WT/TPR/S/147 Trade Policy Review 
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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. Nigeria's agriculture sector employs about 70% of the labour force, and accounts for over a 
quarter of GDP;  it is an important element in the Government's poverty reduction efforts.  
Nonetheless, the sector remains generally underdevelope d, constrained by insufficient investment, and 
reliant on the vagaries of the weather.  Agricultura l production is largely a private sector activity.  
Government support to the sector is focused on: the supply of inputs;  provision of extension services; 
stabilization of market prices for certain goods th rough a strategic reserve programme; and provision 
of financial assistance, albeit at a limited level.  Protection for agricultural products (ISIC, Division 1) 
are relatively high, and average applied tariffs  increased from 26.7% in 1998 to 41.4% in 2003. 
Furthermore, import bans have been placed on sev eral agricultural goods, for reasons of food security 
and to encourage value-added exports. Export taxes apply to some agricultural products.  
2. The petroleum and natural gas sector accounted for about 44% of GDP in 2003, contributed 
to over 95% and 70% of export earnings and total government revenue, respectively, but employed 
only around 5% of the labour force. All mineral resources are owned and controlled by the Federal 
Government and production is ca rried out under joint-venture ag reements with multinational oil 
companies. During the period under review, new li cences were offered for exploratory activities; the 
Government improved its financial contributions to the sector; full commercial status was granted to 
the Nigerian National Petroleum Corporation (NNPC); and measures were taken to improve 
transparency in the sector as well as the participa tion of Nigerian companies.  These efforts have 
helped attract increased foreign direct investme nt in the sector, thereby increasing production and 
exports of crude oil.  Measures to reduce flaring have also led to a rise in the production and exportation of natural gas.  Prices of petroleum pr oducts continue to be fi xed, and alignment of 
domestic prices on those of the world market re mains a challenge. The tariff structure in the 
petroleum subsector is geared towards encouraging value added.  Reforms envisaged in the subsector 
include the unbundling and privatization of NNPC; and the enacting of a new Gas Act to provide a 
more favourable environment for natu ral gas exploitation. Exploitation of  solid minerals has also been 
revitalized through the revision of the mining law and through various investment incentives. The 
tariff structure seeks to enhance the e xploitation of solid mineral deposits.  
3. Manufacturing accounts for some 5% of GDP. The sector remains constrained by various 
factors that affect its competitiveness, most impor tantly the availability of power. A plethora of 
incentives are in place to attract i nvestment to the sector.  Manufacturing firms also receive various 
government funded financial assistance schemes to alle viate the dearth of credit available to them.  
Tariff changes in the sector have been geared towards increasing th e rates of effective protection 
(lower tariffs on intermediate goods and higher tariffs on final goods). In 2003 the average MFN 
applied tariff rate for manufactured goods (ISIC , Division 3) was 28%, up from 24.4% in 1998. 
Import bans are also in place on several finished manufactured goods.  
4. The services sector accounts for about 24% of GDP. During the period under review, Nigeria 
signed the instrument of acceptance of the Fifth Pr otocol (financial services) to the GATS. Reforms in 
financial services include the granting of new banking licences, privatization of public shares;  and the 
adoption of universal banking. Liberalization reform s in telecommunications services continue;  they 
have already brought significant growth to the s ubsector.  Regulatory reforms are also under way to 
attract private sector investment in tran sportation, port opera tions, and tourism. Nigeria WT/TPR/S/147 
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(2) AGRICULTURE  
(i) Main features 
5. Nigeria's total land area is estimated at 92.4 million hectares;  some 36% is arable and 
permanent crop land; 31% pasture land; 12% forest and wood land;  14% water;  and the remaining 
7% is occupied by human activities. According to an FAO classification, Nigeria's soils range from 
low to good productivity, with the majority lyin g in the low (60%) and medium (32%) ranges.1  The 
Land Use Decree No.6 of 1978 guides land ownership a nd tenure. Under this decree, authority to own 
any piece of land, including forestry land, is vested exclusively in the Governor of the State where the 
land is located. Foreigners are allowed to hold long -term leases on tracts of land.  Currently, 40% of 
total arable land is under cultivation. The majority of farmers reside in rural areas.  Some 81% of 
farms are small-holdings (0.1-5.99 hectares), 14% ar e medium-sized (6.0-9.9 hectares), and 5% are 
large (10 hectares and above).  The small-scale farm s contribute some 95% of total crop output;  the 
large farms mainly cultivate cash crops.  Three broad systems of production are used:  traditional 
rotational fallow agriculture, which is undertaken mainly by small-holders, depending largely on 
rainfall, and using rudimentary implements for cultiv ation; and mixed and inte nsive farming, which is 
followed mainly by the medium- and large-scale farm ers.  There is, in general, a low degree of 
irrigation (0.8% of total crop land irrigated);  low fe rtilizer usage (7kg. per hectare of arable land on 
average)2;  and low mechanization (1.1 tractors per hectare of arable land on average). 
6. Nigeria's climate is largely tropical. High temperatures occur all year round, and average 
monthly temperatures ranging between 22°C and 36°C. The rainfall pattern is seasonal, and humidity 
levels across the country range from semi-arid to ve ry humid. These varied climatic conditions enable 
Nigeria to produce a wide range of agricultural products. 
7. Agricultural output consists mainly of: food cr ops, such as cassava, yams, sorghum, millet, 
maize, groundnuts, palm fruit;  cash crops, such as pa lm oil, rubber, cocoa, cotton, gum arabic, and 
shea butter;  poultry, goats, lamb, pigs, and cows ;  fishery products;  and forestry products.  
Nonetheless, Nigeria is a net importer of food, the major agricultural imports being wheat, rice, sugar, 
palm oil, milk, meat, and fish.  Regular supply of these goods helps to meet the raw materials needs of 
agri-industries and ensure food security for Nigeria' s households:  the share of food in their total 
expenditures ranges from 66% for non-poor households to 78% for poor households.  In 2003, food and live animals accounted for some 13.3% (N
261 billion) of import expenditure.3  T h e  m a i n  
agricultural exports are cocoa beans and products, r ubber, and cotton lint.  The sector accounts for 
only 0.1% of total foreign exchange earnings (insig nificant, compared to oil's contribution, but still 
substantial (88%) in terms of non-oil foreign exports).4 
8. The agriculture sector plays a significant role in the Nigerian economy; in 2003, it accounted 
for about 26.4% of GDP.5  In spite of the dominance of oil, th e sector is the mainstay for the majority 
of Nigerians, employing some 70% of the country's labour force. Most workers in the sector live 
below the poverty line:  agriculture accounts for so me 67% of national poverty, thus the sector is 
crucial in national poverty reduction efforts.  Agricu lture remains important for the diversification of 
the economy, in particular its export structure (Chapter (I)3(i)). 
                                                      
1 The low productivity of the soils is due partly to inadequate moisture retention and leaching, caused 
by heavy rains eroding the land area and sapping many nutrients and minerals from the soil. 
2 The sub-Saharan African average is 12 kg. per hectare of crop land and that of the world is 94 kg.  
3 This figure includes animal and vegetable fats. 
4 Prior to the discovery of oil, agricultural exports  generated over 70% of Nigeria's foreign exchange 
earnings. 
5 Some estimates put the sector's contribution to GDP at 41%.  WT/TPR/S/147 Trade Policy Review 
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(ii) Policy developments 
9. Nigeria's agricultural policy aims to ensure food security, promote domestic trade, enhance 
foreign exchange earnings, promote export divers ification, enhance access to agricultural raw 
materials, encourage participation in preferential trade arrangements, and promote the use of modern 
technology and the quality of agricultural expor ts.  During the period under review, the Federal 
Government provided support for:  research activ ities and farmers for the development of high 
yielding, disease resistant and heat-tolerant seed va rieties;  the stabilization of market prices for 
fertilizers;  the improvement of extension services;  and the development of new fertilizers.  Support 
for research activities is said to have been fruitf ul.  The National Seed Service (NSS) continues to, 
inter alia , produce and distribute seeds, upgrade seed processing plants, produce seed certification 
tags, and engage in seed testing and seed crop inspection. In 2001, the Government released 
N11.5 million for NSS operations. 
10. Nigeria has, in recent years, deregulated its fe rtilizer market by allowing the private sector to 
participate in the supply of fertilizers.  However, most fertilizer companies are owned by either the 
Federal Government or the states;  some have be en scheduled for privatization.  The Government 
provides subsidies on the sale of fertilizers to farmers to stabilize prices at affordable levels.  Between 
1999 and 2003, a total of 497,346 tonnes of assorted  fertilizers were procured and distributed 
throughout Nigeria at prices that were 25% subsidized by the Federa l Government;  in addition, some 
States provide further fertilizer subsidies to their farmers. Nonetheless, the sustainability of this 
subsidy programme is uncertain due to outstanding payments totalling some N  4 billion in 2004.  
During 1999-04, funds were provided by the Federa l Government for the purchase of 1000 tractors, 
which were sold to farmers at 25% below the purchase price.  The Government also purchased, inter 
alia, vehicles, demonstration films, and agri-chemicals for extension services. Furthermore, since the 
costs of using tractors and other agricultural machin ery are prohibitive, the Government is supporting 
the promotion of animal traction and hand-tool t echnology in order to improve the performance of 
small-scale farmers. During 1999-03, N 53.7 million in loans were disbursed for this purpose to 2,003 
farmers across all states. 
11. The Government established a National Strategi c Food Reserve Programme, to act as a buyer 
of last resort with the purpose of maintaining food  security as well as price stabilization. Furthermore, 
various Presidential committees have also been established to draw up blue-prints for achieving 
increased agricultural production.  
12. The establishment of three multi-commodity de velopment and marketing companies, owned 
and managed by farmers, is receiving support from the Government; an initial grant of N 10 billion for 
seed has been approved for a period of four years,  starting in 2004. These companies are to promote 
the production, processing, storage, and marketing of agricultural produce, and are to facilitate the timely availability of production input s, and act as buyers of last resort on behalf of the Government. 
The Government also supported the formation of an  umbrella organization for farmers, the Apex 
Farmers Association of Nigeria.  
13. Various schemes are in place to make credit ava ilable to farmers. The Nigerian Agricultural 
Cooperative and Rural Development Bank (NACRDB limited), is the main channel through which the 
Government offers fina ncial support to farmers.
6 During 1999-03, it provided some N 412 million in 
subsidized credit in support of some 25,000 projects;   the majority went to small and medium scale 
farmers.  However, there have been complaints th at credit is often diverted to support projects in 
                                                      
6 In December 2002, the Government merged th e defunct Nigerian Agricultural Cooperative Bank 
(NACB) limited, the People's Bank of Nigeria (PBN), and the risk assets of the Family Economic Advancement 
Programme, to form the NACRDB limited.  NACDRB is wholly owned by the Nigerian Federal Government.  Nigeria WT/TPR/S/147 
 Page 53 
 
 
urban areas to the detriment of farmers in rura l areas. The state-owned Nigerian Agricultural 
Insurance Scheme offers risk protection to farm ers on a range of agricultural products. Between 1999 
and 2002, about 79,000 insurance policies, valued at N 13.4 billion, were underwr itten.  Furthermore, 
the Central Bank of Nigeria (CBN), under its Ag ricultural Credit Guarant ee Scheme Fund (ACGSF), 
either alone or in collaboration with Federal or State Governments, oil companies, and non-
governmental organizations, provides credit or inte rest drawbacks to farmers under a variety of 
arrangements, including micro-credit schemes.  Howe ver, many rural farmers are unaware of these 
incentives.  Between 1999 and 2003, some 95,000 loans, amounting to N 3.6 billion7, were guaranteed 
under the ACGSF, of which about 85% for food crops,  7.5% for livestock, and 1.6% for cash crops.  
14. A Special Programme on Food Security (SPFS) commenced in 2002 with a US$42.5 million 
Unilateral Trust Fund.  Projects to be implemen ted under the programme include water control 
projects, and activities to boost production systems, as well as the diversification of production. Nigeria is due to benefit from technical coopera tion from Chinese experts and field technicians under 
the SPFS.  The programme spans all 36 states and touches some 23,000 rural households. 
Furthermore, during the period under review, several  product-specific (e.g. rice, yams, cocoa, and 
fish) and infrastructure-related (e.g . irrigation and drainage) projects  were undertaken by the Federal 
Government, either independently or in collabora tion with organization, such as the International 
Fund for Agricultural Development and the World Bank.  
15. The agricultural sector (ISIC, Revision 2 definitio n) remains highly protected with an average 
applied MFN tariff rate of 41.4 %, up from 26.7% in  1998.  The most protected products (subject to a 
tariff of 100%) include butter;  cheese and curd;  edible vegetables and cert ain roots and tubers;  
edible fruits and nuts;  vegetable oil; margarine;   prepared or preserved meat products;  sugar 
confectionery;  food preparations containing chocolate;  pasta;  pastry;  and rice.  In addition, import 
prohibitions have been placed on wheat flour, sorghu m, live or dead birds, frozen poultry and poultry 
products, cassava and cassava products, and fruit jui ce in retail packs, on food self-sufficiency, 
safeguard, or health grounds.  Related price increase s may have contributed to inefficient allocation of 
resources, adversely affected the purchasing power of  consumers, especially poor households with a 
relatively large share of income spent on food, an d increased the cost of production for some agri-
processing industries.  Given the importance of agri cultural products in Nigeria's trade with other 
West African countries, these measures are likely to hi nder trade with countries in the subregion, and 
increase the incentive to smuggle these commoditi es from neighbouring countries, with the 
concomitant loss in public revenues. Hence, liberali zation of Nigeria's trade in agricultural products 
would be beneficial to its economy and boost intra-ECOWAS trade (Chapter II(6)(ii)).  
16. Under Nigeria's Export Prohibition Act, the expor t of certain agricultural goods is prohibited 
for purposes of domestic food security and of local  processing. Agricultural products banned from 
export include:  raw hides and skin, timber (rough or sawn), unprocessed rubber latex and rubber 
lumps, rice, yams, maize, and beans. An administra tive levy of US$5 per tonne applies to exports of 
cocoa beans, and US$3 per tonne to exports of other agricultural raw materials.  Exports are subject to 
a sanitary certificate (animals and related products) or to a phytosanitary certificate (vegetal goods). 
17. In 2003, the aggregate index of agricultural pr oduction increased by 6.1% (compared to 4.0% 
in the previous year);  all subsectors contributed to  the growth (Table IV.1),  and consequently to the 
growth of the economy (Chapter I(2)). According to  the CBN, the sector is responding to the various 
government initiatives, including the import ba ns, which have increased domestic prices of 
agricultural products.  Favourable weat her conditions have also contributed to the price effects of the 
policy measures.  Nonetheless, Nigeria's agricultu ral sector is operating far below its potential: 
                                                     
