WORLD TRADE ORGANIZATION

ORGANISATION MONDIALE DU COMMERCE WT/TPR/M/147/Add.1

ORGANIZACIÓN MUNDIAL DEL COMERCIO 14 June 2005
(05-2492)

Trade Policy Review Body Original: English/

11 and 13 May 2005 anglais/
inglés

TRADE POLICY REVIEW

NIGERIA
Minutes of Meeting
Addendum
Chairperson: H.E. Mr. Don Stephenson (Canada)

This document contains the advance written questions, and replies provided by Nigeria.1
__________________________________________________________________________________

Organe d'examen des politiques commerciales

11 et 13 mai 2005

EXAMEN DES POLITIQUES COMMERCIALES

NIGÉRIA
Compte rendu de la réunion
Addendum
Président: S.E. M. Don Stephenson (Canada)

Le présent document contient les questions écrites communiquées à l'avance et les réponses
fournies par le Nigéria.1
__________________________________________________________________________________

Órgano de Examen de las Políticas Comerciales

11 y 13 de mayo de 2005

EXAMEN DE LAS POLÍTICAS COMERCIALES

NIGERIA
Acta de la reunión
Addendum
Presidente: Excmo. Sr. Don Stephenson (Canadá)

En el presente documento figuran las preguntas presentadas anticipadamente por escrito,

junto con las respuestas facilitadas por Nigeria.1

1
In English only./En anglais seulement./En inglés solamente.
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WRITTEN RESPONSES TO QUESTIONS RAISED

I. ECONOMIC ENVIRONMENT

(1) MACROECONOMIC AND STRUCTURAL REFORM

(i) Trade policy formulation and implementation

Regarding the involvement of all stakeholders in the trade policy formulation and
implementation process, the new Trade Policy adopted in 2002 provides for an inter-agency
framework, referred to as the National Focal Point on Multilateral Trade Matters (NFP). The
membership of the NFP comprises all trade-related Ministries and sectoral agencies, the academia,
business and professional associations and civil society groups, including the Nigeria Labour
Congress (NLC) and National Association of Nigerian Traders (NANTS). All sections of the
Nigerian society are therefore involved in the development of national positions for negotiations, as
well as in the implementation of the outcomes of trade negotiations, whether at bilateral, regional or
multilateral levels.

The new Trade Policy further provides for institutionalised dialogue between the Honourable
Minister of Commerce and Chief Executives of major public and private sector companies in all
sectors of the economy. Trade capacity building, seminars, workshops and training programmes are
also organised on trade issues for stakeholders in the appropriate sectors. Nigeria requires support
and assistance in order to intensify these activities.

Furthermore, with the assistance of the Department for International Development (DFID) of
the UK, Nigeria has initiated the process for mainstreaming trade in national development plans,
which commenced with a High-Level Policy Briefing Session for Honourable Ministers, Permanent
Secretaries and Chief Executives of trade-related agencies, particularly those responsible for
communications, energy, transport, customs and ports, etc. The Trade Policy Action Plan which
emerged from the briefing session, has been submitted to the Cabinet for approval. A Trade Policy
Advisory Council to be chaired by the Vice-President of the Federal Republic of Nigeria is also being
established to monitor the implementation of the Trade Policy Action Plan. The annual Nigerian
Economic Summit Group (NESG) also provides a forum for both Government and the private sector
to agree on common policy measures, which promote increased certainty and predictability.

The main focus of the Trade Policy Action Plan is to drastically reduce the uncertainty and
unpredictability of the trade policy regime. Other issues to be addressed include the harmonisation of
trade practices with those of other ECOWAS countries in order to promote the free Trade Area in the
region; ensure respect for Nigeria's obligations under the multilateral and regional trading system,
create a conducive and competitive environment in which Nigerian businesses can flourish and
compete in the global and regional economy, as well as other issues, including trade information,
research and statistics to ensure evidence-based policies. Already, Nigeria is working closely with
Benin Republic to address specific concerns relating to illegal transhipment, smuggling and cross-
border crimes.

It is too early to give a firm assessment of the effectiveness of the new Trade Policy. Nigeria,
however, recognises the need for a systems tic trade needs assessment in order to identify priorities,
especially as already highlighted in the Trade Policy Action Plan. Assistance and support by partners
in this area would be highly appreciated.

