Treasury Today Country Profiles in association with Citi

Doing business in Nigeria

Oil-rich Nigeria is sub-Saharan Africa’s second largest economy, with daily oil production of around 2.1m barrels per day in 2010. Despite the global financial crisis and recession, the Nigerian economy has fared well, posting GDP growth of 8.1% in 2010, making Nigeria one of the world’s fastest growing countries today. The country’s medium-term prospects are also bright, with GDP predicted to grow by 6.9% and 6.7% in 2011 and 2012 respectively.

Close-up of Nigerian flag

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:
History and politics
Government type:
Federal republic
Head of state:
Goodluck Jonathan
Vice President:
Mohammed Namadi Sambo
Country credit rating
  • B+ (Standard & Poor’s)
Trading partners
Top import partners:
China, US, Netherlands, UK, South Korea and France
Top export destinations:
US, India, Brazil, Spain and France

Establishing a prime financial hub

Economic reforms are delivering strong fundamentals; nevertheless, the country still has numerous longer-term overhauls to make. For example, civil unrest in the Niger Delta affected oil production levels and the global recession decreased the amount of exports from the country, which forced the Nigerian government to reflect again on its economic structure. The government’s aim is therefore to implement strategic policies to diversify Nigeria’s domestic production and to reduce the country’s dependence on oil going forward.

As such, Nigeria’s oil and gas industry is set to be completely restructured under the Petroleum Industry Bill (PIB) which has been with parliament since 2008. Nigerian Oil Minister Diezani Alison-Madueke hopes to see the PIB passed before the end of 2011. The expectation is that the PIB will deconstruct historic oil partnerships with funding issues and replace them with five new profit-making bodies. Maintaining peace and stability in the Niger Delta are also key aims of the PIB.

The country’s power sector is an additional target for ongoing reform: at the opening of the 22nd Enugu International Trade Fair in March 2011, President Goodluck Jonathan backed up his decision to establish the Presidential Task Force on power when he told the Nigerian nation that the power sector reform, with potential substantial private investment, was a high priority. He said: “Our focus as a nation should be geared towards the development of a new agenda, aimed at promoting sustainable growth and development in the various sectors of the economy.”

Elsewhere, the telecoms and agricultural sectors have been significant drivers of growth for Nigeria in recent years, helped by large amounts of investment from the government and foreign investors. Indeed, between 2005 and 2010, the amount of foreign direct investment (FDI) in telecommunications rose from $7.5 billion to over $18 billion. An increased number of telephone lines has further improved the business environment in the country, attracting even more investment. The agriculture sector has been largely helped by the Central Bank of Nigeria (CBN) and the Federal Ministry of Agriculture and Rural Development as they established a Commercial Agriculture Credit Scheme (CACS) in 2009/10 which made NGN200 billion available at low interest rates to farmers and agricultural practitioners.

In the banking sector, Lamido Sanusi, Governor of the CBN since June 2009, has been resolute in his aim to establish a superior financial hub in Nigeria to encourage further economic growth. Following the financial stress tests introduced by Sanusi in 2009, eight Nigerian banks were bailed out with an injection of circa NGN627 billion, while the remaining two were forced to recapitalise to meet the new standards. Additional stress tests are scheduled for mid-2012 and demonstrate the country’s commitment to running a sound banking sector, together with measurers to maintain exchange rate stability.

Investor interest reflects the country’s positive outlook and Nigeria’s maiden Eurobond launched in January at 6.75%, which was benchmarked against US Treasury yields, was heavily oversubscribed. Nevertheless, future prospects for Nigeria also rely on advancing infrastructure development in the major economic cities, namely in transport to improve the country’s supply chain links.

Success in this direction can already be seen with Air Nigeria, however, which is resuming its long-haul operations to London after almost three years. The reinstatement of these services will improve the visibility and accessibility of Lagos as a major financial centre internationally.

  • 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), the National Insurance Commission (NAICOM), and the Nigeria Investment Promotion Commission (NIPC).

  • Prior to the recent reforms, banks had to pay an insurance premium of 0.9375% of their deposit taking liabilities to the NDIC. Post-restructure the banks’ premium burden reduced to 0.118% in 2009. However, as of April 2011 the larger banks are required to cover circa 80% of the premiums paid into the government’s deposit insurance fund each year, addressing complaints by small banks that they were taking on too much of the financial burden. The maximum claim a depositor may make in the event of a bank failure is NGN500,000 for each depositor in respect of deposits held in each insured universal bank and NGN200,000 for each depositor in Microfinance Bank and Primary Mortgage Institutions in the same right and capacity.

  • 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 inflows into the country for investment must go through authorised dealers who will issue a certificate of capital importation for the amount invested. This certificate allows the payment of interest and dividend to the investor and repayment of the loan where the investment is in the form of loan capital.

  • Accounting standards in Nigeria are overseen by the Nigerian Accounting Standards Board (NASB). On 3rd September 2010, the NASB announced a staged implementation of IFRS with significant public interest entities expected to adopt IFRS by 1st January 2012, other public interest entities by 1st January 2013, and small and medium-sized entities are expected to implement by 1st January 2014.