 
7 In 2002 alone, credit extended by the "deposit money banks" to the private sector was over 
N902 billion.  WT/TPR/S/147 Trade Policy Review 
Page 54 
 
 
productivity levels are declining8; food production has not kept pace with population growth; 
malnutrition levels are high; the supply of agricu ltural raw materials to the manufacturing sector is 
grossly inadequate; wages in the sector are low, a nd contribute significantly to national poverty; and 
foreign exchange earnings from the sector are mi nimal, due mainly to anti-export biases that the 
incentive schemes barely offset.  This underperform ance partly explains Nigeria's limited share in 
some of the markets where it has preferential access. 
Table IV.1 
Agricultural production, by  type of activity, 1999-03 
(1990 = 100) 
Subsector 1999 2000 2001 2002 2003 
Crops 165.5 171.0 177.1 184.1 196.2 
Livestock 153.0 157.2 163.7 170.5 179.0 
Fishery 140.6 146.0 150.5 160.0 163.3 
Forestry 116.3 118.1 120.4 121.3 124.2 
Aggregate 161.7 167.0 173.0 179.9 190.9 
Source: Central Bank of Nigeria (2003), Annual Report . 
18. There are various reasons for the underperform ance of agriculture, including: inadequate 
infrastructure (feeder roads, stor age, packaging, processing, and retailing facilities), which weakens 
the bridge between producer and marketing centres;  inaccessibility of fertilizers at affordable prices; 
widespread usage of rudimentary farm implements; shortage of farm workers due to urbanization; a 
complicated land tenure system, which creates a poor  environment for investment, especially for 
mechanized farming;  weak linkages between research, extension services, and producers;  
inefficiency in ensuring stable pr ices to farmers; limited access to credit by farmers, especially small-
scale farmers, due to, inter alia , collateral concerns, and unpredictable weather conditions 
(accentuated by the limited irrigation facilities); soil  degradation; and the prevalence of tropical plant 
and animal diseases. The development of agricultural exports has in particular been affected by the 
inadequate management of excha nge rate policy over time and the related poor price incentive for 
diversification into agricultural exports; the "Dutch  disease" effect of oil exploitation; taxation of 
agricultural exports; poor knowledge of potential ma rkets; telecommunication problems; high tariffs 
and restrictive SPS standards imposed by some trading partners9;  and fluctuating world prices of 
major cash crops.  These factors have translated into low incomes in the sector; and as agriculture 
employs some 70% of the labour force, it also accoun ts for the bulk of Nigeria's poor.  Hence, any 
attempt to reduce poverty in Nigeria must focus significant attention on development of the sector. 
19. Private investment inflows are essential to enable  the agriculture sector to realize its potential; 
in 2002, the sector received some 1% of total capital expenditure by the Federal Government.  
Though there are various incentives to attract investme nt in the sector, they have been inadequate.  
Given the relative investment attractiveness of Nige ria's mineral sector, the existing fiscal incentives 
will be insufficient to attract inflows to the ag ricultural sector. Easier access to land and credit 
facilities, improvements to agricultural infrastructur e (feeder roads and irrigation facilities), and plant 
and animal husbandry practices would help to create a more investor friendly environment. 
20. The current economic programme, NEEDS, em phasizes food security and poverty reduction 
through measures to encourage private sector par ticipation in the sector;  facilitation of linkages 
between the agriculture and industrial sectors; mode rnization of the sector;  and improvement of 
agricultural yields.  The targets set under NEEDS include:  minimum annual agricultural growth of 
                                                      
8 For instance, it is estimated that maize yields have fallen from about two tonnes per hectare to as low 
as 500 kg.  Financial Times , 30 March 2001. 
9 Otsuki, Sewadah, and Wilson (2000).  Nigeria WT/TPR/S/147 
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7%;  a rise of agriculture exports to US$3 billion by 200710;  drastic reduction in food imports from 
14.5% to 5% in 2007;  an annual increase in cultivab le land of 10%;  promotion of environmentally 
friendly farming practices; and protection of all pr ime agricultural lands for continued production.  
The strategies to attain these targets include: various presidential initiatives on specific crops and 
livestock;  effective use of the trade preferences av ailable to Nigeria;  improvement of agricultural 
research and extension services; development of a private-sector-led input supply and distribution 
system; improvement of the infrastructural needs of the sector; adequate capitalization of NACRDB; 
promotion of multi-commodity development and ma rketing companies, managed by the private 
sector;  support for all season farming;  a programme for large-scale production of tree crop seedlings; 
and promotion of sound environmental rehab ilitation and management.  In 2004, 2% of pubic 
expenditure was on agriculture. 
(iii) Key subsectors  
(a) Cash crops  
21. Nigeria's major cash crops are cotton, cocoa,  groundnuts, soya beans, rubber, oil palm, 
coconuts, and coffee (Table IV.2).  Until the discovery  of oil, these crops were Nigeria's main foreign 
exchange earners;  however, while they  are still the mainstay of much of the labour force, and a viable 
option for significantly reducing poverty, their impor tance for foreign exchange earnings has declined 
significantly.  More recently, some commodity-spe cific projects have been established to improve 
upon performance in the subsector.  
Table IV.2 
Estimated output of main cash crops, 1998-03 
('000 tonnes) 
Item 1998 1999 2000 2001 2002a 2003b 
Groundnut 2,222.0 2,307.0 2,390.0 2,361.0 2,375.0 2,439.1 
Coconuts 167.0 175.0 181.0 185.0 187.0 191.9 
Soya beans 327.0 333.0 339.0 348.0 383.0 402.2 
Cottonseed 329.0 351.0 353.0 359.0 379.0 400.6 
Palm oil 794.0 825.0 860.0 872.0 884.0 914.9 
Cocoa 160.0 165.0 170.0 171.0 172.0 173.2 
Coffee 188.0 194.0 200.0 202.0 205.0 208.7 
Rubber 255.0 265.0 275.0 279.0 284.0 289.7 
a Revised. 
b Provisional. 
Source: Central Bank of Nigeria, Annual Report , various issues. 
22. The cocoa bean is Nigeria's leading agricultu ral export commodity;  in 2001, it accounted for 
65% of total agricultural exports.  Though world prices have recovered, the cocoa supply response 
remains lagged with annual output levels  hovering around 170,000 tonnes during 2000-02.11  In 2003, 
cocoa exports amounted to some 175,000 tonnes (U S$186 million), of which, cocoa grindings were 
insignificant.  Earlier liberalization steps, th rough the abolition of the Cocoa Commodity Board 
(CCB), have allowed private traders to sell cocoa dire ctly on world markets.  However, as there is no 
mechanism to ensure the quality of Nigeria's cocoa beans, private traders face challenges in meeting 
international SPS standards;  extensive fumigation of  cocoa trees is needed.  However, due to the 
                                                      
10 Exports of cassava and related products are targ eted to reach US$5 billion within ten years.  
11 Productivity in the sector is about 0.28 tonnes pe r hectare, which is similar to that of Ghana but 
below Côte d'Ivoire, figure of 0.54 tonnes per hectare.  WT/TPR/S/147 Trade Policy Review 
Page 56 
 
 
removal of subsidies on chemical inputs and the de preciating naira, costs to meet SPS requirements 
(including fumigation) have become increasingly unbearable for farmers. 
23. During the period under review, a National Cocoa Development Committee was established 
to address the declining production of cocoa in Nigeria.  Under the first phase of the cocoa 
development programme, 4,500 cocoa hybrid seedli ngs were raised, 15,000 hectares of cocoa farms 
were rehabilitated, and some new farms were estab lished; and agri-chemicals, sprayers, pumps and 
cutlasses were distributed to farmers at 50% subsid ized prices.  These measures are believed to have, 
inter alia,  contributed to the increase in cocoa production from about 250,000 tonnes in 2001 to 
281,000 in 2003.  
24. Cocoa and chocolate confectionery attract an average MFN applied tariff of 74.2%, and a ban 
on the import of cocoa powder and cocoa cake has also been introduced recently.12  An export levy of 
US$5 per tonne of cocoa beans exported has been suspended.  
(b) Food crops  
25. Cassava, yam, cocoyam and potato are Nigeria's ma in root and tuber crops  (Table IV.3). They 
contribute to Nigeria's food security requirements an d are a source of income to several small holding 
farmers.  Hence, as part of its efforts to ensu re food security and reduce poverty, the Government 
embarked on a Root-Tuber Expansion Programme in 2003 to achieve sustainable increases in 
production.  Under the programme, r oot and tuber farmers are being assisted to select crop varieties 
suitable to their agri-climatic conditions in order to maximize yields;  research and extension services 
for these crops are being strengthened; and support is being offered for the processing and marketing 
of these commodities.  The programme benefits from a US$23.1 million loan from the International 
Fund for Agricultural Development (IFAD).  It is est imated that 5.2 million small-holder farmers will 
benefit from the scheme. A presidential initiativ e on cassava production and export has also been 
established;  efforts undertaken so far include expl oring export market potential, and controlling the 
spread of certain diseases that affect the crop.  During 1999-02, cassava and yam production grew by 
an average 3.8% per annum, against 7.1% per annum for cocoyam and potato production. 
Table IV.3 
Estimated output of main staples, 1998-03 
('000 tonnes) 
Item 1998 1999 2000 2001 2002a 2003b 
Acha 70.0 73.0 77.0 81.0 88.0 95.0 
Beans 2,054.0 2,096.0 2,281.0 2,409.0 2,612.0 2,831.4 
Cassava 34,092.0 35,980.0 36,795.0 37,949.0 39,410.0 41,853.4 
Cocoyam 1,450.0 1,480.0 1,622.0 1,706.0 1,912.0 2,177.8 
Maize 6,435.0 6,515.0 6,491.0 6,592.0 6,698.0 7,019.5 
Millet 6,328.0 6.39 1.0 6,765.0 7,088. 0 7,231.0 7,686.6 
Plantain 1,809.0 1,870.0 2,025.0 2,163.0 2,378.0 2,649.1 
Potatoes 105.0 109.0 120.0 126.0 138.0 151.4 
Rice 3,486.0 3,522.0 3,865.0 3,989.0 4,085.0 4,264.7 
Sorghum 8,401.0 8,464.0 8,854.0 9,408.0 9,687.0 10,229.5 
Vegetables 4,018.0 4,151.0 4,500.0 4,788.0 4,992.0 5,476.2 
Wheat 51.0 53.0 56.0 54.0 59.0 63.5 
Yam 25,102.0 25,950.0 26,451.0 27,589.0 28,979.0 31,471.2 
a Revised. 
b Provisional. 
Source: Central Bank of Nigeria, Annual Report , various issues. 
                                                      
12 "Nigeria Bans Importation of Cocoa Powder", OT Africa Line online information.  Available at: 
http://www.otal.com/Nigeria/nigeriaimports.htm#cocoa [22 February 2005]. Nigeria WT/TPR/S/147 
 Page 57 
 
 
26. The tariff on edible vegetables, roots, and tubers  is 100%.  The average applied MFN tariffs is 
91.4% on fruit and vegetable canning, and 53.8% on food products;  imports of cassava and cassava 
products are banned. 
27. Grains form an important part of Nigeria's staple food and are also farmed by many small-
scale farmers. The main grains produced are sor ghum, millet, maize and rice; average growth in 
production has been highest for millet, at about 7%  during 1999-02 and lowest for maize, at about 
1%.  The Government operated Strategic Grains Reserve (SGR) programme aims to maintain strategic stocks and stabilize prices.  Between December 1999 and April 2000, the Government acted 
as a buyer of last resort and mopped up about 54,000 tonnes of excess grains, thereby sustaining 
higher price levels. In early 2001, high prices of gr ains necessitated the rele ase of 43,000 tonnes from 
the silos. In support of the SGR programme, four  additional silo complexes were completed and 
commissioned in 2002; currently, the Gove rnment is rehabilitating abandoned silos. 
28. Under the Special Programme on Food Security (S PFS), 3,700 hectares of rice farms are to be 
established;  203 tonnes of improved rice seeds to be procured and distributed; and varying quantities 
of other inputs, such as agri-chemicals, sprayers, fer tilizer spreaders, rice reaper s, and sickles, to be 
distributed to rice farmers. Furthermore, the establishment of rice milling and training centres have 
been approved by the National Council on Agricu lture. The SPFS is also benefiting from Japanese 
technical assistance. Measures taken under a presid ential initiative on rice production in 2004, include 
the production and procurement of seeds, and th e assessment of certain farms for intensive 
cultivation.  
29. Wheat and rice constitute Nigeria's two main food imports (about 40% in 2001).  There is an 
export ban on rice and maize; and the imports of rice, sorghum, and millet attract tariffs of 100%, 
whereas the tariff on maize imports is 25%.  In gene ral, food crops are an important constituent of 
trade with neighbouring countries.  
(c) Livestock  
30. Livestock accounts for some 10% of the value of total agricultural output.
13  The annual 
growth rates for livestock production were between 2.7% and 5.0% over 2000-02.  The main livestock 
raised are cattle, goats, sheep, pigs, and chickens (Tables IV.4 and IV.5). Climate, rainfall, and 
disease determine the location of livestock; most of  the cattle, sheep, and goats are located in the 
semi-arid and sub-humid zones.  Over 80% of cattle , sheep, and goat heads are managed by traditional 
nomadic farmers (Fulani and Shuwa pastoralists) on a subsistence basis.14 The subsector is one of the 
main sources of protein, and is thus integral to Nigeria's bid for food security.  It is also the main 
source of income to some farmers, whilst providing an alternative for diversification of income to 
others;  it is hence an important element in the fi ght against poverty. Livestock represents a form of 
savings to many rural households and can be used as a source of collateral in the informal credit 
sector , as well as an input into crop production by way of draught animal power.  Manure is also used 
as, inter alia , organic fertilizer, fuel (in place of firewood), and bio-gas for domestic use. 
Table IV.4 
Livestock numbers, 1998 and 2003 
 Cattle (Head) Chickens (Head) Goats (Head) Pigs (Head) Sheep (Head) 
1998 15,088,100 126,000,000 25,500,000 4,666,817 20,000,000 
2003 15,163,700 137,680,000 27,000,000 6,356,297 22,500,000 
Source: FAOStat Database 2004. 
                                                      