Regarding the anti-corruption efforts by Government, the EFCC between May 2003 and June
2004, recovered money and assets derived from crimes worth over US$700 million. It also recovered
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another L3 million from the British Government. It has arrested most of the notorious advanced fee
fraud kingpins and over 500 suspects are in custody. Presently, 100 cases are being prosecuted in
court while over 300 are at various stages of investigation. The EFCC is also handling one of the
biggest world fraud cases involving about US$242 million arising from a bank fraud in Brazil. It has
further recovered significant sums of money with respect to failed government contracts. The present
administration has therefore demonstrated strong political will to fight corruption and other economic
and financial crimes in Nigeria.

Nigeria in 1994 introduced a Petroleum Special Trust Fund which was charged with
responsibility for intervention towards the rehabilitation and development of both economic and
social infrastructures. Although, the Fund and its activities were subsequently abolished in 1999,
Nigeria would be interested in sharing experience on the Norwegian experience as it is capable of
enabling the country build up a reserve for future expenditure in order to guarantee intergenerational
fairness.

(ii) Investment regime

Nigeria does not presently have a border one-stop shop where exporters/ importers can make
all their formalities through a single channel. While all export formalities are handled by the Nigerian
Export promotion Council (NEPC), Nigerian Customs Service (NCS) is responsible for import
formalities.

The NCS may accept collateral for the release of goods, especially under the Manufacture-in-
Bond Scheme (MIBS). However, such collaterals do not apply to goods that may not be cleared due
to infringement of existing import regulations, more so as such goods are normally seized and
destroyed. There are also provisions for guarantee of goods in transit, particularly with respect to
land-locked neighbouring countries.

The repatriation of profits, dividends and capital is guaranteed under the main law governing
investment, and it is not subject to a case-by-case negotiation. Other incentives relating to company
income tax, pioneer status, research and development (R&D), capital allowances, in-plant training,
investment in infrastructure or economically disadvantaged areas, local value added, labour intensive
mode of production, re-investment allowance and minimum local raw material, may cover all sectors
or apply to only specific sectors. The nature and application of these incentives have been
considerably simplified with clear guidelines as to the activities that may enjoy the benefits thus
limiting the discretion of the authorities to only those incentives applicable in the sector involved.

It is to be stressed that the application of these tax incentives by the Nigerian Investment
Promotion Commission (NIPC) is not contingent upon the use of domestic over imported goods,
except where the use of local raw materials is involved.

Efforts by Government to improve the business environment include the preparation of

competitiveness studies, in order to determine the cost of doing business in Nigeria, as well as an
investors' roadmap. The new Tariff Structure and current measures in customs and port reforms,
review of incentives, etc., have been geared towards addressing the key issues identified in these
studies. Measures aimed at improving service delivery and the way government institutions work
should also assist in improving the overall business environment.

Selected pre-qualified firms may remain on the “long-list” maintained by the tendering
Ministry or Agency for as long as it is necessary for the execution of the related projects. A pre-
qualified firm may, however, decide to opt out of the list.
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The draft Bill for a legal framework on procurement and for the establishment of the
Procurement Commission is still undergoing enactment by the National Assembly. Government has,
however, proceeded to establish a Procurement Cadre in the Public Service. All ministries and
agencies have also been directed to create Procurement Units. It is expected that when the draft Bill is
signed into law, the ongoing administrative arrangements would dove-tail and ensure successful
implementation.

The customs valuations regulation were enacted into law in 2003. The NCS would, however,
require re-orientation and re-training to fully implement the new valuation system. In view of the
challenges relating to legislation by the National Assembly, it may not be possible to provide an
indicative timetable for the passage of the other Bills. However, assistance to enable the National
Assembly expeditiously handle the technical aspects of these regulations would greatly facilitate in
the early preparation of these trade-related regulations. Nigeria wishes to assure Members that every
effort would be made to align liberalisation with the relevant WTO provisions, including provisions
for appeal or judicial review. The legislation would be notified to WTO as soon as they come into
law.

