Risks and opportunities in Africa’s new largest economy

September 9, 2014

Nigeria is the United States’ largest trading partner in sub-Saharan Africa and, as Africa’s biggest crude oil producer, supplies a fifth of the United States’ oil.

With approximately 174 million inhabitants, Nigeria is the most populous country in Africa and the seventh-most populous country in the world. With the current growth – Nigeria is estimated to have the highest average GDP growth in the world between 2010 and 2050 – the country is expected to become one of the world’s top-20 economies. The United Nations estimates that by 2100 Nigeria will have a population of nearly one billion (compared to 462 million for the United States).

Despite this economic ascent, and the opportunities that come with it, Nigeria suffers from massive widespread and pervasive corruption. This remains a key challenge to business ventures in the country.

Corruption atmosphere in Nigeria

Corruption in Nigeria exists in schools and the education system, in government administration, and in the country’s military and police forces. It is said that widespread and pervasive corruption is affecting all levels of government, including the police and military.

The Nigerian Government is accused of stealing billions of dollars of oil revenues and having generated a very corrupt civil service. An often cited example is that Nigeria pays its legislators the highest salaries in the world (with a basic wage of US$207,000), yet 70 percent of Nigerians live below the poverty line of US$2.50 a day.

Experts also suggest that the widespread poverty and corruption in Nigeria has played a role in giving birth to Boko Haram, the group behind the killing of more than 12,000 people and the kidnappings of nearly 300 schoolgirls. In other words, Nigeria’s corruption has security implications.

Economists say that Nigeria suffers from its abundance of natural reserves, as the huge flow of oil wealth means the government does not rely on taxpayers for its income. This encourages corruption as politicians do not have to answer to the people. Nigeria’s former president Sani Abacha, a military dictator who ruled in the nineties, reportedly illegally amassed a US$5 billion fortune for himself and his family. It is estimated that since 1960 about US$380 billion of government money has been stolen, which is almost the total sum Nigeria has received in foreign aid.

In the oil industry, US$11 billion worth of oil was illegally siphoned off from 2009 to 2011, and hundreds of millions of dollars in subsidies were given to fuel merchants to deliver petrol that never materialised.

Named Central Bank Governor of the Year 2010 by The Financial Times–published The Banker magazine, former governor of the Central Bank of Nigeria Lamido Sanusi was suspended by President Goodluck Jonathan in February 2014, after he allegedly exposed a multi-billion dollar oil fraud involving the president’s regime. In July 2014, the Nigerian Senate formally denied the allegations; however, the President of the Senate declared that both the legislative and executive arms of the Nigerian Government were guilty in their failure to fight the inefficiency in the petroleum industry.

Key considerations for conducting business in Nigeria

Some of the key concerns in Nigeria are the country’s lack of infrastructure, inadequate power supply, and poor security. As well as Boko Haram, there are also other issues, such as a history of kidnappings and crime.

In business terms, however, corruption is still widely seen as the most significant threat in the country. And, with the upcoming general elections in February 2015, the problem looks as though it may be aggravated, with politicians facing pressure from sponsors and funders as well as kickbacks in government tenders. The elections may also fuel political conflicts.

There are further signs that indicate that corruption is a rising risk in Nigeria, as observers point to a trend of charges being dropped in anti-corruption investigations against officials due to political pressure.

Since corruption is very widespread with few serious deterrents, international companies are likely to face requests for bribes. While prosecution in Nigeria looks less likely, the global grasp of the Foreign Corrupt Practices Act (FCPA) and other anti-corruption measures pose a severe hazard to any businesses that may consider paying bribes.

With stringent investigations and enforcements based on foreign legislative directives that do not halt at Nigeria’s borders, changes are taking place regarding the way international business is conducted, especially with government and state-owned entities. This has led to more companies wishing to act responsibly and in accordance with the law. If companies are successful at evading the local difficulties and proactively advance compliance processes within their businesses, they will be able to reap the fruit of this competitive advantage on the African continent.

Business opportunities in Nigeria

Despite the complex risks that companies need to be aware of if venturing into Nigeria, the country’s growing market remains attractive, with promising opportunities to investors across various sectors.

A testament to Nigeria’s potential was its selection by Goldman Sachs as one of the ‘Next Eleven’ countries which could have an impact on the global economy (similar to the BRICS). Over the past few years, the Nigerian Government has emphasised economic reform and, through privatisation, global businesses have created opportunities in Nigeria as a result of the government allowing private ownership of previously government-owned operations.

Foreign brands such as Ermenegildo Zegna, Porsche, Domino’s Pizza, InterContinental Hotels and others have all entered the Nigerian market within the last three years. With a large population, vast reserves of natural resources and an expansive untapped potential in agriculture, Nigeria certainly has an extensive market, offering immense opportunities for business.


While globally renowned for oil and gas, this only accounts for around 20 percent of Nigeria’s GDP, with agriculture accounting for almost half of it. This signifies the extent of other opportunities open to investors as the country seeks to create a more diversified economy.


Increasing levels of commercial activity in Nigeria has spurned the expansion of hotels and growth in the hospitality sector, with occupancy rates of between 80 percent and 85 percent.


Nigeria possesses numerous minerals located across the country. These will be of interest to investors, as the federal government is offering incentives to encourage investment in this area.


The retail space in Nigeria is being transformed with the advent of modern trade targeting the emerging middle class, showing significant opportunity for growth.