13 Some estimates put the contribution of livestock to agricultural GDP at 16%. 
14 Nomadic farmers are considered to be amongst the poorest.  WT/TPR/S/147 Trade Policy Review 
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Table IV.5 
Estimated output of main livestock products, 1998-03 
('000 tones) 
Item 1998 1999 2000 2001 2002a 2003b 
Livestock products 1,949.0 1,995.0 2,050.0 2,134.0 2,223.0 2,334.3 
Poultry meat 77.0 82.0 88.0 95.0 107.0 121.0 
Goat meat 96.0 101.0 107.0 114.0 129.0 145.3 
Lamb/mutton 102.0 107.0 113.0 117.0 126.0 136.8 
Beef 202.0 208.0 215.0 228.0 239.0 251.9 
Pork 45.0 47.0 50.0 55.0 62.0 70.2 
Milk 991.0 1,000.0 1,012.0 1,038.0 1,046.0 1,060.6 
Eggs 436.0 450.0 465.0 487.0 514.0 548.4 
a Revised. 
b Provisional. 
Source: Central Bank of Nigeria, Annual Report , various issues. 
31. The Federal Government's objective for livestock is to enable the sector meet the country's 
protein needs and improve the economic well-bei ng of producers through increased production and 
productivity. The Government's role in the subsector  consists of planning and policy development, 
data collection, project monitoring, animal disea se control and surveillance, and regulatory and 
quality control of animal products and services.  Du ring the period under review, the Government's 
involvement has mainly been through projects aime d at preventing and controlling the spread of 
animal diseases, such as rinderpest, contagious bovine pleuropneumonia, and swine diseases;  and 
improving local breeds of  cattle, sheep and goats through scientif ic selection.  The Government has 
supported the subsector by developing grazing reserves, sinking boreholes (at reduced costs) on 
various grazing grounds;  providing supplementary f eeds;  and disbursing credit to farmers for the 
fattening of livestock.  Presidential committees have  been established to facilitate the production and 
export of livestock and poultry products.  
32. Cattle is the fourth largest agricultural impor t and an important element of trade with 
neighbouring countries;  imports in 2001 reached  US$160 million.  Tariffs on live animals range 
between 5% for live bovine animals and 35% for Turkey s.  Meat and edible meat offals that are not 
on the import prohibition list attract tariffs of 25% ;  frozen poultry and poultry products, pork and 
pork products, beef and beef products, mutton, la mb, and goat meat are all on this list.  
33. Output in the subsector grew by 5.0% in 2003, up from 4.2% the previous year.  The growth 
is attributable to improvements in disease control, restocking of breeding anim als, and provision of 
supplementary feeds.  According to the Central Bank of Nigeria, the ban on imports of frozen poultry 
products also bolstered output.15  Challenges to the subsector in clude:  limited access to pastoral 
lands, which is not helped by the land tenure syst em; limited access to credit and investment in the 
subsector; and meeting the protein needs of an ever increasing population. 
(d) Fisheries 
34. Nigeria is richly endowed with marine, coastal  and inland fisheries.  Its fish output comes 
from artisanal and industrial production. Offshore re sources are located between the 30 nautical mile 
territorial limit and the 200 nautical mile exclus ive economic zone, and catches consist mainly of 
tuna;  only one Nigerian-based vessel operate in offshore waters (as at 2003).  Inshore resources are 
                                                      
15 Central Bank of Nigeria (2004). Nigeria WT/TPR/S/147 
 Page 59 
 
 
exploited by a very active industrial fleet of tr awlers, and a very large artisanal canoe fleet.16  Though 
there is fishing across the 850 km coastline, effo rts are concentrated in the eastern portion as 
productivity is higher in the waters off the Niger Delta region and the wider continental shelf.  
Demersal fish and shrimps are caught by inshore fishers.  The major fresh -water species include 
tilapia, chrysichthys, gymnarchus, lates, and he terotis. In 2003, the total fishery catch was 
514,300 tonnes (Table IV.6).  Fishing contributes about 5% of the value of agricultural output, accounts for some 20-25% of per capita animal prot ein intake, and employs about 8 million people.  
This makes it an important element in Nigeria's bi d to reduce poverty. The subsector also contributes 
to foreign exchange earnings: exports from fish and shrimps amounted to US$50.0 million in 2003.  
Nonetheless, there is a deficit in the supply of fi sh and fishery products, which is met by imports 
(US$403.5 million in 2003).  The average applied MFN tariff (2003) on fish imports is 23.7%; 
crustaceans attract a tariff rate of 25%. 
Table IV.6 
Estimated catches in the fishery sector, 1998-03 
('000 tonnes) 
 1998 1999 2000 2001 2002 2003 
Total catches 430.0 443.0 460.0 474.0 504.0 514.3 
Artisanal coastal and brackish water  190.0 196 203 209 218 220.8 
Artisanal inland rivers and lakes 173.0 175 178 181 195 198.9 
Fish farming 42 43 45 47 50 51.9 
Industrial (trawling) coastal fish and shrimps 25 29 34 37 41 42.8 
Source:  Central Bank of Nigeria, Annual Report , various issues. 
35. The Government's efforts in the fisheries sub sector are geared toward s security of supply. 
There are four main programmes:  the Fish Production Development (FPD) Programme;  the Aquaculture Development (AD) Programme;  Fisheries Infrastructure Development (FID) 
Programme;  and the Fisheries Resource Mana gement (FRM) Programme.  Under the FPD 
programme, a number of projects offer fishing in puts and repair services to organized groups of 
artisanal fishermen and women; rehabilitation of pertinent infrastructure, such as electricity 
generating plants and land ing jetties; credit facilities; and improved technology to reduce post-harvest 
fish spoilage.  The AD programme is aimed at rapidl y developing aquaculture by training fish farmers 
and extension agents in modern techniques.  It i nvolves support: to the private sector to develop fish 
farms;  for stocking of fingerlings;  and for ha tchery development.  Some US$1.5 million from the 
ECOWAS fund was disbursed to fisher folk in 2003.  Infrastructural facilities at fishing terminals are 
also being rehabilitated under the FID proj ect. The FRM programme also provides for, inter alia , the 
monitoring, control and surveillance of fishery r esources; fisheries exploration and promotion; and 
support for an environmental shrimp fisheries project .  Made-up fishing nets are on the list of import 
prohibitions.  The Government also grants five-y ear tax holidays to companies establishing deep-sea 
trawling and processing activities, and to coastal fishing and shrimping.  
36. In 2002 and 2003, fisheries production grew by 6. 3% and 2.0% respectively. The growth rates 
in the subsector have been attributed to the Government's support for, inter alia , restocking initiatives, 
establishment of fish farms, and financing through lo an disbursements.  Nonetheless, challenges to the 
fisheries subsector include:  high costs of fishing i nputs, such as outboard motors and fishing nets for 
artisanal fishers;  over-fishing of coastal resources; declining catch;  environmental degradation;  and 
lack of technical innovation.  Inland fisheries a nd aquaculture have been identified as having the 
greatest prospects for substantially increasing fish supply.  However, this is predicated on the 
availability of appropriate technology, infrastructur e supply, adequate supply of fingerlings of fast-
                                                     
 
16 The canoe fleet exploits coastal waters up to five nautical miles from the shore, and the brackish 
waters of the Niger Delta and other major rivers, estimated at about 858,000 ha. WT/TPR/S/147 Trade Policy Review 
Page 60 
 
 
growing and cultivable species, and quality  fish feed at affordable prices.17  A recent World Bank 
study points out the potential for prawn farming:  in  recent years, exports of prawns and shrimps have 
risen on average by 10%;  total exports of prawn were US$50 million in 2003.  
37. Procedures have been put in place by the authorities to enable exporters of seafood to meet 
international SPS standards. All exporte rs of fish and fishery products are required to register with the 
NEPC.  Before a certificate is issued, the product must conform to the requirements of good manufacturing practices and must pass NAFDAC labor atory tests. The results of the tests are 
forwarded to the Federal Department of Fisheries (FDF) and the Federal Ministry of Agriculture and 
Natural Resources for action and issuance of certificate.   Before issuing an export certificate, the FDF 
would have to verify that:  fishers and fish handl ers at the landing beaches have been trained in basic 
hygienic and sanitary procedures;  fish at the la nding beaches are placed in sanitary containers with 
ice;  vehicles used for transporting fish are ice cold and dust proof;  and fish are maintained in an unbroken cold chain from production to market.  All establishments intending to export fish are to be inspected by the competent authority.  For exports to  the EU, further procedures are required: e.g. EU 
inspectors must approve processors and issue EU export numbers; establishments should implement 
Hazard Analysis and Critical Control Poin t (HACCP) and Good Management Practices (GMP)  
principles, both in their construction and rou tine operating procedures; there should be regular 
documented inspections of the establishments by Nigeria's competent authority; and all personnel 
should have a certificate of health and training in hygiene and sanitation.
18  
(e) Forestry  
38. Forests cover some 12% of Nigeria's land area. The main forest types are: savannah and 
woodland, mangrove, riparian, montane, plantations, and rain forests. Forests serve as a source of: 
timber for various wood products (Table IV.7), incl uding fuel wood and charcoal (the main source of 
energy for a large section of the population); non-ti mber products, such as leaves, fruits, barks, nuts, 
resins, honey, mushrooms, wildlife, cane, chewing st icks, medicinal plants; and wildlife and tourism. 
In 2002, the forestry subsector accounted for about 1.8% of total agricultural output.  
Table IV.7 
Estimated output of main forestry products, 1998-03 
('000 tonnes) 
 1998 1999 2000 2001 2002 2003 
Forestry ('000 cu. metres) 120,014.0 122,414.0 124,292.0 126,667.0 127,623.0 130,687.2 
Roundwood 118,325.0 120,657.0 122,466.0 124,710.0 125,584.0 128,472.4 
Sawnwood 1,551.0 1,614.0 1,678.0 1,790.0 1,864.0 2,016.8 
Wood-based panels 121.0 125.0 129.0 146.0 152.0 172.4 
Paper and paperboard ('000 tonne s) 17.0 18.0 19.0 21.0 23.0 25.6 
Source: Central Bank of Nigeria (2003), Annual Report . 
39. The Government's overall objective in the fo restry sub-sector is to prevent further 
deforestation and to recreate forest cover on already deforested fragile land. Specifically, the forestry 
policy provides for the consolidation and expansi on of the forest estate and its management for 
sustained yield; regeneration of the forests at rates higher than exploitation; conservation and 
protection of the environment; development of th e forestry industry through the harvesting and 
utilization of timber and its derivatives, and th e reduction of waste; and wildlife conservation, 
management, and development, through the creati on and effective manageme nt of national parks, 
                                                      
17 FAO (2000). 
18 World Bank (2004). Nigeria WT/TPR/S/147 
 Page 61 
 
 
game reserves, tourist, and recreational facilities.  Measures implemented in the forestry subsector 
during the period under review include increased s upply of improved breeder seedlings to replace 
harvested tree stock and afforestation of ecologically  degraded sites. Forestry and logging attract an 
average MFN tariff of 12.6%;  there is an export ban in place on, rough or sawn timber.  
40. Output from the forestry subsector increased by 0.8% and 2.4% respectively in 2002 and 
2003, in accordance with the growth in demand for wood products.  The main obstacles to forestry 
development and sustainable management in Ni geria include:  the unlimited powers of state 
authorities to de-reserve or exploit forests;  a weak legal framework; poor funding of forestry 
programmes and forest management; low forest tariff s; and absence of a reliable database for forestry 
planning and development.19  
(3) MINING AND ENERGY  
(i) Petroleum and natural gas 
(a) Upstream petroleum activities 
41. In November 2004, estimates of Nigeria's proven oil reserve rose to some 31.5 billion barrels, 
equivalent to about 35 years of production at cu rrent exploitation levels. The majority of these 
reserves are located along the Niger River Delta;  ne wer reserves have also been discovered in deeper 
waters offshore. The majority of the known reserves are in some 250 small fields;  there are an additional 200 fields for unknown reserves.  Nigeria's oil is of high quality, with low sulphur content 
and light gravity.
20 
42. The petroleum subsector dominates the Nigeri an economy, accounting for some 44% of GDP, 
95% of export earnings, and over 70% of total governm ent revenue (Table IV.8). It is also a major 
contributor to Nigeria's energy needs; some 43% of energy consumption in 2002 was met from petroleum products (excluding natural gas).  The s ubsector also receives the major share of foreign 
direct investment (FDI) inflows to Nigeria (Chapt er I(3)(ii)), but accounts for only 5% of the labour 
force. There are quotas on the number of expatriat es who can be employed in the oil subsector;  
currently, some 25% of professional and management  staff are foreigners.  The annual wages and 
salaries survey conducted by the CBN shows that incomes in the mining sector (mainly petroleum) 
are some ten times higher than those in the agricultu re sector and over four times higher than those of 
the manufacturing sector. Furthermore, the survey sh ows a widening of the income disparity over the 
past decade.  
Table IV.8 
Basic data on the petroleum subsector, 1999-03 
 1999 2000 2001 2002 2003 
Spot crude prices  17.93 28.40 24.24 25.05 28.65 
Crude oil exports ('000 b/d) 1,705.1 1,986.4 2,089.4 1,798.2 2,303.5 
OPEC proven oil reserves (m/b) 29,000 29,000 31,506 34,349 35,255 
Crude oil production ('000 b/d) 1,781.5 2,053.6 2,017.6 1,801.7 2,166.3 
Source : OPEC (2003), Annual Statis tical Bulletin . 
43. Under the Nigerian Constitution, all minerals, mine ral oils, and natural gas within its territory 
are owned and controlled by the Federal Govern ment, as prescribed by the National Assembly 
(Chapter II(1)).  The Petroleum Act of 1969 provides that production licences may be granted only to 
                                                      