An empirical analysis of the results of the current reforms to privatise, regulate and empower
the private sector, etc., is yet to be carried out. In view of the complex, cross-cutting and
heterogeneous nature of the issues involved, Nigeria would appreciate assistance from members in
developing empirical evidence to monitor and guide the future course of the reforms.

(iii) Competition policy and price control

On the proposed Federal Competition Commission, Nigeria wishes to further explain that all
the existing draft Bills have been harmonised under a new body to be known as the Nigerian Trade
and Competition Commission (NTCC), which will be responsible for the handling of all issues
relating to anti-dumping, subsidies, safeguards, consumer protection, anti-trust and competition, and
weights and measures administration. The new draft Bills were prepared with assistance from
relevant international organisations, particularly the WTO Secretariat and UNCTAD; and have fully
taken into account Nigeria's rights and objections in the WTO, including provision for judicial review.

The declaration of prices of all specific goods or services to be controlled by the President has
been eliminated from the new Anti-Trust and Competition Bill within the framework of the NTCC.
The proposed NTCC is an independent body, as the main objective is to provide a rule-based
mechanism for the adoption of trade policy measures in the areas under the Commission's
competence. The scope of responsibility of the NTCC relates to a unified approach to consumer
protection in such a way that all aspects of anti-consumer corporate behaviours and practices would
be handled by the Commission. This means that the Commission's competence would cover all
competition and consumer affairs, including the determination and application of trade defense
measures. The draft Bills for some of these laws provide for review panels in order to ensure the
early resolution of disputes as well as avoid the cumbersome procedure of the regular courts.
However, while a party that is not satisfied with the outcome of a decision by the panel is free to refer
the matter to the regular courts.

(iv) Public enterprises and privatisation

Nigeria is determined to shore up its investment profile and tread the path of enhanced
political, social and economic development on a sustained basis. In tune with global economic trends,
Government is divesting its interest in over 1000 State-Owned Enterprises (SOEs) to foreign and local
core investors. These SOEs cut across diverse areas of economic activities, ranging from agriculture
to aviation and from oil and gas industries to hospitality industry. Detailed information on the
companies earmarked for privatisation including the status of each company, location, type of
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business/capacity, facilities, utilities, employees, financial status, privatisation plan and contact
persons, can be obtained from the Bureau of Public Enterprises (www.bpeng.org).

The privatisation programme involves marketing the right public enterprises to the right
strategic investors with the appropriate financial and managerial competence at the right prices, based
on best global practices. A wide range of sales methods is in use, e.g., core-investors, public offer,
concessions, etc. Efforts are also being made to ensure transparency in the application of the
established procedures for privatising each enterprise. There are no limitations on the participation of
foreign investors in the privatisation programme.

(v) Trade policy in NEEDS and sustainable development

The links between trade policy and National Economic Empowerment and Development
Strategy (NEEDS) can be found around its three pillars of empowering people, promoting private
enterprise and changing the way the Government does its work. Nigeria has recognised that the
exchange of goods and services empowers people to consume and produce in ways otherwise not
possible. By expanding production, trade also creates employment opportunities, increase income and
reduces poverty. The NEEDS' strategy to promote private enterprise also contains numerous trade-
related activities, including globalisation, regional integration initiatives, infrastructure provision and
access to finance. Changing the way Government does its work under the NEEDS should also
enhance efficiency and effect of customs and ports procedures on trade flows, while simplified
government regulations would assist in developing product standards and control of anticompetitive
behaviours by operators.

Sustainable development, in particular its social and environmental pillars, remains a core
element of Nigeria's Trade Policy. This is to ensure that the exploitation of natural resources for trade
is carried out in a sustainable manner that would not adversely lead to imbalances in the environment,
and/or further increase the risk for the vulnerable groups in the society.

(2) NIGERIA IN THE WTO

(i) Trade agreements and arrangements

Nigeria did not participate in the negotiations on any of the Plurilateral Agreements that
emerged from the Tokyo Round. At that time, it was felt that some of the issues being addressed by
the Plurilateral Agreements did not have any direct bearing on the country's economic policies, e.g.,
the Agreement on Trade in Civil Aircraft. In the future, Nigeria may consider undertaking
commitments in some Plurilateral Agreements, particularly those that are still in place, and are
capable of assisting the country maximise the benefits from its current reforms.

