Business prospects good, but caution is advised - Nigeria

Since the institution of a Structural Adjustment Program in 1986, Nigeria has made significant progress toward strengthening and diversifying its economy through the introduction of free market policies, trade liberalization. privatization of public enterprises, and promotion of growth in the agricultural and manufacturing sectors. Since late 1990, however, Nigeria's praiseworthy performance under the program has faltered, as domestic political pressures have motivated increased government spending and relaxed monetary policies. Also, a rising tide of increasingly aggressive and menacing business fraud has threatened to spoil the reputation of the Nigerian marketplace.

U.S. exports 1991 - $832.8 million

U.S. imports 1991 - $5.4 billion

Nigeria's military government is preparing for a peaceful conversion to civilian democratic rule by the end of 1992. The new government will face some difficult negotiations with bilateral creditors and the IMF to restructure debts falling due in 1992-93, especially as creditors are likely to demand further cuts in the size of the civil service.

Real GDP growth in 1991 was about 4.3 percent and is projected at 4.0 percent in 1992, continuing a two-year downward trend. Most of the growth came, and will come from the agricultural sector, due to lower world oil prices and minimal increases in Nigerian production. However, firmer world oil prices are expected to spur a higher rate of growth in 1993. Over two-thirds of the labor force is employed in agriculture, many in subsistence, rain-fed, low technology farming. Agriculture contributes just over 30 percent of GDP, petroleum and trade about 13 percent each.

The petroleum sector, which provides Nigeria with about 90 percent of its foreign exchange earnings and 80 percent of government revenues, has little direct spillover into the rest of the economy, although it earns the capital to develop other sectors. Nigeria was the second leading supplier of crude petroleum to the United States in 1991, with sales of $5.2 billion. Purchases from Nigeria accounted for nearly 14 percent of U.S. oil imports. The stability of the country's general economic situation is highly dependent on the international oil market.

U.S. exports to Nigeria rose by over 40 percent from 1990 to 1991, with the top items being oil and gas field equipment, ship building and repairing materials, and various plastics and resins. There are a number of promising areas for further increases in U.S. exports to Nigeria. Best prospects identified by the Commerce Department's U.S. and Foreign Commercial Service include: computers and peripherals, telecommunications equipment, avionics and ground support equipment, aircraft and parts, medical equipment, oil and gas field machinery/services, airconditioning and refrigeration equipment, food processing and packaging equipment, laboratory scientific instruments, and printing and graphic arts equipment.

As noted above, doing business in Nigeria is not without risk. However, during the past year, many American firms have been contacted by Nigerian companies claiming to have strong connections in both government and private organizations that are able to award and/or obtain multi-million dollar contracts. Some of the offers imply a possible violation of U.S. or Nigerian laws. The U.S. and Foreign Commercial Service advises that a purchase order or contract award that seems too good to believe be approached with extreme caution. Cases of counterfeit drafts are also not uncommon. Unfortunately, this fraudulent business activity shows no signs of abating in the near future. The US&FCS strongly advises American firms, especially those new to the market, to make shipments only on the basis of an irrevocable letter of credit confirmed by a U.S. bank. U.S. companies are also advised to verify the bona fides of Nigerian companies through Commerce Department district offices before doing business with them.

American exporters interested in more information about doing business in this country should contact the Commerce Department's Nigeria Desk at (202) 377-4388.

COPYRIGHT 1992 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group