19 FAO (2001). 
20 Bonny Light has 37° API. WT/TPR/S/147 Trade Policy Review 
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Nigerian citizens. In practice, production is main ly under joint-venture agreements between the 
Nigerian National Petroleum Corporation (NNPC) and multinational companies, in the form of memoranda of understanding; under these agreements, all operating costs are financed jointly by a 
system of monthly cash-calls. The main multinatio nal companies are Royal Dutch/Shell, Chevron, 
Mobil, AGIP, Elf, Texaco, and Pan Ocean. Profits are shared in proportion to ownership; on average, 
NNPC owns 57% in these joint-ventures. The G overnment has recently introduced a production 
sharing contract (PSC) arrangement, whereby oil co mpanies can fund the cost of operations and the 
profits will be shared according to agreed a rrangements, after the company has recouped its 
expenditure.  The main multinational companies ope rate some 98% of the oil reserves and operating 
assets in Nigeria;  the remainder is owned by priv ate Nigerian firms that commenced operations a few 
years ago. In 2003, Nigeria's crude oil production averaged 2.33 million barrels per day (b/d), of 
which about 95% was produced jointly by NNPC and the multinational companies.  Some 99% of the 
total daily production was exported in 2003, up from 79% in 2002, and the remainder was consumed 
domestically (Table IV.9). Nigeria is a member of the Organization of the Petroleum Exporting Countries (OPEC);  in March 2003, OPEC allocated  a production quota of about 2 million b/d to 
Nigeria. Nigeria's location makes it well suited to supply the oil markets in North America and 
Europe; Asia is also becoming an important market. Nigeria is also the main supplier of crude oil to 
West African States.   
Table IV.9 
Crude oil production and exports, 1998-02 
('000 barrels) 
Year Production Exports Domestic consumption 
1998 776,190 687,390 88,620 
1999 778,900 666,490 112,410 
2000 797,880 688,080 1,098,00 
2001 817,150 674,930 142,220 
2002 685,773 521,973 163,800 
Source: Central Bank of Nigeria online information.  Av ailable at: http://www.cenbank.org [23 September 2004]. 
44. A new policy direction was set in 1999 to address the considerable strain and stress due to 
lack of coordination and of funds for the Government 's share of costs.  The objectives set out for the 
1999-03 period were to, inter alia , ensure adequate budget provision to cover the Government's share 
of agreed costs of operations under the joint-ventur e agreements;  improve the workings of the joint-
venture technical committees;  increase the local cont ent in oil production;  and create an environment 
conducive for communities in the oil producing areas to become effective and more involved stake 
holders.  Targets to be achieved by 2003 included:  exploration to attain 30 billion barrels of oil 
reserves; and achieving three million b/d production a nd 40% local content (i.e. use of Nigerian goods 
and services and manning of professional cadre) in oil activities.  With regard to exploratory 
activities, the Government offered up 22 new oil blocks for competitive bidding in March 2000;  
eleven were deepwater or ultra-deep water, sev en were shallow water and the remainder were 
onshore.  As a consequence, the number of o il wells drilled increased from 17 in 1999 to an 
unprecedented 76 new wells in 2002. The discoveries ar ising from these wells are said to have added 
some 5 billion barrels to Nigeria's oil reserves. 
45. The Government has also taken steps to impr ove financing to the subsector: in 2001, the 
Government made available the largest budget alloca tion to the oil industry, some US$3.5 billion, in 
order for NNPC to meet its funding obligations u nder the joint-venture operations, and an additional 
US$300 million was released for cash-call payments . In 2002, Parliament approved US$3.1 billion 
also for cash-call payments. In May 2002, NNPC was granted full commercial status, thus enabling it, 
in principle, to be financially independent from the Government. Hence, the Central Bank now Nigeria WT/TPR/S/147 
 Page 63 
 
 
deducts the approved amounts of joint-venture cash  calls and of NNPC priority projects from the 
proceeds of crude oil and gas, after which the bala nce is allocated to the Federation Account. Between 
July 2002 and December 2002, US$4.8 billion was ear ned from crude oil and gas sales, of which 
US$1.5 billion was disbursed as cash calls for joint-venture operations and US$3.3 billion was 
transferred to the Federation Account. 
46. The Government has been exploring alternative means of financing to bridge the funding gap 
in the oil industry, including production-sharing co ntracts (PSCs) with multinational companies for 
the exploration and development of oil in the new bl ocks.  In its bid to encourage Nigerian companies 
to participate of in the upstream oil industry, the Government offered 24 marginal fields for bidding;  
out of 398 applications received, 31 companies wo n their bids.  The Government has also recently 
launched a licensing round for further 116 marginal fields located within the leaseholds of multinational companies in the Niger Delta. These fiel ds are estimated to have a collective reserve of 
about 1.3 billion barrels, and have not been deve loped because they are considered uneconomical by 
the current lease holders. These efforts are also d esigned to meet the Government's local content 
target. Other measures affecting the upstream o il industry include the adherence to OPEC quotas 
allocated to Nigeria and the use of countertrade measures.  NNPC exports crude oil on a countertrade 
basis with Venezuela and Brazil in ex change for heavy industrial products. 
47. MFN tariffs applying to crude petroleum and na tural gas average 21.7%. However, crude oils 
and oils obtained from bituminous minerals attract ta riffs of 5%. The subsector also benefits from the 
reduced tariff rate of 2.5% on industrial machinery.  
48. The Government's efforts in the upstream oil s ubsector have helped it achieve its target of 
proven reserves of 30 billion barrels  and reach a production capacity of 3 million barrels per day.  FDI 
inflows to the subsector have been on the rise si nce 1999, and as a result, production has increased, 
from 1.8 million  b/d in 1999 to about 2.5 million b/d in 2003. Export earnings have also been rising 
despite fluctuations due to developments in the international oil market, and quota allocations by 
OPEC. In 2003, Nigeria was the sixth largest e xporter of crude oil among OPEC members. Current 
targets for the upstream oil industry, as outlined u nder the NEEDS programme, include exploration to 
increase the reserve to 40 billion barrels by 2007; a nd significant increases in the local content in the 
oil industry, to 70% by 2007.  
49. Among the key challenges to Nigeria's oil subsector  are lack of transparency, and corruption. 
A recent study points out that the poor long-run growth performance of the Nigerian economy can be 
attributed to the negative effect of the oil subsector on economic grow th, through waste and the 
weakening of institutions.
21  In a bid to deal with these probl ems, the Government has committed to 
guidelines provided under the Extractive Industries Transparency Initiative (EITI) to help reduce 
corruption.22  The EITI encourages the Government and companies to disclose information on 
revenue flows and payments from extractive industr ies to an agreed third party. The National 
Stakeholders Working Group (NWSG), establishe d under the EITI, has organized a workshop and 
prepared terms of reference for independent audits  of oil subsector payments to the Government. 
Other challenges to the oil subsector include local unrest against oil companies on grounds of 
environmental degradation and marginalization of local communities in the dividends from oil;  and 
illegal siphoning of oil for a thriving  black market for fuel products.23 The Government estimates that 
as much as 300,000 b/d of crude are illegally freight ed out of the country. In 2002, some US$4 billion 
                                                      
21 Salai-i-Martin and Subramanian (2003). 
22 IMF (2004a). 
23 In a survey by the Federal Office of Statistics, so me 80% of firms recognized security of lives and 
property as a serious constraint to business.  WT/TPR/S/147 Trade Policy Review 
Page 64 
 
 
of oil revenue was estimated to have  been lost due to acts of vandalism.24 Furthermore, given the 
dominance of crude oil in Nigeria's exports, oil price fluctuations present challenges to macroeconomic management, with  consequences on the competitiveness of non-petroleum exports, 
via exchange rate movements (Chapter I(2)).  
(b) Downstream petroleum activities 
50. Downstream petroleum activities (i.e. the pro cessing of crude oil to fuel) are controlled by 
NNPC, through its ownership of refineries, pipelines,  and storage depots.  However, the retailing of 
petroleum products is largely in the hands of the private sector.
25  The Government allocates crude oil 
to NNPC for domestic refinery and consumption n eeds; the allocation increased from 300 kg. barrels 
per day (kb/d) in 2002 to 450 kb/d in 2003.  There are currently four refineries in Nigeria: two in Port 
Harcourt, and one each in Warri and Kaduna.  In to tal, they have a nominal refining capacity of 
445 kb/d.  Following the refining process, petroleum products are deposited in large storage depots at 
the refineries and then shipped through pipelines to  15 storage depots located strategically across the 
country.  There is a distribution network of over 5, 000 km of pipelines. The distribution and storage 
infrastructure is controlled by the Pipelines and Pr oduct Marketing Company (PPMC), a subsidiary of 
NNPC.  About 60% of the retail end of the petr oleum product market (i.e. transport of products 
between the strategic storage depots and filling stati ons) is controlled by the downstream arms of the 
multinational oil prospecting companies, and the remai nder is in the hands of a large number of small 
independent indigenous oil companies.  Larg e amounts of petroleum products are imported to 
supplement domestic production.  Nigeria has five je tties for imports: two are located near Lagos, and 
one each in the Western Delta, Port Harcourt, and Calabar.  
51. Until September 2003, the Government, throug h the Petroleum Product Pricing Marketing 
Committee (PPPMC), set wholesale and retail prices for petroleum products (margins for private retailers), to provide Nigerian consumers with cheap fuel at uniform prices.  The low price set by the 
Government often failed to cover th e refining and distribution costs, which discouraged investment in 
the subsector.  Consequently, the subsector suffere d from the lack of maintenance of infrastructure 
and low capacity utilization at all the refineries, which led to low domestic production of petroleum 
products and large amounts of imports to supplement the shortfall.
26  However, the relatively low 
retail prices served as a disincentive for the privat e sector to import fuel, thus making NNPC the only 
wholesale supplier of petroleum products, both thro ugh its own refining activities and imports.  To 
cover the difference between import costs and th e low domestic prices, the Government used to 
allocate crude oil to NNPC at prices below the world market prices. This allocation was partly used 
by NNPC for domestic refining and the rest exported,  with profits on exports  subsidizing imports of 
petroleum products by NNPC.  
52. The cost to Government of these arrangement s was huge:  in 2001 and 2002, the cost of 
charging fuel retail prices below import parity, and the revenue lost by the Government for charging 
NNPC below-export-equivalent crude oil prices, am ounted to 8.4% and 5.3% of GDP respectively. 
Furthermore, the substantial differential between pr ices of petroleum products in Nigeria and those in 
neighbouring countries led to a thriving illegal trad e in petroleum products. An OECD study estimates 
that 30-40% of fuel oil needs of some neighbo uring countries were met by illegal imports from 
Nigeria.27 Other costs associated with the policies in the downstream industry included periodic fuel 
shortages and the concomitant disruption to so cio-economic activities; vandalism; and fraudulent 
                                                      
24 U.S. Department of Energy online information.  Available at:  http://www.eia.doe.gov/emeu/cabs/ 
nigeria.html [05 August 2004]. 
25 IMF (2004a). 
26 In 1999 and 2003, shortages in fuel supp ly led to disruption in economic activities. 
27 OECD (2001). Nigeria WT/TPR/S/147 
 Page 65 
 
 
leakages of pipelines. Some 60% of businesses c onsidered the poor supply of fuel and other 
petrochemicals to be a serious business constraint. 
53. The Government has sought to revamp the dow nstream petroleum subsector to deal with 
these challenges.  The policy thrust is to ensure regular supply and distribution of petroleum products 
through a liberalized and deregulated supply, di stribution, and refining system. In June 2003, 
domestic retail prices for petroleum products were increased from N 26 to N 40 per litre to cover all 
costs;  however, due to labour unrest, the price was lowered to N 34 per litre.  In September 2003, the 
Government announced the end of official retail pric ing, and most retailers increased their prices to 
N40 per litre. The price liberalization led to the thr eat of a general strike, and following consultations 
with unions and downstream oil companies, a consultative retail price fixing body, the Petroleum 
Products Pricing Regulatory Agency (PPPRA), was established. Furthermore, since October 2003, 
government allocation of crude oil to NNPC has been at the equivalent world price.  
54. The tariff on petroleum products, such as re fined petroleum oils, petroleum coke, and 
petroleum jelly is 30%, while the tariff on crude petr oleum oil is 5%;  thus the tariff structure in the 
petroleum subsector is geared towards adding value in the industry.  As with other sectors, the import 
tariff on industrial machinery is 2.5%.  
55. The export of refined petroleum is exclusivel y to the NNPC or under permits issued by the 
NNPC. Currently, Nigeria's only contract for the supply of fuel is with Chad.  Certain public or semi-public industrial establishments are permitted to export part of thei r production of oil products and 
petrochemicals, including condensates and benzene; th is is an area of importance to Nigeria's trade 
strategy as it seeks to add value to exports of petroleum products. 
56. Other reforms under way or envisaged in th e subsector include unbundling of NNPC and 
privatization of its downstream subsidiaries; co mplete liberalization of downstream activities, 
including the distribution network; establishment of an independent regulatory commission for the 
subsector to assure private investors of competition on a level playing field; and the creation of an 
appropriate regulatory framework for petroleum pr oducts. The Government has awarded preliminary 
licences to 18 private investors for th e establishment of private refineries.   
(c) Natural gas 
57. Though Nigeria has been known as a major oil pr oducer, in recent years, its potential reserves 
in natural gas are only now being discovered. Curre nt proven gas reserves are estimated at 3.5 trillion 
cubic metres, among the largest in the world, with  additional reserves estimated at some 25 trillion 
cubic metres. Hence, the potential for gas production c ould be greater than that of oil. Some 60% of 
the proven reserves lie to the east of the Niger Delta.   Much of Nigeria's gas is produced in association 
with oil production; hence, the same multinationa l companies are engaged in  the same system of 
joint-ventures with the NNPC for the production of  gas.  The Nigerian Gas Company (NGC), a 
subsidiary of NNPC, buys gas from the gas produ cing companies at agreed prices and sells it to 
domestic consumers; it has a monopoly in the supply of  natural gas to the domestic market.  The NGC 
operates a 1,000 km gas gathering, transmission, an d distribution pipeline network with a capacity of 
about 56.6 million cubic metres per day.  Natural g as consumption is rising as it is becoming a source 
of fuel for power generating plants, industrial en terprises, and exploration activities of some oil 
companies (Table IV.10). In 2003, natural gas c onsumption increased by 3%, to 29.9 million tonnes 
of coal equivalent (tce); it accounted for 51.2% of the total energy consumed.  WT/TPR/S/147 Trade Policy Review 
Page 66 
 
 
Table IV.10 
Gas production and utilization, 1998-02 
(Million cubic metres) 
Year Production Utilization Flared 
1998 36,036.6 10,886.5 25,150.1 
1999 36,156.4 12,664.6 23,191.8 
2000 47,538.0 21,945.0 25,592.0 
2001 57,529.9 29,639.7 27,890.3 
2002 47,976.0 26,203.4 75,772.7 
Source: Central Bank of Nigeria online information.  Avai lable at:  http://www.cenba nk.org [23 September 2004]. 
58. Various incentives have been put in place over the past six years to encourage the production 
and use of gas.  The production incentives include an  income tax rate of 30% (compared with the 
Petroleum Profit tax of 85%);  accelerated capital allo wances;  investment tax credits; reduced royalty 
rates; tax-free periods; tax-free dividends; and tax- deductible interests on loans. Incentives geared at 
improving the domestic use of gas include duty- free imports of machinery and equipment by 
industrial establishments using gas; VAT-free purchase of plant, machinery, and equipment acquired 
for gas utilization; corporate income tax exemption for up to seven years for activities using gas; and 
no royalty or Petroleum Profit tax on oil extracted  in association with gas.  The tariff rate on 
petroleum gases and other hydrocarbons is 30%.  
59. Natural gas exports have been on the rise in r ecent years (Chart IV.1).  Nonetheless, gas 
production remains well below its potential. Gas is pr oduced mainly in association with oil; almost 
50% of gas produced in 2003 was flared (i.e. burnt at the oil collection point), leading to significant 
economic loss, as well as environmental pollution.28 Furthermore, private sector investment in the 
petroleum subsector was almost exclusively in oil activities, while the potential for gas exploitation is 
largely ignored.  
60. Awareness of the policy shortcomings in the ga s subsector has prompted the development of 
a reform strategy aiming to: end the flaring of gas by 2008; capture (in the meantime) the economic 
value of flared and unexploited gas; rapidly deve lop domestic and regional gas markets; and improve 
responsiveness to environmental issues.  A new Ga s Act will be introduced to:  create a new and 
separate legal and regulatory framework for downstr eam and upstream gas activities; define the title, 
rights, and taxation arrangements for associated and non-associated upstream gas discoveries; allocate 
the responsibility of downstream gas activities to the Minister for Petroleum Resources and Energy; 
create an independent Gas Regulatory Commission to  deal with the full range of economic and 
technical regulation of the downstream gas subsecto r; create a National Gas Transportation Company 
(NGTC), separate from NNPC; permit private sector developers to construct and operate pipelines, and connect these pipelines to the network; license a single distributor for a geographically defined 
area designated as a local distribution zone; and pr escribe the principles on which prices should be set. 
In general, the Government is expected to shift fro m its present role of "hands -on" to that of a policy-
maker, planner, and regulator.
29  
61. A number of major gas projects are under way.  The National Liquefied Natural Gas 
Company (NLNG), a joint-venture between three in ternational oil companies and NNPC, was created 
and commenced the liquefaction of natural gas in  September 1999, with a capacity of 2.7 million 
tonnes annually; the construction of the plant cost US$3 billion. In 2002, the plant's capacity was 
                                                      