Presently, efforts are on-going at the WTO to fulfil the notification requirements with respect
to ECOWAS and the African Economic Community (AEC) by the members of the affected
organisations. Technical assistance and guidance of WTO Secretariat is required to facilitate a speedy
completion of the notification requirements to enhance transparency.

(ii) Preferential arrangements

The tariff harmonisation schedule under the ECOWAS Tariff CET is on course and would
come into effect in 2008. President Olusegun Obasanjo, in his 2005 Budget Speech has duly
reaffirmed Nigeria's commitment to the full implementation of the ECOWAS (CET). Nigeria, along
with other member countries has submitted to the ECOWAS Secretariat, its existing tariff structure as
well as list of exception and exemptions, to ensure an early completion of the tariff harmonisation
implementation schedule.
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Currently, Nigeria has commenced its national studies aimed at developing the evidence to be
used in the planned dialogue with stakeholders, regarding the whole integration process in the sub-
region as well as the ECOWAS-EU, EPA negotiations. Nigeria has no special difficulties with the
regional integration process once agreement is reached with the ECOWAS Secretariat on the list of
exemptions and exceptions to the Common External Tariff.

The harmonisation of Nigeria's tariff is expected to transform some banned items into the new
tariff regime to be implemented with effect from June, 2005 while the remaining items will be phased
into the ECOWAS CET band, starting January 2007. This would ensure that every importer would be
facing the same low tariff regime. Already, Government has commenced publicity and training
campaigns to ensure that officials in the Ministry of Finance and Customs become familiar with the
new regime and can appropriately guide the public.

Nigeria believes that the establishment of an FTA in the sub-region, including monetary
integration would assist in promoting its trade with other member countries, particularly in view of
the existing payments problems. Increased participation in regional trade should also enhance the
contribution of the secretor to the growth and development of the economy as well as provide the
platform for enhancing competitiveness. Giving the high potentials anytime that that successful
integration is achieved in the sub-region would be in Nigeria's interest, meaning that the earlier the
better.

Regional Trade Policy initiative should also assist Nigeria's participation in bilateral and
multilateral trade arrangements.

II. TRADE POLICIES

(1) TARIFFS

(i) Bound and unbound tariffs

It is to be observed that prior to the Uruguay Round, Nigeria had only one item on its
schedule. However, a modest attempt was made to deepen the level of tariff binding during the
Uruguay Round negotiations. In the face of the ongoing reforms, Nigeria hopes to further increase
the level of its binding. Regarding the question of the gap between bound and applied rates, Nigeria
in the context of the current Doha Round, also hopes to realign its bound tariffs to achieve consistency
with the current applied rates and ensure the certainty of the tariff regime.

(ii) Other duties and charges

The application of most other duties and charges in Nigeria is not based on the value of the
items, but on the value of the customs duties charged, thereby not significantly increasing the level of
border protection.

The fees charged by NAFDAC, on the other hand, relate to its services regarding testing,
certification and registration of regulated products. The fees charged by NAFDAC and other standard
setting bodies are on a once-and-for-all basis, except when renewals are required. Domestic products
within the category of regulated products are also required to comply with the same testing,
certification and registration procedures.

The port development levy is chargeable only on goods being imported by sea. It does not,
therefore, apply to imports through other entry points. The Comprehensive Import Supervision
Scheme, prior to the reintroduction of Pre-shipment Inspection in 1999, was normally funded by
Government. Importers are now required to pay the charge. Government intends to reintroduce
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destination inspection in the context of the on-going customs reforms, which should ultimately lead to
the elimination of the Comprehensive Import Supervision Scheme charge.

Preference for non-price based measures in Nigeria has been dictated largely by difficulties
that reduce the efficacy of price-based measures. As already explained, the long years of military
dictatorship have led to a complete erosion of the rule of law and decay in national institutions.
Government is convinced that drastic measures which may be more conveniently implemented, are
required to address the prevailing challenges. The use of very high tariffs and import prohibitions is
therefore expected to provide temporary relief, and enable Government to develop a rule-based
mechanism as a permanent solution.

