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Analysis of Investment Opportunity of Pvc in Nigeria Essay

Words: 1506, Paragraphs: 14, Pages: 6

Paper type: Analysis

ANALYSIS OF INVESTMENT OPPORTUNITY OF PVC IN NIGERIA Submitted By: Sonali Verma Roll No:043054 IMG IV ECONOMIC: The petroleum-based economy of Nigeria, long hobbled by political instability, corruption, and poor macroeconomic management, is undergoing substantial economic reform following the restoration of democratic rule in 1999. Nigeria’s economic decline, especially during the last 20 years is illustrated by the fact that per capita income, which was US $1000 in 1965 had declined to US $300 by 1998.

Within some 18 years, Nigeria had declined from being a low middle income country and amongst the fifty richest countries in the world to one of the 30 poorest. In 2005, Nigeria achieved a milestone agreement with the Paris Club of lending nations to eliminate all of its bilateral external debt. Under the agreement, the lenders will forgive most of the debt, and Nigeria will pay off the remainder with a portion of its energy revenues. From 2003 to 2007, Nigeria attempted to implement an economic reform program called the National Economic Empowerment Development Strategy (NEEDS).

The purpose of the NEEDS was to raise the country’s standard of living through a variety of reforms, including macroeconomic stability, deregulation, liberalization, privatization, transparency, and accountability. In 2009, Nigeria took significant steps to strengthen the banking sector. After completing financial audits of all 24 national banks, the Central Bank found 10 of the banks to be undercapitalized or suffering from illiquidity The Obasanjo government supports “private-sector” led, “market oriented” economic growth and has begun extensive economic reform efforts.

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Other positive developments included: * Government efforts to deregulate fuel prices * Nigeria’s participation in the EITI and commitment to the G8 * Anticorruption/Transparency Initiative * Creation of what had been an effective Economic and Financial Crimes Commission (EFCC), which until 2008 had earned 150 convictions and recovered over $5 billion in mishandled funds; and * Development of several governmental offices to better monitor official revenues and expenditures. GDP (2008): $183 billion (agriculture 33%; industry 39%; services 28%). Real GDP growth rate (2009): 4. %. Oil growth: -18%. Non-oil growth: 3%. Per capita GDP (2009): $1,418. Inflation (2009): 11. 5% LEGAL There are however, four distinct systems of law in Nigeria: * English Law, which is derived from its colonial past with Britain; * Common law, (case law development since colonial independence); * Customary law, which is derived from indigenous traditional norms and practices * Sharia law, used only in the predominantly Hausa and Muslim north of the country. Foreigners may own up to 100% of any Nigerian business (S17) except in the Maritime sector (Cabotage).

Under the provisions of the Foreign Exchange (Monitoring & Miscellaneous Provision Act No. 17 of 1995) , foreign investors are free to repatriate their profits and dividends net of taxes through an authorized dealer in freely convertible currency. The other laws which help foreign investors are: * No enterprise shall be nationalised or expropriated by any Government of the Federation, * No person who owns, whether wholly or in part, the capital of any enterprise shall be compelled by law to surrender his interest in the capital to any other persons. There will be no acquisition of an enterprise by the Federal Government unless the acquisition is in the national interest or for a public purpose under a law which makes provision for: (a) payment of fair and adequate compensation, and (b) a right of access to the courts for the determination of the investor’s interest of right and the amount of compensation to which he is entitled. * Compensation shall be paid without undue delay, and authorisation given for its repatriation in convertible currency where applicable. POLITICAL

Nigeria is a Federal Republic with executive power exercised by the president and with influences from the Westminster Systemmodel in the composition and management of the upper and lower houses of the bicameral legislature. However, the President of Nigeria is both head of state and head of government, and of a multi-party system. The Nigerian Government has put in place a number of investment incentives for the stimulation of private sector investment from within and outside the country. While some of these incentives cover all sectors, others are limited to some specific sectors.

The nature and application of these incentives have been considerably simplified. The incentives include: * Companies income tax at 30 percent * Pioneer status-provides 5-7 years of tax holiday * Investment in infrastructure which varies according to the industry * Investment in economically Disadvantaged areas * Labour intensive mode of production POLITICAL RISK: Violence External Threat: Nigeria’s neighbors do not pose an external threat. Foreign support for Islamist militant groups in the north and cross-border criminal activities may be the most acute external threats.

