This information is derived from the State Department's Office of Investment Affairs’ Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 7/13/2016

The Government of Nigeria does not have an established practice that is consistent with the OECD guidelines on Corporate Governance for SOEs. SOEs have enabling legislation that governs their ownership. To legalize the existence of SOEs, provisions have been made in the Nigerian constitution under socio-economic development in section 16 (1) of the 1979 and 1999 constitutions respectively. The government has privatized many former State-Owned Enterprises (SOEs) to encourage more efficient operations, most recently the state-owned telecommunications company, NITEL, and its mobile subsidiary, MTEL.

Nigeria does not operate a centralized ownership system for its SOEs. The enabling legislation for each SOE stipulates its ownership and governance structure. The Boards of Directors are usually appointed by the President. The Boards operate in line with their enabling legislation. Boards are appointed in line with the enabling legislation which usually stipulates the criteria for appointing Board members. SOEs Boards consist of members appointed by the President on the recommendation of the Minister. Directors are appointed by the board within the relevant sector. In a few cases, however, some board appointments have been viewed as a reward to political affiliates. In the case of the Nigerian National Petroleum Corporation (NNPC), appointment is made by the presidency but the day to day running of business is overseen by the Group Managing Director (GMD). The GMD reports to the Minister of Petroleum, although in the current administration the GMD doubles as the Minister of State for Petroleum while the President is the substantive Minister.

Responsible for exploration, refining, petrochemicals, products transportation and marketing, the NNPC is the biggest and arguably most important state-owned enterprise. It owns and operates Nigeria’s four refineries (one each in Warri and Kaduna and two in Port Harcourt), all of which operate far below their original installed capacity. There is an ongoing drive to encourage private investment in refineries. Nigerian cement conglomerate Dangote has committed to building a $9 billion, 500,000 barrel per day refinery and petrochemical plant in the Lagos area which it expects to begin operating by 2017.

In a bid to attract investment in refineries; the GON says it plans to deregulate the downstream sector fully. In 2016, the Buhari administration took steps to reorganize NPPC into seven independent operational units: Upstream, Downstream, Gas and Power, Refineries, Ventures, Corporate Planning and Services, and Finance and Accounts.

The NNPC operates as an autonomous entity. For many years, there has been little or no information available on its finances, internal controls, or quasi-fiscal obligations. The minister of petroleum resources grants licenses for oil exploration, while the Department of Petroleum Resources, under the minister, oversees the licensing process and regulates the sector. While there is open bidding, the minister of petroleum resources exercises wide discretion in awarding licenses. The legislative branch has limited oversight of the process. Nigeria's tax agency receives taxes on petroleum profits and other hydrocarbon-related levies, while the Department of Petroleum Resources collects rents, royalties, license fees, bonuses, and other payments. The Buhari administration has launched efforts to provide greater transparency in the collection of revenues that accrue to the government and requiring these revenues, including some from the NNPC, to be deposited in the Treasury Single Account.

Another key SOE is the Transmission Company of Nigeria (TCN), responsible for the operation of Nigeria’s national electrical grid. Private power generators have accused the TCN grid of significant inefficiency and inadequate technology. The TCN is a wholly owned subsidiary of the Nigeria Electricity Regulatory Commission. The TCN incorporated in November 2005 and emerged from the defunct National Electric Power Authority (NEPA). TCN is currently being managed by a Management Contractor, Manitoba Hydro International (Canada).

The conduct and governance of SOEs are contained within the provision of the company legislation. While SOEs’ financials are usually not made public, the NNPC recently started publishing its monthly reports. SOEs prepare their financials, get them audited and submit to the relevant supervisory ministry or the President based on their enabling legislation.

OECD Guidelines on Corporate Governance of SOEs

Nigerian SOEs are not governed by OECD Guidelines on Corporate Governance. The Government of Nigeria does not have an established practice that is consistent with the OECD guidelines on Corporate Governance for SOEs. SOEs have enabling legislation that governs their ownership. To legalize the existence of SOEs, provisions have been made in the Nigerian constitution under socio-economic development in section 16 (1) of the 1979 and 1999 constitutions respectively.

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) is the manager of Nigeria’s Sovereign Wealth Fund. It was created by the Nigeria Sovereign Investment Authority Act in 2011 and began operation the following year with seed capital of USD 1 billion. It's most recent annual report (calendar year 2014) reported total assets of USD 971.6 million, a 12.8 percent increase from 2013. It was created to receive, manage and grow a diversified portfolio that will eventually replace government revenue currently drawn from non-renewable resources, primarily hydrocarbons.

The NSIA is a public agency that subscribes to the Santiago Principles which are a set of 24 guidelines that assign “best practices” for the operations of Sovereign Wealth Funds globally. The NSIA invests through three funds: the Future Generations Fund for diversified portfolio of long term growth, the Nigeria Infrastructure Fund for domestic infrastructure development, and the Stabilization Fund to act as a buffer against short-term economic instability. NISA does not take an active role in management of companies. The Embassy has not received any report or indication that the activities of the NSIA limit private competition.

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More Information

Nigeria Economic Development and Investment