(2) CUSTOMS PROCEDURE AND VALUATION, AND PRESHIPMENT INSPECTION

(i) Company registration procedures

The requirements for registration with Corporate Affairs Commission (CAC) are, search of
availability of name, payment of appropriate Stamp Duty fees at the Federal Inland revenue Service,
submission of Memorandum and Articles of Association together with statutory forms of verification
and assessment, and the payment of statutory fees. The fees charged depend on the share capital of
the company.

Registration can only be denied when the required documentation as listed above is not
provided, or where the name for registration is in conflict with an existing registered name, or where
the Memorandum and Articles of Association of the proposed company are in conflict with the
objectives and principles of State policy.

(ii) Destination inspection

Destination inspection would be reintroduced as soon as the on-going customs reforms are
concluded. Already, the installation of scanners and ASYCUDA are being handled through BOT.

(iii) Customs reforms

The NCS is in the final stages of concluding arrangements lto launch software called Clean
Report of Inspection (CRI) and Authority Card Administration System (CRACAS). These measures
should facilitate clearance of goods at the nation's ports and move the Service in the direction of
achieving paperless operations. The essence is to enhance trade, ensure speedy clearance of goods as
well as eliminate fraud, touting and other perceived delays associated with the transfer of CRIs. The
system would also eliminate the unauthorised use of the Single Goods Declaration (SGD) Form.

(iv) Internal taxation

Nigeria confirms that both the imported and domestically produced goods listed in
Table III.33 are currently exempted from VAT.

(v) Contingency trade measures

Since Nigeria is yet to enact WTO-consistent anti-dumping and subsidies laws, the country
has not imposed any anti-dumping or countervailing duties since 1998. Notifications to that effect
would be submitted to WTO.
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The notification by Nigeria with respect to safeguard actions relates to pre-existing measures;
and was submitted in the context of BOP consultations. However, the proposed legislative framework
for the NTCC also includes provisions for a WTO-consistent safeguard legislation.

(vi) Import prohibitions

The import bans imposed by Nigeria on some products are meant to check the activities of
some unscrupulous operators, and to allow Government to put in place WTO-consistent rules. The
measures are essentially transitory and are not intended for indefinite application. Nigeria is assessing
the impact of the import bans on its economy and the trade of other countries. Nigeria wishes to
assure all those affected by the measures that they are being reviewed with a view to phasing them out
in 2007, as the process for their eventual elimination has already commenced.

Nigeria confirms that each application for the importation of restricted products, particularly
petroleum products is determined on its merit, but there are no quantitative restrictions and such
waivers are not dependent on the country of origin. Such waivers can be obtained based on request
submitted to the Honourable Minister of Finance. A transition period is usually provided for to ensure
that shipments made before the effective date of the measure are not unduly affected by the
prohibitions. The importer and the NCS can always reconcile based on the actual dates on the
shipping documents.

Since the reasons for the import prohibitions are go beyond the promotion of industrial
development, Nigeria has not developed the data to establish a causal link between the development
of domestic industry and the prohibition of imports.

The major criteria used in evaluating waiver applications is the impact on the operations of
the applicant. The new Tariff Policy is expected to eliminate some of the distortions and incentives
for businesses that have been associated with the use of discretionary waivers.

(vii) Incentive scheme, including export finance, duty drawback, and EPZ

Nigeria's industrial development has been largely dependent on imported inputs. A "bona
fide" manufacturer therefore is a producer who must import inputs for use in his production process.
The incentive is not available to an importer who is not a proven manufacturer that uses the imported
inputs. Bona fide manufacturers may also benefit from the other incentives being administered by the
NIPC as provided in the enabling legislation.

Under Article 27.2 (a) of the Agreement on Subsidies and Countervailing Measures,
provisions regarding prohibited subsidies, {Article 3.1(a)} do not apply to Nigeria. All incentives can
be enjoyed by all companies operating in the country on a non-discriminatory basis. Nigeria,
therefore, believes that these incentives cannot be described as export subsidies.

The EEGF was suspended by Government in 2003. New guidelines on the scheme would be
notified to the WTO once they are approved by the Cabinet.

The list of industries and products that qualify for pioneer status has been determined under
the enabling legislation and covers 65 different industries. The full list is available on the NIPC
website, www.nipc-nigeria.org.