Continued focus on resolving infrastructure challenges provides financing opportunities to willing investors as estimates indicate Nigeria needs US$12 billion to $15 billion annually to advance its infrastructure deficiencies.

Information technology

Investing in IT companies is considered a powerful investment opportunity that is creating growth in Nigeria.


Bilfinger SE

In 2013, German engineering and services company Bilfinger was ordered to pay a US$32 million penalty for FCPA violations by bribing Nigerian officials to obtain and retain contracts related to a gas project.

Noble Corporation

In July 2014, a former and a current executive of Noble Corporation, a British contract driller of oil and natural gas wells, settled with the United States Securities and Exchange Commission (SEC) without paying any penalties.

The two executives were charged in February 2012 with bribing officials in Nigeria in exchange for illegal import permits for drilling rigs.

Furthermore, one of Noble’s former controllers and head of internal audit settled the SEC’s civil charges in 2012 by paying a US$35,000 penalty.

In 2010, Noble Corporation also paid US$8.1 million to settle FCPA offences. According to the United States Department of Justice (DOJ) and SEC, Noble paid US$74,000 to a Nigerian freight-forwarding agent, knowing that some of the payments would be passed on as bribes to Nigerian customs officials. Noble falsely recorded the bribes as legitimate business expenses, the SEC said.


In November 2010, the DOJ and SEC announced coordinated FCPA enforcement actions against Switzerland-based freight forwarder Panalpina and six oil and gas companies that utilised its services in connection with business in Nigeria. The enforcement action resulted in US$237 million in combined settlement amounts.

Halliburton Company and KBR, Inc.

In 2009, the DOJ charged United States multinational oil field services company KBR with paying tens of millions of dollars in bribes to Nigerian officials in order to win government contracts in connection with the construction of a natural gas plant requiring US$7.5 billion. KBR pleaded guilty and was ordered to pay US$402 million in criminal fines, nearly all of which was covered by KBR’s former parent Halliburton. Halliburton also paid US$177 million to settle allegations by the SEC relating to the FCPA charges. Furthermore, former CEO Albert Jackson Stanley, who ran KBR when it was a subsidiary to Halliburton, was sentenced to 30 months in prison via a plea agreement.

In relation to the same case, in early December 2010 the Nigerian Economic and Financial Crimes Commission (EFCC) filed corruption charges against Dick Cheney in connection with his role as the chief executive of Halliburton. In mid-December 2010, the case was settled when Nigeria agreed to drop the corruption charges against Cheney and Halliburton in exchange for a US$250 million settlement.

Jeffrey Tesler, the London lawyer who helped KBR and its partners deliver nearly US$150 million in bribes to Nigerian officials, was sentenced to 21 months in prison in February 2012 after pleading to conspiracy and violating the FCPA. He was disbarred in May 2014. Tesler also forfeited the US$149 million he held in a dozen bank accounts in Switzerland and Israel, which is still the biggest FCPA forfeiture by an individual. Tesler admitted being a middleman for the Nigeria consortium by routing bribes through European bank accounts between 1994 and 2004, and once arranged for US$1 million in US$100 notes to be passed to a politician to finance a political party in Nigeria.

Willbros Group, Inc.

In 2013, the DOJ sentenced Paul G. Novak, a former consultant of Willbros, a global engineering and contractor company based in Houston, for conspiracy to pay more than US$6 million in bribes to Nigerian officials. Novak admitted to violating the FCPA as he conspired with others to make a series of corrupt payments from 2003 to 2005. He was sentenced to 15 months in prison and Willbros paid US$32.3 million to settle civil and criminal FCPA charges with the DOJ and SEC.


The most common red flags found in Nigeria

Political environment

Politicians and officials of all levels are said to be highly corrupt.

Legal system

Nigeria’s weak and overburdened judiciary has been an obstacle to effective prosecutions. Many corruption cases against high-level political figures have been stalled in the courts for years, with some trials not even having begun.

Government involvement

Government interference is prevalent in Nigeria. Famous examples include Nigeria’s temporary ban from the 2010 World Cup in South Africa after interventions by the country’s president and FIFA’s suspension of Nigeria from international football in July 2014 citing government interference in the running of its national federation.

Media freedom

Although Nigeria ranks 112th out of 180 countries on the 2014 Reporters Without Borders Press Freedom Index, Nigeria’s press is generally free to write almost anything about anyone, regardless of whether it is true. However, there has been recent fear among reporters that the government is becoming more sensitive to criticism, especially on coverage of the battle against Boko Haram.

Business climate

Good relationships with the government are often needed to establish business.

Specific risks

Principals are often connected to various industries.

Key anti-corruption agencies in Nigeria

Independent Corrupt Practices Commission (ICPC)

The ICPC targets corruption in the public sector, especially bribery, gratification, graft and abuse or misuse of office.

Economic and Financial Crimes Commission of Nigeria (EFFC)

Established in 2003, the EFCC is a law-enforcement agency that investigates and prosecutes financial crimes in all sectors of the Nigerian economy.


In August 2011, Human Rights Watch published a report criticising the EFCC. It was stated that the high expectations to fight corruption were not met due to political interference and inefficiency in the judicial system. Additionally, the chairman of the ICPC opposed the duplication of functions of the ICPC and EFCC. In particular, he noted the overlap between the ICPC Anti-Corruption and Transparency Monitoring Units and the EFCC Anti-Corruption and Transparency Committees.

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