network.

NBC has gained visibility of its payments and balances through Citi’s two-part solution. Through Citi’s partnership with local banks, many small merchants – previously among Nigeria’s 40m unbanked people – now have the ability to make low-value payments.


The main payment channels in Nigeria are as follows:

  • Cash.

    This is still the dominant mode of payment.

  • Cheques.

    A common form of non-cash payment in Nigeria, usage of which has increased since anti-fraud measures were introduced in 2006 outlining imprisonment and/or fines for issuers of dishonoured cheques.

  • Payment cards.

    Payment cards suffered at their initial introduction, but the CBN’s guidelines on e-banking in 2003 encouraged further developments in e-banking, thus facilitating the wider use of payment cards. Types of cards available include debit cards, credit cards, ATM cards, smartcards and dollar denominated debit and credit cards. These foreign currency cards allow Nigerians to make payments in over 210 countries around the world.

  • Electronic Funds Transfer.

    Automated processing and settlement of fund transfer instructions is undertaken by the NIBSS (see below).

Clearing and settlement

The Nigerian Automated Clearing System (NACS) commenced operation in 2002. It was established by the CBN and operates within the infrastructure of the Nigeria Inter-Bank Settlement System (NIBSS). This system enables the transfer of funds electronically between NACS members. Once full automation is completed and NACS is activated nationwide, it is anticipated that the current T+3 clearing cycle for local and upcountry transfers will be significantly reduced.

The Inter-Bank Fund Transfer System (IBFT) allows banks and financial institutions to settle funds on a deferred net basis. Payments are then aligned with international best practice through the Real Time Gross Settlement System (RTGS). The CBN RTGS (Central Bank of Nigeria Inter-bank Fund Transfer – CIFT) System ensures safe and secure co-operation with Nigeria’s other payment and settlement systems, allowing continuous and immediate payment settlement in all securities transactions.

Different payment types are processed in the following manner:

Payment type Payment instrument Supporting infrastructure
  • Cheque

  • Other paper-based instrument

Non-NACS clearinghouse
NACS clearinghouse
Bulk electronic
  • Electronic Fund Transfers

  • Other electronic funds from EFTPOS (electronic funds transfer at point of sale) and ATM

High value
  • Inter-bank fund transfers

  • High-value time sensitive third-party


Cash management

Foreign currency current accounts are available to both Nigerian residents and non-residents, and non-resident local currency accounts are permitted in line with CBN foreign exchange regulations. While the large international banks offer domestic physical cash pooling, cross-border cash pooling does not take place in Nigeria, due to exchange control regulations. Notional pooling is permitted for local currency accounts, subject to CBN regulations. Zero balancing services are offered by those banks with networks operating in real-time.

Short-term investments

Although current accounts do pay interest in Nigeria, banks also offer business savings accounts which allow corporates to accrue interest at a higher rate. Term deposits are also available, usually over a period of 30, 60, 90 or 180 days. In addition to bank deposits, investment opportunities in Nigeria take the form of money market funds, treasury bills, government fixed income bonds and the stock market. Money market instruments may take the form of commercial paper, negotiable certificates of deposits, bankers’ acceptances and treasury bills. Foreigners are not permitted to invest in treasury bills that possess a maturity of less than one year.

Government securities are traded through treasury bills, which have a short-term tenure of 91-365 days, and through treasury bonds and Federal Government of Nigeria (FGN) bonds, both of which are more medium to long-term investments, with a tenure of between three and 20 years. Transactions are only possible through an account with the CBN. Equities, government debt and corporate bonds are traded through the Nigerian Stock Exchange (NSE) which was established in 1960 and now lists over 200 companies with a market capital of $35 billion. Transactions are conducted through the Central Securities Clearing System (CSCS), a subsidiary of the NSE, which was established to allow the automation of transactions in real time in a T+3 transaction cycle. Settlement is completed though means of the NIBSS.

Key websites

Federal Ministry of Finance:
Central Bank of Nigeria:
Securities and Exchange Commission
Federal Inland Revenue Service:
Nigeria Deposit Insurance Corporation:
The Chartered Institute of Taxation of Nigeria:
Nigerian Stock Exchange:

Citi’s capabilities in Nigeria

Citi celebrates its 25th anniversary of operations in Nigeria in 2009. Formerly operating under the name Nigeria International Bank Limited, it was renamed Citibank Nigeria Limited in 2008. Citi offers its clients a broad range of services in the areas of treasury, cash management, investments, loans, trade, buyer and supplier financing, capital markets, risk management and corporate finance, from 13 branches across the country.

In August 2008 Citi unveiled its Direct Custody and Clearing Services (DCC) in Nigeria. The DCC business is designed to enable transactions for investors looking to do business in Nigeria. Additional products offered by Citi include payment solutions to meet a variety of local and international payment needs, and a range of receivables products and liquidity management solutions which enable clients to make the most of the return on cash balances in local foreign currency accounts.

Citi also offers its CitiDirect® online banking platform in Nigeria. This is the primary platform used by clients to administer cash management products and access services both locally and globally.

Contact details:
Iheyinwa Ugenyi
Sales Head Treasury & Trade Solutions
+234 1 279 8459
Nigeria, West & Central Africa