Pioneer status is only available in the form of five years tax holiday to qualifying industries
located anywhere in the Federation, and seven-year holiday in respect of qualifying industries located
in any economically disadvantaged local government area of the Federation.
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(viii) Export levies and bans

Nigeria is a net-food importing country. The export prohibition on rice, maize and beans is
for purposes of domestic food security and local processing, as well as to prevent the illegal
transhipment of imported food items to neighbouring countries.

(ix) Standards and other technical regulations

Consumer products such as electrical and electronic products are regulated by the Standards
Organisation of Nigeria (SON), to comply with mandatory standards, which are based on related
international standards. Conformity assessment procedures are consistent with the requirements of
the ISO and the International Electrotechnical Commission (IEC). Mutual Recognition Arrangements
may be made with SON to promote equivalence, even where the imported goods cannot carry the
Nigerian Industrial Standards certification mark.

The use of permits in the importation of any animal products (e.g. semen or egg) is to allow
for the control of diseases as well as protect animal life, health and safety. The current bans on the
import of animal products is for health reasons as importers were no longer complying with
quarantine and other safety requirements.

Written answers to the specific questions on SONCAP by the US delegation would be

provided within one month after this meeting.

(x) Intellectual property rights

The current law does not provide for the protection of geographical indications. However, the
draft Bills under preparation will provide for the protection of geographical indications, including
additional protection for wines and spirits as required by the TRIPS Agreement. The draft Bills also
have provisions on service marks, border measures, patents, and layout designs of integrated circuits
and protection of undisclosed information.

Efforts made by Government in preventing piracy by disk manufacturing plants include

constant raids conducted by the Nigerian Police, in cooperation with the Nigerian Copyright
Commission (NCC), and seizure of goods by the Department of Customs and Excise upon a notice
given by the owner of the copyright.

It is important to note that in Nigeria, any accused person is presumed innocent until proven
guilty. The law empowers the court upon conviction for criminal counterfeit or infringement to order
seizure and destruction of infringing copies and materials or counterfeit goods, including the
equipments used in producing such goods. Assistance to enhance enforcement of IPRs would be
appreciated in the area of capacity building for judges, Nigerian Police and the Nigeria Customs
Service.

The low numbers of successful prosecution of infringement cases may largely be traced to the
provision of the law which requires the rights owner to make a complaint as well as the limited
number of Judges at the Federal High Court which is the only court with jurisdiction on IPR cases

The requested statistics would be provided at later date.

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III. SECTORAL POLICIES

(1) AGRICULTURE

(i) Policy development

Over 70% of the Nigerian population live in rural areas and are dependent on agriculture for
their livelihood. Nigeria, therefore, provides subsidies on fertilisers, tractors and pesticides in order to
promote rural development as well as ensure livelihood for households and food security. With
respect to negotiation positions on agriculture in the Doha Round, Nigeria places special importance
on the removal of export subsidies and the elimination of restrictive domestic support measures.
Nigeria expects a pro-development outcome in the agriculture negotiations and would seek substantial
market access for products of export interest to developing countries, particularly cotton. To further
provide the country's developing needs, Nigeria would welcome a positive outcome with respect to
Special Products (SP) and Special Safeguard Mechanism (SSM).

Food items are procured under the National Strategic Food Reserve Programme by the
Federal Ministry of Agriculture, through competitive bidding and are subsequently stored in its silos
for release to the market in emergency situations. Allocations are generally made to the public
through the State and Local Governments in an affect area.

(2) MINING, QUARRYING, AND ELECTRICITY

(i) Petroleum and natural gas

Foreign companies wishing to join the new licensing round for marginal fields are required to
participate in the bidding process being handled by the Ministry of Petroleum Resources, in
collaboration with the Nigerian National Petroleum Corporation (NNPC). Further information on
procedures and regulations can be obtained from the NNPC website: www.nnpc-nigeria.com.

In view of the dominant role of the oil sector in the Nigeria economy, Government does not
currently have plans to reduce the tariff rates applicable to imports of crude petroleum and natural gas.