Internal Threat: The two principal threats to domestic security are violence in the Niger Delta and sectarian strife between Muslims and Christians. The catalyst for violence in the Niger Delta, where the country’s energy sector is concentrated, is the indigenous population’s dissatisfaction with their impoverished condition, despite the wealth generated by the area’s resources, and the environmental degradation caused by energy-related development In addition to this , another internal security threat is sectarian violence, which has cost the lives of more than 10,000 Nigerians since 1999.

Corruption: One of the major challenges that has faced the Nigerian nation over the years is the issue of corruption and its debilitating ancillaries – bribery, graft, fraud and nepotism. Transparency International, an independent global watch on corruption ranks Nigeria among the five most corrupt nations in the world, an inglorious record that has stunted growth in all areas of endeavour in the country. However,  the administration of President Olusegun Obasanjo, on coming to power in 1999, vowed to confront this problem decisively.

From then onwards government has progressively working to reduce corruption. With renewed confidence in the government to combat and reduce financial crimes and other corrupt practices, foreign investors have the guarantee of achieving their objectives in Nigeria. SOCIAL AND CULTURE Meeting and Greeting * The most common greeting is a handshake with a warm, welcoming smile. * Men may place their left hand on the other person’s shoulder while shaking hands. Smiling and showing sincere pleasure at meeting the person is important. * As in the rest of Africa, it is rude to rush the greeting process. One must take the time to ask about the person’s health, the health of their family, or other social niceties. * A Nigerian generally waits for the woman to extend her hand. * Observant Muslims will not generally shake hands with members of the opposite sex. * Address people initially by their academic, professional or honorific title and their surname. * Always wait until invited before using someone’s first name. * When greeting someone who is obviously much older, it is a sign of respect and deference to bow the head. Ethnic Groups

Nigeria has more than 250 ethnic groups. The most significant groups are Hausa and Fulani, Yoruba, Igbo and Ijaw . Hausa and Fulani have traditionally dominated in the north, Yoruba in the southwest, Igbo in the east, and Ijaw in the Niger Delta. Rivalries among ethnic groups are a source of instability. Since 1991, questions about religion and ethnicity have not been included in the national census. Languages The official language is English. Other widely used languages are Edo, Efik, Fulani, Adamawa Fulfulde, Hausa, Idoma, Igbo (Ibo), Central Kanuri, Yoniba, and Yoruba.

Hence communicating in Nigeria is not difficult for a foreign national. Religion Nigeria’s population is split primarily between Islam (50 percent) and Christianity (40 percent). Muslims constitute the majority in the north and Christians the majority in the south.. Rivalry amongst religion has been a reason for clashes in Nigeria. BUSINESS STRUCTURE: Decisions are invariably made right at the top, so try not to waste too much time trying to force decisions out of more junior employees. The boss expects and receives respect from those below them in the structure.

As age is highly valued in Nigerian culture, managers are often of the older generation — age brings wisdom. CONCLUSION In 2007 and 2008, Nigeria received a net inflow of US$5. 2 billion and USD216. 4 billion respectively of foreign direct investment (World Investment Report 2008 – UNCTAD. ) Most FDI is directed toward the energy, chemical and Infrastructure sectors. The other factors that favors FDI in Nigeria are: * Government of Yar’Adua’s has been paying special importance to infrastructure growth. Nigerian Investment Promotion Council has been set up to help foreign investors. Tax holidays and other tax benefits to FDI and FDI open in almost all sectors, hence companies can later diversify. There are no restrictions on profit repatriation hence making the Legal Environment investor friendly. * Government supports macroeconomic stability,  deregulation,  liberalization,  privatization, transparency, and accountability. Though has high inflation, labor cost are low in Nigeria. Hence making the Economic environment friendly. * The government is putting efforts to lower the level of corruption and violence.

This is to boost investors confidence in the Political environment. FDI IN NIGERIA The positive growth of FDI shows that the confidence of investors in NIGERIA Hence investment in Nigeria in PVC is beneficial in Nigeria.. REFERENCE http://www. fdi. net/country/sub_index. cfm? countrynum=149, http://en. wikipedia. org/wiki/Politics_of_Nigeria http://en. wikipedia. org/wiki/Economy_of_Nigeria http://www. state. gov/r/pa/ei/bgn/2836. htm www. aercafrica. org/documents/RP_165. pdf http://www. nipc. gov. ng/

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