28 Though the levels of flaring ar e decreasing, Nigeria is estimated to account for some 12.5% of the 
world's total gas flare. 
29 "Nigerian Natural Gas Strategy Project".  Available at:  http://www.ipaenergy.co.uk/nigeria/ 
finalreport.pdf [09 August 2004]. Nigeria WT/TPR/S/147 
 Page 67 
 
 
increased by 50% at a cost of US$1.3 billion; fina ncing plans are in place for another expansion. 
Furthermore, gas production facilities under th e "Escravos Gas Project" are being expanded30;  and 
one of the world's first commercial gas-to-liquids f acilities is to be constructed. There are also plans 
for the construction of a Trans-West-African pipe line to supply natural gas to Benin, Togo and 
Ghana; the project is anticipated to enable Nigeria to export some 200 million cubic feet of gas per 
day. The Government has also expressed its determ ination to execute the Trans-Saharan Gas Pipeline 
Project, which will carry Nigeria's gas to Europe. 
02004006008001,0001,2001,4001,6001,800
1999 2000 2001 2002 2003
Source: Central Bank of Nigeria.Chart IV.1
Natural Gas Exports, 1999-03
US$ million
 
(ii) Solid minerals  
62. Nigeria is richly endowed with solid minerals , including precious metals, a variety of stones, 
and industrial minerals. Bitumen deposits in Nigeria are estimate d at 42 billion tonnes, an amount 
greater than the existing reserves of both crude petroleum and natural gas. There are nearly 3 billion 
tonnes of "indicated" reserves of coal in 17 identified fields, and over 600 million tonnes of proven 
reserves;  Nigeria's coal is among the most bituminou s in the world, owing to its low sulphur content. 
Around 3 billion tonnes of iron ore deposits are lo cated in three states and the Federal Capital 
Territory;  it is being mined in one state.  An est imated 10 million tonnes of lead and zinc are spread 
across eight states. A billion tonnes of gypsum de posits (an important input in the production of 
cement) are spread over many states.  Other solid  minerals include:  over 40 million tonnes of talc 
deposits;  7.5 million tonnes of barite;  700 milli on tonnes of bentonite; and 3 billion tonnes of 
kaolinitic clay.  Other reserves include gemston es, gold, limestone, marb le, manganese, phosphate, 
rock salt, tin, diatomite, and columbite.  
63. The Nigeria Mining Corporation (NMC), which operates under the Federal Ministry of Solid 
Minerals, processes applications for investment in the solids minerals subsector. The mining of solid 
minerals is largely in the hands of small-scale mining entities that are often poorly financed; some 
                                                      
30 IMF (2004a). WT/TPR/S/147 Trade Policy Review 
Page 68 
 
 
mining activities are also carried out by illegal artisans who lack the technical competence, and 
engage in unsafe and environmental degrading practices.   Hence, in general, the level of exploitation 
of these minerals is very low.  Solid minera ls contribute less than 1% to real GDP.  
64. The Government has recognized that the solid minerals subsector is under-developed and that 
it has potential to, inter alia , stimulate industrial growth, diversify the economy, eradicate poverty, 
and generate revenue and foreign exchange through exports, and has thus undertaken a number of 
measures to develop it.  Incentives available in the su bsector include:  three- to five-year tax holidays  
lower income taxes, of between 20% and 30%;  de ferred royalty payments;  capital allowances;  
investment allowances;  and exemption from the paym ent of import duties.  Currently, bentonite and 
barite, the main constituents of the mud used in drilling oil wells, are import prohibitions on the list 
(Table III.5). The average tariff in mining and qu arrying in 2003 was 30.4%, with a maximum tariff 
of 150% on gypsum.  
65. The mining law of 1946 was revised in 1999 with the purpose of ensuring an orderly 
attractive and conducive atmosphere for the explo itation and development of  solid minerals. Under 
the current legislation, a mining licence is granted to a prospecting company subject to proof of 
economic reserves of the mineral commodity fo r which the concession is sought. Prospecting 
companies have to obtain the right to prospect in  addition to a certificate of entry into the mining 
industry;  they can apply for an exclusive prospec ting licence (EPL) where the mineral is located. An 
EPL is renewable every one or two years, for a surface area not exceeding 22 square km.  Once the company has established the existence of the mi neral in commercial quantities under the EPL it can 
apply for a mining licence over the whole or part of the area covered by the EPL.  
66. During the period under review, the first lapi dary for cutting and polishing gemstones was 
established in Jos.  The Government also approve d a number of projects and agencies to support the 
subsector.  These include artisanal and small-scale mining projects to assist small-scale miners in marketing their products and in creating jobs;  the Geological Survey Agency of Nigeria;  and the Bitumen Development Authority.  In 2003, deve lopment and exploration of Nigeria's bitumen 
resources commenced with some urgency: thus fa r, two companies have been awarded bitumen 
blocks.  Plans to establish two medium-sized coal briquetting plants in Enugu have been concluded;  
and Nigeria has entered into a cooperative arrange ment to establish an international geological 
laboratory.  Furthermore, the Government has decided to privatize the productive activities of NMC and focus its attention on de tailed geologic exploration.  
(iii) Electricity  
67. Nigeria has abundant resources for the generati on of electricity (e.g. rivers, oil, gas). 
However, current generation is highl y inadequate and is a significant ba rrier to the development of the 
economy.  Thermal power accounts for two thirds of  the electricity generated and the balance is 
provided from hydroelectric sources. The Natio nal Electric Power Authority (NEPA) is the 
government monopoly with responsibility for electricity  generation, transmission, and distribution;  
and the Utilities Charges Commission of the Presidenc y is responsible for setting electricity prices.
31 
NEPA's current installed capacity is about 6,000 MW, and average electricity generation in 2003 was 
about 3,300 MW, which is well below the level of electricity demand.  The inadequate supply is 
aggravated by acts of vandalism on distribution and transmission infrastructure. The deficit in electricity supply has led to, inter alia , rationing of power, frequent power  outages, and fluctuations in 
power supply, all of which are very costly to bu sinesses as well as households.  In a recent survey, 
Nigerian manufacturing firms identified, infrastructural weaknesses, in particular the inadequate 
                                                     
 
31 NEPA produces electricity at a relatively high cost  of US$0.11/kWh compared with an international 
average of about US$0.5-0.6/kWh;  however, NEPA is allowed to charge only US$0.35/kWh.  Nigeria WT/TPR/S/147 
 Page 69 
 
 
supply of power, to be their biggest problem. Se veral businesses use generators;  however imports 
require prior approval from NEPA. It is estimated  that generators and accessories account for some 
22% of the total equipment and machinery costs for businesses and, on average, firms spend an additional 3.3% on equipment and machinery dama ged due to power fluctuations and cessations.  
68. According to the authorities, the problems in the electricity subsector are a result of years of 
neglect and under-investment.  For instance, no new power stations were built and no major overhaul 
was carried out on existing plants between 1990 a nd 1999;  hence, by 1999, only 19 out of 79 
generating units were in operation and act ual daily generation was only 2,000 MW.  
69. Since 1999, a series of short and long-term measures have been taken:  a new NEPA 
management has been established;  rehabilitation of old plants and installation of new ones has 
increased operating power generation units to 40;  an d agreements have been made with independent 
power producers to augment supply to the national gr id.  These efforts helped to increase electricity 
generation to 3,300 MW in 2003.  Nonetheless, th e inadequate supply of electricity remains a 
significant hindrance to national development efforts.  Imports of electricity and electricity generation 
sets attract tariffs of 30% and 15% respectively. 
70. As part of its efforts to provide a long-term  solution to Nigeria's electricity needs, the 
Government has embarked on reforms aimed at in creasing the generation capacity to 10,000 MW and 
the transmission and distribution capacity by 60% and 80% respectively;  increasing collection efficiency from 70% to 95%;  and reducing transm ission and distribution losses from 44.5% to 15%. 
In order to attract and encourage private investment and ensure a level playing field for all investors, 
the Government has drafted the Electric Power Sect or Reform Bill to establish an appropriate legal 
and regulatory framework, with clearly defined market  rules, and adequate trading arrangements and a 
cost-reflective tariff structure.  Under the bill, N EPA's vertically integrated structure is to be 
unbundled into six generation companies, 11 distri bution companies, and one transmission company. 
The transfer of these companies to  private-sector operators is sch eduled for 2005. The bill also 
provides for the establishment of an independent regulatory commission, the National Electricity 
Regulatory Commission (NERC), which, inter alia , will be responsible for issuing licences to 
companies operating in the subsector. A rural elec trification agency and a fund to increase rural 
access to electricity are also envisaged. Th e passage of the bill has been delayed.  
(4) M
ANUFACTURING  
71. In 2003, the manufacturing sector accounted for so me 4.7% of total GDP. Nigeria has a fairly 
diversified manufacturing sector (Tables IV.11 and IV.12). The main subsectors (excluding petroleum 
refinery) produce plastic products, textiles, beverages, tobacco products, chemical products, pottery, 
earthenware, food products, electrical machiner y, fabricated metal pr oducts, non-metal mineral 
products, paper and paper products, and transport equipment. About 96% of the enterprises are small 
(less than 100 employees) or medium-sized (less than 300).  Firms in the sector are largely privately 
owned;  however, the Government still owns concer ns in the sugar, cement, newsprint, automobile, 
agri-processing, and steel industries. The sect or employs some 7% of the labour force , and average 
minimum wages and sal aries are above th e national average.32  Manufactured output is consumed 
largely in the domestic market, with only a small fr action sold in international markets, including the 
West African subregion.  
                                                      
32 There are wide disparities betwee n the average minimum wages and salaries of junior and senior 
workers in the sector.  CBN surveys show  that junior workers in this sector are the lowest paid in the economy;  
this represents another important element in the fight against poverty.  WT/TPR/S/147 Trade Policy Review 
Page 70 
 
 
Table IV.11 
Manufacturing production, 1998-02 
(Base year: 1985 = 100) 
 1998 1999 2000 2001 2002 
Beer and stout 119.3 125.5 125.5 125.7 183.5 
Cement 92.3 92.0 91.6 93.5 96.0 
Cotton 94.5 91.8 92.3 93.5 90.8 
Footwear 45.6 45.6 45.5 44.9 44.8 
Paints 112.9 112.3 112.9 114.4 114.0 
Radio and TV 4.5 4.0 3.4 3.3 3.3 
Refined petroleum 119.3 124.8 123.6 133.0 132.6 
Roofing sheet 29.1 28.0 28.1 27.6 28.1 
Soap and detergent 206.7 209.7 209.0 210.1 214.8 
Soft drinks 162.1 170.5 170.9 194.0 198.8 
Sugar confectionary 56.5 55.7 56.0 47.5 48.7 
Synthetic fabrics 708.4 703.7 727.0 665.6 661.5 
Vehicle assembly 14.8 15.8 15.6 15.1 15.1 
Total 133.1 137.7 138.2 137.7 146.3 
Source: Central Bank of Nigeria online information.  Av ailable at: http://www.cenbank.org [23 September 2004]. 
Table IV.12 
Average manufacturing capaci ty utilization rates, 1998-02 
Subsector 1998 1999 2000 2001 2002 
Bakery products 14.5 15.3 30.1 54.3 60.6 
Basic industrial chemicals 31.6 28.0 30.4 51.8 67.5 
Basic metal industries 20.8 0.0 0.0 0.0 0.0 
Beer and stout 54.2 47.1 49.4 54.6 56.3 
Cement and cement products 46.6 48.5 49.1 48.8 61.7 
Drugs and medicines 16.6 36.1 38.6 40.8 39.2 
Fabricated metal products 40.8 45.2 47.1 58.7 60.2 
Glass and glass products 32.0 41.0 42.3 44.9 48.3 
Knitted carpets and rugs  31.8 36.6 35. 8 42.1 45.8 
Leather footwear 28.2 22.4 23.1 22.9 30.7 
Leather products 38.7 39.2 37.9 36.7 31.8 
Meat and dairy products 39.4 41.3 43.2 51.4 54.3 
Miscellaneous food preparation 35.6 38.2 39.2 45.2 50.8 
Motor vehicle assembly 30.5 42.4 41.9 41.4 32.8 
Other chemical and petroleum products 43.6 41.0 46.8 47.6 54.4 
Paints 40.3 43.4 47.0 49.2 36.6 
Paper manufacture and products 27.9 27.0 25.1 27.1 23.7 
Plastic products 40.1 41.2 45.1 47.7 38.7 
Printing publishing 32.6 35.3 38.0 45.6 47.4 
Radio, TV and communication equipments 35.9 33.4 36.7 35.6 39.6 
Roofing sheets .. 39.2 39.8 0.0 0.0 
Saw milling 27.4 30. 0 26.8 35.9 40.9 
Soap and perfumes 40.2 43.3 45.6 48.2 42.1 
Soft drinks 30.9 22.0 27.0 40.2 44.4 
Structural metal products 21.6 0.0 0.0 0.0 39.9 
Sugar cocoa confectionary 30.8 32.0 31.0 35.6 24.5 
Textiles 33.4 20. 2 21.4 31.8 35.5 
Tyres and tubes 30.1 30.5 31.8 32.8 38.4 
Vegetable and grain m ill 12.2 14.0 16. 8 39.2 43.2 
Wine, spirits and distillers .. 36.1 35.6 0.0 0.0 
Wood and cork products 34.9 0.0 0.0 0.0 49.7 
Average utilized rates (%) 32.4 34.6 36.1 42.7 44.3 
.. Not available. 
Source: Central Bank of Nigeria online information.  Avai lable at:  http://www.cenba nk.org [23 September 2004].  Nigeria WT/TPR/S/147 
 Page 71 
 