The transparency guidelines provided under the Extractive Industries Transparency Initiative
(EITI) process apply to both Nigerian and foreign companies that invest in the oil sub-sector. Details
of the guidelines provided under the EITI in Nigeria would be made available at a later date.

Nigeria is already importing oil products to replenish shortages and revamp price
liberalisation. However, the overall priority of Government is in the rehabilitation of existing
refineries along with the establishment of new ones by the private sector to supply the domestic
market as well as export.

Refined petroleum products are exclusively exported by the NNPC largely because of its
ownership of all refineries in the country. However, with deregulation and privatisation of the sub-
sector, any investor or private refinery would be allowed to export its products as well as supply the
domestic market. Nigeria is satisfied that the current measures would promote free trade and ensure
fair competition. Moreover, certain industrial establishments under the present regime are permitted
to export part of their production of oil products and petrochemicals, including condensates and
benzene.

The Independent Gas Regulatory Commission is responsible for the full range of economic
and technical regulations of the domestic gas sector. The new National Gas Transportation Company
would be responsible for the development of gas distribution infrastructure and networks. The
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National Electricity Regulatory Commission is envisaged to provide economic and technical

regulations in the energy sector. The Nigerian Gas Company is a subsidiary of the NNPC,
responsible for the marketing and sale of gas.

The basic philosophy behind these reforms is to ensure that the role of government in the
sector is only regulatory, to allow for increased private sector participation and competition.

Apart from the applicable income tax rate of 30% for gas production, other major features
encouraging a preference for the gas sector include royalty at the rate of 7% on onshore and 5%
offshore, investment tax credit at the current rate of 15%, and capital allowance at the rate of 20% per
annum in the first four years, 19% in the fifth year and the remaining 1% in the books. In addition, all
gas development projects are taxed under the provisions of the Companies Income Tax Act (CITA)
and not the Petroleum Profits Tax. All dividends distributed during the tax holiday shall not be taxed,
while interest on loans for gas projects are tax deductible, provided prior approval was obtained from
Federal Ministry of Finance before taking the loan.

(ii) Electricity

The market will operate in the form of bilateral trading arrangement between generators and
distributors, and not by pool or centralised market, nor the third party system.

Under the proposed Rural Electrification Strategy and Plan, any shortfall in the capital and
assets of the rural electrification fund may be covered by contribution rates as determined by the
Commission from eligible customers and consumers, after the Commission has been satisfied that
retail power tariffs for such consumers have reached a level where they reflect the cost of electricity.
While determining the contribution rate, the Commission shall take into consideration the impact of
such rate on eligible customers and consumers who have to assume the burden of such contributions.

Contributions payments for rural electrification shall be paid by eligible customers directly to
the Rural Electrification Agency. Consumers shall pay contribution to their distribution licensee and
the distribution licenses shall compile such contributions and send them to the Rural Electrification
Agency, which shall establish procedures for all collections and payments.

Payment from Rural Electrification Fund shall be made by the Rural Electrification Agency in
consultation with the Minister of Power and Steel based on:

(i) established objective and transparent criteria for the geographical allocation of
resources from the Rural Electrification Fund, including the need for financial support from the Fund,
progress made through previous disbursement; and the existence of local matching funding;

(ii) develop and open, competitive and transparent procedure for making disbursements
from the Rural Electrification Fund to individual projects, including the establishment of eligibility
and selection criteria.

Any person who fails to pay the Rural Electrification Agency or a distribution licensee, within
the prescribed time period, any amount owed, shall be liable to a fine not exceeding three times the
amount owed.

The Electric Power Sector Reform Bill is at the final stages of enactment by the National
Assembly. However, Nigeria would only confirm progress on the implementation of the legislation
when it comes into force. The Electric Power Sector Reform Bill provides for clearly defined market
rules and adequate trading arrangements, and a cost reflective tariff structure. These provisions are
expected to minimise the conditions and actions that may hamper the reform programme when prices
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are liberalised. Nigeria further clarifies that there is no ceiling for foreign ownership in the electricity
sub-sector.