  • 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 NGN6m. This figure must be at least NGN380,000 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 NGN50,000. A withholding tax of 10% is levied on royalty income.

  • The standard rate of VAT is 5%, although this is less (or exempt) in the case of 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

The financial institutions in Nigeria 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, channelling excess liquidity by facilitating the trading of government short-term securities, such as treasury bills.

  • Commercial banks

    Commercial banks accept deposits, approve loans and manage the payment and settlement system. They also get involved in investment banking activities like provision of medium and long-term loan financing, equipment leasing, loan syndication and debt factoring.

  • Microfinance banks

    Microfinance banks which replaced the former Community Banks are meant to serve the small savers and extend banking services to the unbanked. They are also regulated by the Central Bank of Nigeria.

  • 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

MTN Nigeria Communications Ltd – multibanking transaction initiation (MBTI)

With over 40m subscribers, MTN Nigeria Communications Limited is the largest subsidiary in the MTN Group, the biggest mobile communications operator in Nigeria and sub-Saharan Africa.

MTN Nigeria secured one of four licenses to operate digital GSM (Global System for Mobile Telecommunications) telephony on 9th February 2001, from the Nigerian Communications Commission (NCC). A licence fee of $285m was paid for an initial 15 year period, allowing MTN Nigeria to provide and operate a 900 and 1800 MHz second-generation digital mobile service within Nigeria. The company then made the first call on its network on 16th May 2001.

On 19th March 2007, MTN Nigeria was also granted a 3G licence from the NCC, and later made a payment of $150m before commencing 3G services operations same year.

The challenge

MTN Nigeria operates an extensive partnership and distribution chain with hundreds of trade partners, sub-trade partners and third party-owned connect stores who sell various MTN products and services.

The company also works with various local vendors/suppliers.

To facilitate the collection of funds and payments to various parties, MTN maintains several accounts with 18 local banks, including Citi. The operation of multiple bank accounts did not provide an efficient financial solution as required by MTN, since manual instructions and cheques had to be sent to the various banks whenever payments had to be made.

The solution

MTN was already using CitiDirect® Online banking facility to effect electronic payments from its Citi accounts. However, due to insufficient liquidity with Citi, MTN was unable to make all payments from Citi accounts alone.

Citi therefore identified an opportunity in the client’s need and offered MTN the bank’s Multi-Bank Transaction Initiation solution (MBTI). With MBTI, MTN is able to directly initiate payments from a single electronic platform from any of the company’s accounts with the various local banks. In addition, the solution also allows them to view their various account statements.

The result

The solution converted MTN’s payment processes from manual to electronic, thus replacing the need for physical cheques/payment instructions with a more efficient e-payment process, using a secure platform.


The main payment channels in Nigeria are as follows:

  • Cash

    This is still the dominant mode of payment although there are policies in place to reduce the number of cash transactions (see cash management section overleaf).

  • 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. The limit on cheque payments is NGN10m.

  • Payment cards

    The types of cards available in Nigeria are; debit/ATM cards, credit cards, and pre-paid cards. These cards are mostly issued in Naira, but foreign-currency-denominated cards are also issued by Nigerian banks to customers who maintain accounts in such currencies. The major brands of cards in use are Visa, MasterCard, and Verve, a home-grown brand. The Naira-denominated cards issued on the international card platforms (Visa and MasterCard) can be used for transactions outside the country.

  • Electronic Funds Transfer

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

  • Mobile payments

    In November 2010, 16 mobile payments operators were given approval-in-principle to commence operations.

Clearing and settlement

The Nigerian Automated Clearing System (NACS) commenced operation in 2002. 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 RTGS ensures safe and secure co-operation with Nigeria’s other payment and settlement systems, allowing continuous and immediate payment settlement.

Different payment types are processed in the following manner:

Payment type Payment instrument Supporting infrastructure


Other paper-based instruments

Non-NACS clearing house

NACS clearing house

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. With one of the largest cash economies in the world, cash management efficiency is high priority for the CBN. Recently implemented policies have included the application of limits on daily cash withdrawals and lodgements. The retail cash policy which comes into effect from 1st June 2012 stipulates that over-the-counter cash transactions above NGN150,000 and NGN1m for individuals and corporates respectively will attract a charge. The aim is to reduce cash usage and processing costs in addition to heightened security and money laundering measures.

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, however ‘select’ clients can make use of nationwide cash-pooling services from the bigger commercial banks. 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 from overnight to one year, although most do not exceed a period of 90 days. In addition to bank deposits, investment options in Nigeria include 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. However, bankers’ acceptances can only be issued to finance an underlying trade transaction. Previously, foreigners were not permitted to invest in treasury bills that possess a maturity of less than one year, but the CBN recently removed its restrictions and guaranteed foreigners “unconditional repatriation of their investments on maturity from the domestic foreign exchange market.” The Nigerian government issues t-bills that have three to 12 month maturities with a minimum investment of NGN10,000.

Equities, government debt and corporate bonds are traded through the Nigerian Stock Exchange (NSE) which was established in 1960 and now lists approximately 260 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:
The Institute of Chartered Accountants of Nigeria (ICAN):

Citi’s capabilities in Nigeria

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.

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
Head, Client Sales Management
+234 1 279 8459