 
72. Manufacturing faces several obstacles.  In a World Bank survey, Nigeria's manufacturing 
companies identified, in order of importance, th e lack of infrastructure, access to finance, and 
uncertainty and inability to plan (due to fluctua tions in government policie s) as the three biggest 
problems.  The most serious infrastructure problem was the deficient supply of electricity identified as 
a serious business constraint by 73.8% of firms.  Ac cess to finance is hindered by high interest rates 
and collateral requirements.  Long-term access to fina nce is rare;  larger firms are most likely to 
receive loans and SMEs are marginalized.  The ma in sources of business uncertainty were identified 
to be the unstable macroeconomic environment and ex change rate volatility;  and, to a lesser extent, 
the regulatory environment.  Among the areas of regulatory concern were:  the high degree of 
bureaucracy and corruption in obtaining of various permits from public institutions;  and the arbitrary 
and capricious manner in administering certain regulations.  Other factors that affect the sector include: slow port operations;  increasingly higher co sts of imported inputs due to the persistent 
depreciation of the naira;  and, until recently, stat e ownership of several large manufacturing units.  
Together, these factors render Nigeria's manufacturing sector uncompetitive with imports. 
73. The Federal Ministry of Industry's policy objective is to transform the Nigerian economy 
from "its rural and agrarian form to a modern and competitively industrialized one". This is to be 
pursued by, inter alia , encouraging the private sector to play a pivotal role;  providing services for the 
training and development of indigenous skills and manpower;  and financial support.
33  A number of 
measures were implemented during the pe riod under review to support the sector.34  The average 
applied MFN tariffs on manufactured goods (ISIC, Revision 2) increased from 24.4% in 1998 to 
28.5% in 2002 before decreasing marginally to 28% in 2003.  Annual changes to the tariff schedule 
since 2002, have increased the effective level of pr otection for local industries, as tariffs on several 
industrial raw materials and interm ediate goods were reduced, while tariffs on several finished goods 
were increased.  Since 2002, imports of all industr ial machineries carry a maximum tariff of 2.5% and 
are exempted from VAT.  Manufactured products attracting the highest tariffs (between 40-150%) include: tobacco and related products;  wine, spirit and beer;  cosmetics;  motor vehicles;  textiles and 
clothing;  articles of paper pulp;  articles of iron and steel;  pocket lighters;  furniture;  and soap. 
74. Several manufactured goods are on the import prohi bition list. These include: cement in bags;  
printed fabrics;  textiles;  exercise books;  envelop es;  men's footwear; leather bags;  plastic;  soaps 
and detergents;  and assembled bicycles (Table III. 5). The cascading tariff structure and import bans 
effectively distort the incentive structure for pr oducers, as the profitability due to these measures may 
not reflect the economy's comparative advantage, and thus may lead to inefficient allocation of 
resources.  A survey by the Federal Office of Statistics (FOS) shows that the importance of import bans and lower tariffs on inputs for the growth of businesses has declined since 1999, in spite of the 
increased use of these measures;  therefore, the manufacturing sector appears to have more fundamental problems, which cannot be solved by increasing effective protection rates.  
Liberalization of trade in manufactured goods would thus be beneficial to the economy. Other trade 
measures that have an impact on domestic industry include the policy to physically inspect all 
imports;  and the intensified efforts to clamp down on dumping of sub-standard goods on the Nigerian 
market (Chapter III((4)(ii)). 
                                                     
 
33 Federal Ministry of Industry (2004). 
34 The objective of trade policy in the manufacturing sector is to stimulate competition and promote 
investment in Nigeria with a bias towards exports, while developing the skills and capacity to compete with imports in the domestic market.  According to the authoritie s, the export regime is aimed at helping to diversify 
the export base and enhance non-oil foreign exchange earnings;  whereas, th e tariff regime on imports aims to 
expose domestic manufacturers to import competition, and attract investment into raw materials and intermediate goods production. WT/TPR/S/147 Trade Policy Review 
Page 72 
 
 
75. Investment incentives for the manufacturi ng sector include five-year tax holidays35;  tax relief 
for research and development;  capital allowances;  tax credits to industries using specified minimum 
levels of local raw materials;  tax concessions on local value-added;   and re-investment allowances 
(Table II.2). Under the privatization programme, th e State has divested its interests in several 
manufacturing firms in the cement, fertilizer, pulp and paper, sugar, and automotive industries.  
76. In 2001, the Government established the Bank of Industry (BOI) to assist ailing industries and 
promote new ones. To be eligible for BOI support, projects must have a large transformation impact 
by supporting forward and backward linkages, u se domestic inputs, generate large employment 
opportunities, and produce quality products for export.   Furthermore, in 2001, a Small and Medium 
Industries Equity Investment Scheme (SMIEIS) was established by banks, thro ugh the setting aside of 
10% of pre-tax profit, for equity partic ipation in SMEs. As of July 2004, N 6.6 billion had been 
invested, half in the manufacturing sector. Other support to SMEs includes: capacity building programmes for export production;  establishment of  industrial parks for micro enterprises;  
standardization and quality control services;  pr omotion of SME clusters  and networks;  and 
establishment of a Small and Medium Industries De velopment Agency to coordinate and support the 
development of SMEs.  Reforms under way in the electricity, telecommunication, and transport 
subsectors will have a positive effect on the manufacturing sector. 
77. In 2003, the index of manufact uring production increased by 1.1%. Capacity utilization levels 
also increased from 34.6% in 1999 to 44.3% in 20 03. In 2000, the manufacturing sector contributed 
0.2% to Nigeria's foreign exchange earnings. Howeve r, in terms of non-oil exports, it accounted for 
some 57% of foreign exchange earnings, th us representing a potential channel for export 
diversification.  Manufactured products accounted  for some 75% of total imports in 2000. 
78. Under the NEEDS programme, the Government's target growth for the sector is 7% per 
annum;  and a capacity utilization rate of about 70% is expected by 2007. This is to be achieved by, 
inter alia , removing the remaining infrastructural constraints;  providing appropriate institutional 
support;  improving access to finance;  providing ade quate fiscal and investment incentives in support 
of export-oriented manufacturing activities;  foster ing the growth of SMEs;  providing targeted 
financing for science, technology, and research a nd development projects;  and providing incentives 
to facilitate joint ventures between fo reigners and Nigerian counterparts. 
(5) S
ERVICES  
79. In 2003, the services sector accounted for 24.2% of GDP.  Nigeria's main services activities 
are: wholesale and retail trade, real estate, transportation, financial, communication, hotel and 
restaurant, business, and government services.  In  general, services are dominated by public 
ownership.  However, ongoing reforms seek to dere gulate and liberalize the sector, thereby opening it 
up to private sector investment.36  Services are used intensively in production and trading activities 
and hence play a key role in the competitiveness of locally produced goods.  Nigeria is a net importer 
of services, in particular business, travel, frei ght, and communication services;  in 2003, net service 
imports amounted to about US$3 billion.  
80. Nigeria has undertaken commitments under GATS in four out of 12 service subsectors. These 
are communications, financial services, transport servi ces, and tourism and travel related services;  the 
                                                      
35 These apply to certain newly established manufacturing firms (pioneer industries). 
36 Oyejide and Bankole (2001). Nigeria WT/TPR/S/147 
 Page 73 
 
 
extent of commitments varies across subsectors (Table IV.13).37 Horizontal or cross-sectoral 
limitations apply to commercial presence (mode 3)  and presence of natural persons (mode 4) for 
supply of services.  Foreign service providers must incorporate or establish the business locally in accordance with the relevant provisions of Nigeri an law.  Measures affecting presence of natural 
persons are unbound, except for entry and tempor ary stay of personnel employed in senior 
management and experts jobs for the im plementation of foreign investment.  
Table IV.13 
Summary of GATS commitments 
 Limitations Cross- 
border supply Consumption 
abroad Commercial 
presence Presence of 
natural persons 
Communication services     
(C) Telecommunication servicesa     
Market access None None None  None Sale/installation of terminal 
equipment (CPC 7521, 7522, 
7523) National treatment None  None None None 
Market access n.a. n.a. None None  Operating pay phones 
(CPC 7521) National treatment n.a. n.a None None 
Market access Unbound Unbound None  None Mobile communications: 
cellular, paging, etc. (voice and data)
b (CPC 7521, 7523) National treatment Unbound Unbound None none 
Market access None None None None Value-added services 
(CPC 7523) National treatment None None None None  
Financial services      
A. Banking and other financial 
services (excluding insurance)      
Market access None Unbound with the 
exception of (c) None Unbound (a) Acceptance of deposits 
and other repayable funds from the public (CPC 
81115-81119) National treatment None Unbound with the 
exception of
 (c) None Unbound 
Market access None Unbound with the 
exception of (c) None Unbound (b) Lending of all types, 
including mortgage credit, factoring and financing of 
commercial transactions 
(CPC 8113) National treatment None Unbound with the 
exception of
 (c) None Unbound 
Market access None Unbound with the 
exception of (c) None Unbound (c) Guarantees and 
commitments 
(CPC 81119**) National treatment None Unbound with the 
exception of (c) None Unbound 
Market access None Unbound with the 
exception of (c) None Unbound (d) Financial leasing 
(CPC 8112) 
National treatment None Unbound with the 
exception of (c) None Unbound 
Market access None Unbound with the 
exception of (c) None Unbound (e)  All payments and money 
transmission services, 
including credit, payment and similar cards, travellers cheques and 
cheques (CPC 81339**) National treatment None Unbound with the 
exception of
 (c) None Unbound  
B. Insurance services      
Market access Unbound Unbound None Unbound (a) Life, accident and health 
insurance services 
(CPC 8121) National treatment None Unbound None Unbound 
Market access None Unbound None Unbound (b) Non-life insurance 
services (CPC 8129) National treatment None Unbound  None Unbound  
Table IV.13 (cont'd) 
                                                      
37 Nigeria's Schedule of Specific Commitments are contained in GATS/SC/65, 15 April 1994;  and 
GATS/SC/65/Suppl.1, 25 February 1998.  A draft consolidated version prepared by the WTO secretariat is contained in S/DCS/W/NGA, 24 January 2003.  WT/TPR/S/147 Trade Policy Review 
Page 74 
 
 
 Limitations Cross- 
border supply Consumption 
abroad Commercial 
presence Presence of 
natural persons 
Market access None None c Unbound  (c) Reinsurance and 
retrocession (CPC 81299*) National treatment None None None  Unbound  
Market access None None None Unbound (d) Service auxiliary to 
insurance, including 
broking and agency 
services (CPC 8140) National treatment None  None None Unbound  
Tourism and travel-related services A.-D. (CPC 641-643, CPC 7471, CPC 7472)  
Market access None None None None 9. Tourism and travel-related 
services A.-D. (CPC 641-643, 7471, 7472) National treatment None None None  None  
Transport services      
A. Maritime transport services       
Market access Unbounde None Nonef Unbound  (a) Foreign transportationd 
(CPC 7212) National treatment Unbound None None Unbound  
Market access Unbound None Unbound Unbound (b) Rental vessels with crew 
(CPC 7213) National treatment Unbound None Unbound Unbound  
Market access Unbound Bound None Unbound (c) Maintenance and repair of 
vessels (CPC 8868) National treatment  None Boundg None Unbound  
D. Rail transport services      
Market access Unboundh Unboundh None None (a) Maintenance and repair of 
rail transport equipment (CPC 8868) National treatment Unbound
h Unboundh None None 
n.a. Not applicable. 
a The national carrier, NITEL, has monopoly of all public switche d and international services;  and is charged with the 
responsibility of network infrastructure expansion.  There is a progressive move by Government through the National 
Communications Commission to introduce some element of priva tization and competition in the areas listed under this offer. 
b The provision of any service across the border (international se rvices) by passing the network or diverting international tra ffic 
from NITEL is not permitted, and such measures  can only be done in co-operation with NITEL. 
c The establishment of a reinsura nce company in Nigeria is subject to the approva l of the Minister of Finance, who shall have 
regard of the need to control the number of reinsurance companies opera ting in the country.  Insurers are required by law to ce de 
20 per cent of their business compulsorily to Nigeria Reinsuran ce Corporation which has the right to first refusal before the 
ceding of any reinsurance business outside Nigeria.  
d Cabotage is excluded. 
e Access to cargo is subject to the provisions of the National Shipping Policy Decree No. 10 of 1987:  (i) at least 40 per cent  of 
liner cargo is reserved for national carrier s;  (ii) 100 per cent of Government cargo is reserved for national carriers;  (iii)  50 
per cent of bulk trade (dry/wet) is reserved for national carrier s (cabotage is excluded);  and (iv) 50 per cent of cargo gener ated 
through technical assistance or international aid is rese rved for ships owned or hired by national carriers.  
f Provided ship-owner's representativ e complies with relevant laws of establishing business in Nigeria. 
g Authorization is necessary for national carriers.  h Unbound due to lack of feasibility. 
Source:  WTO document S/DCS/W/ NGA, 24 January 2003.  
81. During the period under review, Nigeria signed the instrument of acceptance of the Fifth 
Protocol to the GATS (the Financial Services Protoc ol). It has also participated in WTO services 
negotiations, in particular on maritime transport services. As of November 2004, it had not presented 
any initial offers but had received a number of initial requests. 
(i) Financial services 
82. The Nigerian financial system is among the largest and most divers ified in sub-Saharan 
Africa. It consists of 89 deposit banks, with a to tal of 3,382 branches;  532 community banks;  six 
development finance institutions;  one stock exch ange;  one commodity ex change;  five discount 
houses;  118 insurance companies;  88 primary mort gage institutions;  100 finance companies;  and 
90 bureaux de change. However, the deposit banks overwhelmingly dominate financial services, with 
only ten of the largest banks accounting for some  51% of total non-central-bank assets and deposit 
liabilities. Nigeria WT/TPR/S/147 
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83. The regulatory and supervisory institutions gove rning financial services include: the Central 
Bank of Nigeria, which is the highest regulatory and supervisory authority;  the Ministry of Finance, 
which cooperates with the CBN on monetary matter s;  the Nigeria Deposit Insurance Corporation 
(NDIC), which complements the functions of th e CBN by providing deposit insurance to boost 
confidence in the banking system;  the Secur ities Exchange Commission (SEC), which seeks to 
promote an orderly and active capital market;  the National Insurance Commission (NAICOM), which 
regulates and supervises the insurance industry;  the National Board for Community Banks (NBCB), 
which seeks to support the establishment and opera tion of community banks;  and the Financial 
Services Regulation Coordination Committee, which seeks to coordi nate the supervision of all 
financial institutions.  
(a) Banking 84. At end December 2003, aggregate assets/liabilities of deposit banks were N
3,047 billion, 
about 40% of GDP. The banking subsector is highly concentrated, as ten of the largest banks account 
for 55.3% of its total assets and 56.2% of  its liabilities. In 1998, there were ten  government-controlled 
banks, with combined assets of 4.6% of the tota l;  and foreign banks had majority shares in three 
banks and minority shares in 13 others.  
85. Under the GATS, Nigeria bound, without lim itation, cross-border supply and commercial 
presence for banking services.  Foreigners, corporates or individuals can own up to 100% equity in 
any enterprise.38 
86. Liberalization and deregulation reforms of financial services have been under way since 1987. 
In 1999, a commercial operating licence was grante d to one foreign bank, ending an eight-year 
embargo on the issue of new banking licences.  Under its privatization programme (Chapter 
III(4)(iv)), the Government sold shares in five banks  to the public.  In 2000, the CBN adopted the 
universal banking system by recalling existing licences of all commercial and merchant banks and granting a uniform licence to all banking institutions .  Consequently, all banks are free to undertake, 
in addition to traditional banking, capital market ac tivities and insurance marketing services.  Current 
reforms seek to consolidate the system.  To this effect, the current minimum capitalization 
requirement for banks will be raised as of December 2005, from N
2 billion to N 25 billion.  The CBN 
has also supported development banks by restructur ing and recapitalizating them. Similar assistance 
has been offered to specialized financing schem es such as the ACGSF (section (2)(ii)(a)) and the 
SMIEIS (section (4)).  The CBN also encourages banks  to contribute some 10% of profits before tax 
to the SMIEIS fund;  in December 2003, the fund amounted to N  19.7 billion.   
87. Supply of services by banks is reported to be improving with the adoption of the Nigerian 
Automated Clearing System;  the introduction of debit cards, which reduces dependency on cash in 
the economy;  and the use of on-line banking servi ces by some banks.  The NDI C has also helped to 
boost depositor confidence in the banking system ;  as at December 2003, it had paid about 
N3.3 billion insured deposits out of a total of N 5.2 billion to depositors of 34 banks in liquidation.  A 
bill to increase the deposit insurance coverage by NDIC from N 50,000 to N 200,000 is before the 
National Assembly.  In 2003, 11 licensed banks were  rated sound, 53 satisfactor y, while 14 were rated 
marginal and nine unsound. 
88. All banks are required to meet performance criteria such as N 25 billion minimum paid-up 
capital requirement (as of December 2005);  a mi nimum of 40% liquidity ratio and 10% capital 
adequacy ratio;  less than 20% of non-performing lo ans:  a 9.5% minimum cash reserve ratio;  and the 
Basel principles.  Requirements applicable to banking  management and internal controls include;  the 
                                                      