(3) MANUFACTURING

Nigeria continues to intensively pursue policies on export-led growth by emphasising the

development of non-oil products for effective export diversification. The incentive structure is
expected to shift more resources into export production. Exchange rate and tax policies are also
geared towards ensuring that Nigeria's export products compete effectively in the international
market. In view of the overall infrastructural deficiencies and the fragile nature of the macro
economy, increase of the contribution of the non-oil sector to the economy is largely dependent on
overcoming supply-side constraints rather than more market access. The current policy form
therefore, is to increase efficiency in production and infrastructure as part of the broad strategies for
revamping the economy.

(4) SERVICES

(i) Financial services, including insurance

Nigeria recognises the strengthening of the quality of the banking system as an important
element towards a successful development strategy. The current reform to increase the capital base of
commercial banks from N2.0 billion to N25.0 billion by December, 2005 is consistent with this
objective. Other banking reforms, including measures relating to prudential guidelines are aimed at
reducing the unnecessary developments observed in the banking system. The Central Bank of Nigeria
also enjoys increased autonomy to ensure effective supervision.

Nigeria has fully liberalised ownership and participation by foreign entities in all sectors of
the economy. However, the country is yet to attract investment by foreign banks in the financial
services sub-sector. The absence of 100% foreign owned banks in Nigeria cannot therefore be
attributed to any restriction on market access. The presence of three foreign banks with majority
foreign-held shares is evidence that 100% ownership is possible.

A written answer would be provided to questions by the US and EC at a later date.

(ii) Communication/Services

The on-going reforms in the telecommunications sector in Nigeria are driven by the National
Telecommunications Policy of 2000 and the Telecommunications Act of 2003. The priorities of the
reforms are to connect Nigeria with the rest of the world as well as make communications easier in
the country. The reforms are meant to improve teledensity, generate employment and increase
investment and efficiency in the telecommunications sector.

Wireless services are expected to complement the wireline services in terms of improving
access. Nigeria, nevertheless, is promoting competition in the telecommunication sector. There are
plans to allow further competition in all market segments of the industry by the Nigerian
Communications Commission (NCC). Further deregulation of the sector should ensure competition.
The NCC is committed to ensuring that operators play according to the rules, in order to reduce
network congestion and interconnectivity bottlenecks.

Nigeria is yet to adopt the WTO telecommunications Reference Paper. The Government is
presently reviewing the paper and would communicate its position to the WTO, once it is rectified
that the pro-competitive principles of the Paper are consistent with its policy objectives in the sector.
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Nigeria's Telecommunication Policy is aimed at increasing the country's participation in

international telecommunications activities, including the ITU and WTO. Nigeria would expand its
commitments as the need arises after careful review of the situation, including ability to meet
enhanced commitments. The country intends to submit an Initial Offer within the framework of the
ongoing GATS negotiations. However, further GATS commitments by Nigeria would depend on
progress in other areas of the negotiations, especially with respect to liberalisation in mode 4.

Efforts to privatise NITEL are ongoing. The current percentage ownership by Government
therefore remains at 100%. Presently, the Request for Expression of Interest in the state-owned
telecommunication entities have been advertised.

(iii) Transport

Written answers to the questions by the US and EC regarding transport services would be
supplied later.

(iv) Tourism services

Written answers to the questions by the EC and Brazil on tourism services would be supplied
later.

(v) Construction and distribution services

Nigeria has fully liberalised and deregulated its construction and distribution services sectors.
Federal Government investments in construction companies have all been divested, although some
states and local authorities still possess shares in some construction companies. Any foreign investor
can establish commercial presence in Nigeria and own up to 100% of a company in any of these
services sectors.

Prior to the introduction of the Structural Adjustment Programme (SAP) in 1986, the
distribution services sector was largely dominated by wholesale and retail trade services. Most of the
products involved were imported. The devaluation of the naira exchange rate and further restrictions
on imports have led to a decline in the sector. Activities in the sector are presently dominated by
small businesses and informal sector operators. Data on FDI in the distribution sector is not available
and would be insignificant even if it exists. The sector, however, remains a major employer of labour.
Nigeria expects that the current efforts to integrate informal sector activities into the mainstream
economy should increase its contribution in overall economic growth.

(vi) Business services

The legislation applicable to management consulting and services related to management

consulting does not discriminate against foreign service suppliers, except that operators may be
required to possess requisite qualifications and must be accredited by the relevant professional bodies
where applicable.

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