38 WTO document S/DCS/W/NGA, 19 August 2004. WT/TPR/S/147 Trade Policy Review 
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involvement of at least two officers in all major d ecisions;  corporate planning;  and a succession plan 
for key officers.  All banks are to be incorporated in Nigeria and must abide by Nigerian banking rules 
and regulations.  Branches of fo reign banks are not allowed.  
89. In spite of reforms, the role of banks in financial intermediation remains weak.39  Interest 
rates remain high (Table I.1) and are widely spread.  An estimated N 400 billion in currency exists 
outside the banking system, and many businesses, across all sectors, lack access to finance.40  The 
allocation of funds is skewed towards large borro wers. In some cases, banks reportedly allocate a 
large share of funds to government treasury bills , engage in foreign exchange transactions, and open 
letters of credit for importers, neglecting productive activities in the real sector of the economy. Many 
small and medium-scale enterprises, including expor ters of non-oil products, do not have access to 
funds from the formal banking system and thus rely  on informal money lenders, who charge much 
higher interest rates.  Other problems in the Nige rian banking system include: increased uncertainty 
and inability to make long-term business plans due to heavy reliance on public sector funds, which 
depend on widely fluctuating income from oil;  ne glect of small and medium-scale savers;  weak 
capital base;  engagement in unorthodox practices by  some banks in order to achieve compliance with 
regulatory requirements;  weak internal control sy stems, which facilitates fraud and forgeries;  and 
inadequate legal provisions to handle banks in difficulties and to protect supervisors.41 
(b) Insurance  
90. The insurance industry comprises life, non-life,  and composite insurance companies. The 
industry's regulatory authority is the Nigerian Insu rance Commission.  Under the Insurance Decree of 
1 January 1997, the minimum paid-up share capital of  companies carrying out insurance businesses is 
N20 million, except in cases of special risk, incl uding oil and gas insurance, credit insurance, 
insurance of contractors and engineering, and marine and aviation insurance business, where the 
minimum paid-up capital is N 50 million.  The minimum paid-up capital for re-insurance companies is 
N150 million.42  In 2003, a new Insurance Act was passed.  
91. Until recently, the insurance industry was domi nated by two state-owned companies, the 
Nigerian Insurance Company and the Nigeria Re-ins urance Corporation;  both concerns have been 
privatized. 
92. Nigeria's commitments under GATS cover all in surance services. All government properties 
are to be insured with the National Insurance Corpora tion of Nigeria;  and all imports into Nigeria are 
to be insured locally by insuran ce companies registered in Nigeria.  An insurance broker must obtain 
approval before entering into a contract with fore ign insurers. Insurance companies must invest and 
hold Nigerian assets, at least equivalent to the amount of insurance business transacted in Nigeria. The establishment of a reinsurance company in Nigeria is  subject to the approval of the Minister of 
Finance, who shall have regard to control the number of reinsurance companies operating in the 
                                                     
 
39 It has been suggested that financial services reforms in Africa have focused too narrowly on the 
elimination of financial repression by way of price and in terest rate liberalization, whilst not adequately dealing 
with structural and institutional is sues confronting the financial system.  The importance of a stable 
macroeconomic environment for the success of fina ncial services reforms is also acknowledged 
(Aryeetey, 2003).  
40 Nigerian banks are reported to  focus on larger depositors. 
41 Both the IMF and the World Bank have noted the need for Nigeria to provide adequate legal 
provisions to protect supervisors and to prevent the Government from interfering in the discharge of their 
responsibilities in respect of the implementation of corrective actions on failing or distressed banks.  
42 All insurance broking firms and loss adjusting companies must be incorporated as limited liability 
companies with a mini mum share capital of N 5 million. Nigeria WT/TPR/S/147 
 Page 77 
 
 
country. Insurers are required by law to cede 20% of their business compulsorily to Nigeria 
Reinsurance Corporation before ceding an y reinsurance business outside Nigeria.  
(ii) Telecommunications 
93. Though telecommunications services account for less than 1% of GDP, they remain a key 
element in the lowering of transactions costs in Nigeria.43 The formulation and oversight of the 
implementation of telecommuni cations policy are the responsibility of the Ministry of 
Communications. The Nigerian Communications Co mmission (NCC), established in 1992, exercises 
direct regulatory oversight over the telecommunica tions industry. Telecommunications services are 
supplied by the Nigerian Telecommunications Li mited (NITEL), the dominant national carrier, and 
other licensed private operators and service providers.  
94. In 2000, the Government set out a National Policy on Telecommunications with the 
overriding objective of modernizing and rapidly expanding the telecommunications network and 
services in Nigeria.44 This has been pursued by allowing mo re private operators in the subsector. 
During the period under review, the NCC granted, inter alia : a second licence for the operation of a 
national carrier alongside NITEL;  digital mobile licences (GSM) to four companies, including 
NITEL (Chart IV.2);  50 fixed wireless access licenc es to 25 companies to operate in 20 states;  one 
long-distance carrier licence;  and two global m obile personal communication system licences. 
Furthermore, various incentives were put in place to  encourage investment in the subsector.  These 
include the removal of restrictions on the level of foreign equity in the subsector;  reduction of import 
duties on telecom equipment from 25% to 5% over th e 2001-03;  simplification of procedures for the 
import of telecommunications equipm ent and development of related software;  granting of pioneer 
status (i.e. five-year tax holiday) to qualified i nvestors;  and fiscal incentives to encourage local 
manufacture. In September   Nigeria also launched into orbit its first satellite, NIGERIA SAT-I.45 
                                                      
43 The growth effects of telecommunications have both static and dynamic innovation dimensions. 
Economy-wide gains from improved telecommunications services stimulate overall growth and contribute to 
poverty reduction.   
44 The short-term objectives  of the plan are to, inter alia , implement network development projects to 
ensure that the country meets and exceeds the ITU recommended minimum teledensity of one telephone for 
100 inhabitants; participate effectively in international telecommunications activities in order to promote telecommunications development in Nigeria, meet the country's international obligations, and derive maximum 
benefit from international cooperation in these ar eas; establish a National Frequency Management Council 
(NFMC); ensure that the Government divests its inte rest in the state-owned telecommunications entities; 
promote competition to meet growing demand through the full liberalization of the telecommunications market; 
and review and update telecommunications laws in order to bring all telecommunications operators under the 
regulatory control of NCC.  Th e medium-term objectives are to, inter alia , provide a new regulatory 
environment that is sufficiently flexible to take into account new technological development and the 
international trend towards convergence; meet telecommuni cations service needs of the social, commercial, and 
industrial sectors of the economy;  ensure that public telecommunica tions facilities are accessible to all 
communities in the country; establish and meet aggressive targets for the installation of new fixed and mobile 
lines; encourage Nigerian telecommuni cations companies to become global leaders in the industry; and 
encourage the development of an information super-highway  that will enable Nigerians to enjoy the benefits of 
globalization and convergence. 
45 This is intended to help in data gathering for use in disaster management, agriculture, and urban 
planning. WT/TPR/S/147 Trade Policy Review 
Page 78 
 
 
Chart IV.2
Mobile market share, as at March 2004
Source: Nigerian Communications Commission.NITEL GSM
12
ECONET
25MTN
45GLOBACOM
18Per cent
 
95. The nature and effectiveness of regulation re main crucial for reaping the benefits from 
telecommunications liberalization.46  A new Telecommunications Act was adopted in July 2003. 
Under the new Act, NCC's authority has been exte nded to enable it grant and renew communication 
licences, and monitor and enforce compliance with  licence terms and conditions by licensees. Under 
the Act, NCC is also responsible for the prom otion of fair competition in the communications 
industry, and for the protection of communications  services and facilities providers from misuses of 
market power or anti-competitive and unfair prac tices by other service providers or equipment 
suppliers. Tariffs and charges set by licen ce holders are subject to approval by NCC47;  NCC currently 
determines a ceiling price.  Operators are allowed to  manage their own infrastructure.  However, all 
network services or facilities providers are obliged to  allow interconnection with their communication 
systems for licensees that so requ est;  all interconnection agreements are to be agreed upon between 
the relevant operators and registered with NCC, with  the latter acting as an arbiter in the event of any 
anti-competitive practice. The NCC is also responsib le for the management and administration of the 
frequency spectrum for the communications subsector, as well as assisting the newly created National Frequency Management Council (NFM C) in developing a national fre quency plan. Furthermore, the 
new Act empowers NCC to design and determine a sy stem that promotes the widespread availability 
and use of network and application services through out Nigeria, in particular to unserved or 
underserved areas and underserved groups within a co mmunity. In this regard, a special Universal 
                                                     
 
46 Fink, Matoo and Rathindran (2002).  
47 According to the NCC Act, the tariffs should be fair and non-discriminatory; cost-oriented; void of 
cross-subsidization; attractive to inve stors, taking into account regulations and recommendations of international 
organizations of which Nigeria is a member, and should not contain discounts that unreasonably prejudice competitive opportunities of other providers.  Nigeria WT/TPR/S/147 
 Page 79 
 
 
Service Provision fund is envisaged, with revenue  from the Government, licensed operators, donor 
agencies, and commercial sources.48  
96. These reforms are having a favourable impact on Nigeria's telecommunications subsector. 
Teledensity has increased considerably:  the num ber of connected fixed lines increased from 400,000 
in 1999 to over 1 million in 2004;  and the numbe r of connected digital mobile lines increased from 
zero in 2000 to over 7 million in 2004.  This recent growth contrasts with the previous four decades 
when connected telephone lines increased at an aver age rate of 10,000 lines a year.  Consequently, 
teledensity levels increased from 0.42 lines pe r 100 inhabitants in 1999 to 6.73 lines per 100 
inhabitants as at October 2004 (Table IV.14 and Tabl e IV.15). The high growth in mobile phones, has 
made Nigeria one of the fastest growing mobile markets in Africa.  Furthermore, the tariffs and 
charges are on a downward trend.  In 1999,  the average line inst alment cost was N 100,000;  however, 
by 2004, the acquisition cost of fixed lines was N 13,000 and, similarly, the initial cost for analogue 
mobile lines was reduced from N 60,000 to N 8,000 between 1999 and 2003.49  According to a survey 
by the Federal Office of Statistics (FOS), in 200 3, 52% of firms observed that improvements in the 
telecommunications subsector had increased th eir businesses, compared with 31% in 1999.  
Table IV.14 
Growth in telecommunications services, 2000-04 
 December 2000 December 2002 December 2003 March 2004 
Number of national carriers 1 2 2 2 
Number of operating ISPs 18 30 35 35 
Number of active licensed fixed line operators 9 16 30 30 
Number of licensed mobile operators 1 4 4 4 
Source: Nigerian Communications Commission online inform ation.  Available: at http://www.ncc.gov.ng 
 [23 September 2004]. 
Table IV.15 
Connected lines and teledensity, 1999-04 
 1999 2000 2001 2002 2003 Mar 04 Jun 04 Sept 04 Oct 04 
Fixed 473,316 553,374 600,321 702,000 888,534 895,385 988,217 1,035,200 1,056,544 
Mobile 35,000 35,000 266,461 1,569,050 3,149,472 3,811,239 4,961,921 6,022,000 7,020,000 
Total 508,316 588,374 866,782 2,271,050 4,038,006 4,706,624 5,950,138 7,057,200 8,076,544 
Teledensity 0.42 0.49 0.72 1.89 3.36 3.92 5.45 5.88 6.73 
Source: Nigerian Communications Commission. 
97. The improvements to the telecommunications infra structure has been possible mainly due to 
inflows of private investment, following liberalizati on in the subsector;  it is estimated that between 
1999 and 2003, private investment in the subsector amounted to some US$4 billion.  Some 5000 
people have been employed by the GSM opera tors alone and 400,000 indirect employment 
opportunities are estimated to have been created  through the GSM operators (including recharge 
hawkers, resellers).50 In general, the expansion in the use of telecommunications has had a favourable 
impact on production and trade activities in the real  sector, and government revenue from licence fees 
alone was over US$1.1 billion in 2000-03.  The NCC estimates the contribution of growth in telecommunications industry on Nigeria's GDP at some 1-3%.  Nonetheless, despite significant improvement, teledensity remains low and the dema nd for telecommunications facilities is expected 
                                                     
 
48 Nigerian Communications Commission online inform ation.  Available at:  http://www.ncc.gov.ng/ 
index1_e.htm [17 August 2004]. 
49 Charges for internet usage in cybercafé have fallen from N 600-N 750 in 1997 to N  100-N  150. 
50 Nigerian Communications Commission (2004). WT/TPR/S/147 Trade Policy Review 
Page 80 
 
 
to continue to rise.  Furthermore, the high cost of international calls negatively affects 
competitiveness and constitutes a constraint  to exports, particularly for SMEs. 
98. Massive investment is still required to expand capacity (both human and physical)51 and 
improve the still weak infrastructure base. Further alignment of telecommunications tariffs to costs, 
and the locking-in of reforms within commitments under GATS could give reforms further credibility, 
stimulate further competition, and attract more invest ment.  Furthermore, futu re expansion of facilities 
will depend upon the reliability of the electrical power supply;  a reliable database for a directory;  
trained manpower;  and a strong financial regul atory regime, amongst ot hers. Other challenges 
include the need to ensure competition in all seg ments of the market;  improving the quality of 
service;  decreasing in network congestion and interc onnection bottlenecks;  maintaining a  favourable 
regulatory and investment regime;  and supporting rural access.52 In 2002, a bid to privatize NITEL 
was not successful;  however, it is scheduled to be privatized in  December 2005.   
(iii) Transport 
99. Nigeria's transportation subsector encompasses a network of roads, railways53, waterways, 
and seaports. In 2002, the subsector's direct share of GDP was 2.5%;  however, as a key 
infrastructural service it is vital to improving comp etitiveness (via lower input and output prices) and 
to poverty reduction. Higher transport co sts also reflect on consumer prices.  
100. The Federal Ministry of Transport is responsib le for formulating and implementing policies;  
providing transport infrastructure; and developing sk illed manpower in the transportation subsector. It 
is assisted by a number of parastatals.54  Policy initiatives in the subsect or seek to achieve a more 
effective, productive, and safe transportation sy stem.  A National Transport Sector Policy was 
developed in 2003. The policy aims to, inter alia,  promote trade and transport services through an 
efficient and affordable integrated transport netw ork, and transparent and streamlined administrative 
procedures based on modern management techniques; improve the safety, security, quality, and speed of movement of goods and people;  increase the invol vement of the private sector in the financing and 
operation of transport-related services; structur e the infrastructure to ensure environmental 
sustainability and internationally accepted standards;   build a strong financial base for the creation, 
maintenance, and upgrading of tran sport infrastructure; and promote public transport over private car 
travel. Under its GATS Schedules, Nigeria has unde rtaken commitments in maritime and rail 
transport services.  
(a) Road transport 
101. Nigeria has 193,200 km of roads, of which 32,100 km are federal roads, 30,500 km are state 
roads, and 130,600 km are rural roads.  The road network density is 209 km per 1,000 km
2 and 
1.61 km per 1,000 population.  The total asset value of the road network is estimated at US$20 billion. 
Road infrastructure is largely provided by the Government; between 1999 and 2003, 61 roads with a 
                                                      
51 In 2004, the Digital Bridge Institute was establis hed to support the manpower needs of the Nigerian 
telecommunications industry. 
52 Information available at:  http://www.ncc.gov.ng/index10_e.htm. 
53 There are about 3,505 km of mainly narrow-gauge railways.  The two principal lines connect Lagos 
and Nguru, and Port Harcourt with Maiduguri.  
54 The Ministry of Transport supervises the followi ng parastatals, which are its implementing agencies: 
Nigerian Ports Authority;  National Maritime Authority , Nigerian Unity Line Plc;  National Clearing and 
Forwarding Agency;  National Shippers Council;  Nige rian Inland Waterways Authority;  Nigerian Railway 
Corporation;  Maritime Academy of Nigeria;  Nigeria Institute of Transport Technology;  and the Joint Dock 
Labour Industrial Council. Nigeria WT/TPR/S/147 
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total length of 2,476 km and 2,985 metres of bridges were completed;  another 79 roads with a total 
length of 5,209 km are under construction.  Though the private sector is allowed to invest in the road 
network under the supervision of the Ministry of Works, there are no privately developed or 
commercially operated roads in Nigeria.  
102. Nigeria's road network is the principal trans port route for goods and passengers to various 
income-generating and consumption activities.  For instance, some 98% of Nigeria's non-oil 
exportables are conveyed to seaports by road;  oil,  on the other hand, is carried through pipelines, 
conveyor belts, and suction pipes. Transport of goods to sea ports by rail and water is undeveloped. 55 
103. Road transportation services are largely prov ided by the private sector, and range from 
company-operated fleets to one-man operations.  Acco rding to the authorities, there are no restrictions 
to foreign participation in the provision of road transport services in Nigeria, and prices are market 
determined.  Government involvement in direct provision of transport services was limited to the 
Urban Mass Transit Scheme, which has ended.  Th e National Committee on the Reactivation of Road 
Transportation in Nigeria recommended the setting up of a special fund for the purchase of buses. 
Another National Committee was established to mo nitor and implement the ECOWAS Protocol and 
Decisions on Transport.  The success of this comm ittee will play an important role in enhancing 
sub-regional trade, as there are currently several road  blocks (legal and illegal) that hinder the transit 
of goods within West African States, including Nigeria.   Nigeria has also revi ved its participation in 
the United Nations Communications and Transport D ecade for Africa II, which aims to provide an 
enabling environment for linking African countries through a network of transport and 
communication facilities.  
104. The road transport infrastructure and services in  Nigeria are in a very poor state, and road 
transport is slow and in some cases unsafe.56  The subsector suffers from lack of maintenance, mainly 
due to inadequate funding and poor planning that leads to erosion of investments and wastage of 
resources.  The subsequent costs to the econo my (in terms of additional vehicle and road 
rehabilitation costs), estimated at some 3.5% of  GDP, substantially affects the competitiveness of 
Nigeria's non-oil exports.57  Efforts to address this problem include the establishment, in 2002, of the 
Federal Road Maintenance Agency responsible fo r the inspection and maintenance of all existing 
federal trunk roads. 
(b) Maritime transport and port operations 
105. The main regulatory and implementing agenci es for maritime transport are the Federal 
Ministry of Transport;  the National Maritime Authority (NMA);  the Nigerian Ports plc; and the 
Nigerian Shippers Council. The Nigerian National Sh ipping line is the national carrier;  however, the 
NMA has granted national carrier status to some private ocean lines to complement the services of 
NMA.  Until recently, the allocation of cargo to shipping companies was carried out by NMA. 
However, due to abuses of the system, the polic y was abolished;  shipping companies currently 
compete for available cargo.  In general, the privat e sector, in particular foreign shipping companies, 
dominates ocean shipping in Nigeria.  
106. The Nigerian shipping policy decree was enact ed in 1987 with the main objective of 
increasing the participation of domestically owned sh ips in international trade. The decree limits the 
                                                      
55 Water transportation accounts for about 2% of goods conveyed to Nigerian sea ports; in 2000 and 
2001, no goods were recorded to have been transported by the railways to sea ports.  
56 A CBN survey showed that some of the roads, constructed over 30 years ago, had never been 
rehabilitated;  this has resulted in major cracks, depr essions, broken-down bridges, and numerous potholes. 
57 World Bank (2003). WT/TPR/S/147 Trade Policy Review 
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total value of foreign participation in maritime tr ansport service transactions and the total number of 
foreign natural persons who may be employed in th e maritime transport service subsector. In effect, 
100% of the crew, at least 75% of the shipboard o fficers, and wherever possible the chief engineer 
must be Nigerian. The decree also gives indigenous shipping lines exclusive rights to carry at least 
40% of Nigeria's sea-borne trade, in line with th e UNCTAD Code of Conduct for Liner Conferences. 
Furthermore, 50% of Nigeria's oil exports must be carried by vessels flying the Nigerian flag. 
National carrier status has been granted to six  indigenous shipping lines. Under Decree 37 of 1999, a 
Joint Dock Labour Industrial Council was established to reorganize, streamline, and bring reason to 
the dock labour industry. Among the issues addressed by the law are strike actions and corrupt and 
criminal practices by dock workers. The law is thought  to have helped to increase participation by 
international shipping lines in maritime transport from and to Nigeria, to the faster turn-around of 
vessels, and the reduction in freight costs.58  The Nigerian Coastal and Inland Shipping Act, passed in 
2003, introduced a cabotage shipping regime, which has been in force since May 2004.  The Act 
contains waiver provisions that allow foreign firms to engage in coastal shipping in the event that 
Nigerian firms lack the required capacity.  
107. A cargo defence fund has been set up in a bid to protect the interest of indigenous shippers.  
The scheme aims to facilitate th e settlement of international trade disputes and claims involving 
Nigerian shippers. Furthermore, the abolished car go allocation policy is to be replaced by a cargo 
support scheme.   
108. Ports are owned by the Federal State.  Ports and auxiliary services, such as container station 
and depot services, maritime freight forwarding, mar itime cargo handling, and repair of vessels may 
be carried out by foreign suppliers. Under the Port s Act, private persons are allowed to undertake 
auxiliary services activities. The Minister of Trans port is authorized to grant licences to private 
citizens or foreigners to use the water front for commercial purposes. The use of certain port services, 
including pilotage, garbage collecting and ballast w aste disposal, and navigation aids, is mandatory.  
Port operation charges consist of cargo, ship, and pilotage dues.  
109. In recognition of the strategic importance of the e fficiency of the ports system in the costs of 
imports and the competitiveness of exports, the Gove rnment has a policy to reform and modernize 
ports operations, under its National Tr ansport Policy. The new ports po licy aims to create an enabling 
environment to attract private investment.  The main  elements of the policy are for the Government to 
retain ownership of strategic port assets, while gr anting concessions to private sector companies for a 
limited period; the separation of regulatory functions from operations, with the Government 
responsible for the former and the private sector th e latter; a new legal and regulatory framework to 
enhance private sector confidence in the system; making Nigeria a hub for shipping and maritime activity in West Africa; the development of outly ing ports; and resolving the existence of surplus 
labour in ports operations.
59  The Government is working to reduce the level of congestion at seaports 
by reducing the number of agencies responsible for cargo clearance.   
110. Since 1999, the Government's activities to improve ports operati ons have included: 
rehabilitation of ports;  procurement of new handling equipment and the maintenance of old 
equipment;  computerization of port operations; elim ination of multiple fees;  reduction in the number 
of security and regulatory agencies;  and streamlini ng of activities of port workers.  Furthermore, a 
three-shift operating system has been put in place by  the ports authorities, in order to meet a 48-hour 
delivery of consignments target set by the Govern ment.  According to an FOS survey, in 2003 some 
                                                      
58 Oyejide and Bankole (2001).  
59 Bureau of Public Enterprises online informa tion.  Available at:  http://www.bpeng.org/10/ 
adddoctool.asp?DocID=101&MenuID=41#. Nigeria WT/TPR/S/147 
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32% of businesses recognized improvements in port cl earance to have been very important in their 
growth performance, up from 24% in 1999.  
111. Maritime and ports services face challenges:  th e major Nigerian ports are not as competitive 
as other ports in West Africa, and this contributes to  the diversion of imports from Nigerian ports to 
other ports.  With regard to maritime services, Ni geria has insufficient shippi ng lines to fully use its 
shipping rights under its cabotage regime and the UNCTAD Code for Liner Conferences.  In 2002, 
the number of ships that berthed at Nigerian ports decreased by 15.5% to 2,688, and the net registered tonnage decreased by 14.9% to 17.49 million tonnes. Similarly, the number of ships that departed 
from Nigerian ports fell by 4.2% to 2,812 with a net registered tonnage of 18.2 million tonnes.  
(c) Air transport 
112. The Federal Airports Authority of Nigeria is r esponsible for maintaining facilities at Nigeria's 
airports and for upgrading the facilities to internatio nal civil aviation standards.  The Nigerian Civil 
Aviation Authority is responsible for providing aviation safety and economic regulatory services;  and the Nigerian Airspace Management Agency was est ablished to meet international requirements for 
safe and economic air navigation. Nigeria Airways, the national carrier, has been liquidated.  A new 
national carrier, Nigeria Eagle Airline, is to be established.  A total of 37 air transport licences, air 
operating permits, air travel organizers' licences,  and non-commercial licences were granted between 
1999-2003.  
113. International air routes are served by foreign ai rlines under single-destination type bilateral air 
services agreements, allowing for one carrier per si gnatory;  the agreements are based on capacity 
sharing. Since 1998, a number of bilateral air servic es agreements have been modified, negotiated, re-
negotiated or concluded with: Algeria, Democra tic Republic of Congo, Eritrea, Uganda, Kenya, 
Niger, Tunisia, and the United States. The bilateral air service agreement between Nigeria and the United Kingdom, which had been suspended at the ti me of the previous review, has been restored. 
114. A new civil aviation policy has been approve d. The policy seeks to create an enabling 
environment to encourage accelerated growth in the subsector; enhance safety oversight through 
regulation; improve airport and aviation security ; improve airspace management; develop aviation 
sector infrastructure and manpower; increase participa tion of the private sector;  eradicate corruption 
in the aviation system; and ban outdated aircraft, sp ecifically aircraft over 22 years old are prohibited 
from Nigerian airspace.  In 2003, the number of airline passengers to and from Nigeria on African and 
other international routes, increased  by 13.8% and 9.6% respectively. 
(iv) Tourism  
115. Nigeria has several natural and cultural tourist attractions, including beaches, overland safaris, 
national parks, game reserves, water sports, archaeo logical monuments, and festivals.  Tourism holds 
potential for generating employment and helping to reduce poverty in rural areas.  
116. The Federal Ministry of Culture and T ourism (FMCT) has responsibility for policy 
formulation and monitoring, and cooperates with  state governments on all tourism matters. The 
National Council on Culture and Tour ism coordinates the planning and development of tourism in the 
Federation. The Council comprises stakeholders from th e federal and state governments, travel agents, 
hoteliers and catering associations , tour operators, and boards of airlines. The Nigerian Tourism 
Development Corporation is respons ible for regulating and supervisi ng the registration and grading of 
tourism enterprises, including hotels and restaurants , and for marketing, and disseminating 
information to the industry.  WT/TPR/S/147 Trade Policy Review 
Page 84 
 
 
117. Nigeria's tourist industry is underdeveloped. Proceeds from hotels and restaurants accounts 
for only 1.2% of services GDP and 0.15% of overall GDP. The underperformance of the tourism 
subsector has been attributed to inadequate and underdeveloped facilities at tourist centres; low level 
of awareness of tourist attractions in Nigeria; security concerns; lo w level of investment; and the poor 
attitude to recreation and vacations by Nigerians.60  
118. The Government has renewed its determinati on to develop the subsector through a tourism 
policy that seeks to, inter alia,  make Nigeria a prominent tourism destination in Africa, generate 
foreign exchange, promote tourism-based rural en terprises, and generate employment.  Various 
incentives are provided to attract private sector par ticipation, such as: tax holidays, import duty 
exemptions, and provision of basic infrastructure. The policy also provides for the establishment of a 
tourism development bank. State governments are also required to demarcate tourism zones to 
facilitate tourism development in their respective st ates. Furthermore, laws promoting the security of 
tourists and tourists attractions are envisaged . The Government has also increased budgetary 
allocations to federal and state bodies involved in the development of the subsector, and has permitted 
various taxes to be levied to enable them fund thei r activities. In the short-term, the key target is to 
increase tourist arrivals into the country by 10% a year.61 
                                                      
 60 The National Economic Empowerment and Development Strategy. Available at: 
http://www.nigerianeconomy.com/n eeds.htm [10 November 2004]. 
61 Figures on tourist arrivals are unavailable.  However,  in 2003, non-resident visitor arrivals at national 
borders were about 2.3 million. Nigeria WT/TPR/S/147 
 Page 85 
 
 
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