Nigeria achieves very low overall compliance with international standards and codes, with a score of 7.5 out of 100 in our Standards Compliance Index. Nigeria suffers from the legacy of decades of misguided policies, corruption, the poor state of basic infrastructure, and weak institutions. Seven out of twelve standards are at an "insufficient information" level, making a full assessment of the country's observance of international standards difficult. In the areas of data dissemination, accounting, and auditing, Nigeria is non-compliant. On the other hand the Financial System Strategy 2020 initiative launched by the government aims to reform the financial system, and a new real-time gross settlement system was introduced in 2005. In addition, anti-money laundering reforms have led the Financial Action Task Force to remove Nigeria from its list of non-cooperative countries and territories in 2006.

Macroeconomic Policy and Data Transparency

Nigeria does not subscribe to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS), but subscribes to the General Data Dissemination System (GDDS), which is less prescriptive and generally less demanding than the SDDS. While Nigeria has benefited from several technical missions dedicated to improving its data collection and dissemination practices, to date there has been little forward motion in this regard. There is little publicly available information documenting Nigeria's data dissemination regime or evaluating its overall compliance with best practices. More »

Nigeria suffers from the legacy of decades of misguided policies, corruption, the poor state of basic infrastructure, and weak institutions, according to a February 2005 International Monetary Fund (IMF) report. The reform program in place meets resistance from entrenched interests, which may make it difficult to pass crucial legislation. Capacity constraints and poor data management impede the pace of reform implementation, requiring more focused technical assistance, stronger donor coordination, and careful reform prioritization. To overcome these obstacles, the IMF and the structural reform agenda of Nigeria are focused on improving governance and transparency, enhancing the efficiency of the public sector, and improving the business environment. In particular, the IMF supports plans to institutionalize reforms with several important bills now being discussed in the National Assembly. However, it is unclear to which extent these initiatives will put Nigeria into compliance with the IMF's Code of Transparency in Monetary Policy. More »

The recent passage of the Fiscal Responsibility Bill by the Senate (it awaits passage by the House) and the National Extractive Industry Transparency Initiatives Bill (pending presidential signature) have contributed significantly to improvements in Nigeria's fiscal policy transparency, according to two International Monetary Fund (IMF) reports filed in 2007. In particular, the introduction of an oil-price based rule, restricting the government's use of oil revenues to cover its fiscal obligations, was applauded as a major step forward. However, major problems associated with Nigeria's federal system and its historic problems with public-sector corruption still remain. The reliability of fiscal data suffers from the lack of coordination in reporting across Nigeria's three tiers (federal, state, and local) of government, and from corrupt practices that are only now being addressed. The failure of the Nigerian government to publish key budget documents has earned it a 20% rating ("Scant or None") on the Open Budget Index assessment by E.C. Eboh, and the inadequacies of Nigeria's data compilation and analysis have made it ineligible for subscription to the IMF's Special Data Dissemination Standard, although Nigeria does participate in the less prescriptive General Data Dissemination Standard. In April of 2007 a new president, Umaru Yar'adua, took office. It remains to be seen whether the progress achieved during the tenure of previous president Olusegun Obasanjo since 2003 will be carried forward during the new president's tenure in office. More »

Institutional and market infrastructure

Nigerian law is based on the principles of British common law, as a result of its historical link with the United Kingdom during the colonial era. While Nigeria does not as yet have a specific Insolvency Law on its books, bankruptcy and insolvency issues are treated in the Nigerian Constitution (1999) and the Companies and Allied Matters Act (1990). In 1990, Nigeria did pass a Bankruptcy Act (which deals only with individual bankruptcy), but even that law has been rarely used until recently. According to INSOL International, the Business Recovery and Insolvency Practitioners Association of Nigeria has been working to draft comprehensive legislation with the objective to codify insolvency laws as the Nigerian Insolvency Law. The World Bank Global Insolvency Law Database website reports that, in 2006, a Report on the Observance of Standards and Codes dealing with the issue of insolvency was carried out in Nigeria, but that study is not yet available on the World Bank website or any other publicly available forum. There is, therefore, insufficient publicly available information as to Nigeria's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems promulgated by the World Bank. More »

According to an assessment of the accounting and auditing environment in Nigeria conducted by the World Bank in 2004, Nigerian Statements of Accounting Standards (SASs) are based on the International Financial Reporting Standards (IFRSs). However, differences exist because the most recent revisions of IFRSs have not been incorporated into the Nigerian requirements, and some of the IFRSs have not been adopted. Overall, the World Bank concluded that the regulation of accounting and auditing practices was somewhat weak and recommended stronger enforcement mechanisms to improve compliance. One major recommendation was the creation of an independent oversight body responsible for the adoption and enforcement of accounting and auditing standards by public interest entities based on international standards. Simplified reporting requirements for small and medium-sized enterprises also should be developed. Following the assessment, the World Bank and the Nigerian Accounting Standards Board agreed on an Action Plan to issue IFRSs as SASs by September 2005. However, as of October 2007, no information on the actual implementation of the Action Plan is publicly available. More »

According to both a 2001 paper by Oyejide and Soyibo and a 2007 speech by N.E. Usman, Nigeria's Minister of Finance, Nigeria has sufficient corporate governance legislation and institutions, but is lacking with respect to implementation. However, the Minister indicates that the government is putting forth an effort to improve compliance with and enforcement of the law. The two most relevant laws with regard to corporate governance are the Companies and Allied Matters Act 1990, which defines the duties of the managers of limited liability companies, and the Investment and Securities Act 1999, which charges the Securities and Exchange Commission (SEC) with regulating and developing the capital market and preserving orderly conduct, transparency, and market confidence. The 2003 Code of Corporate Governance, issued by an SEC-appointed committee, is a voluntary code which includes best practices with regard to the roles and duties of the Board of Directors and Management, the role and duties of the Audit Committee and the rights of shareholders. However, there is not enough publicly available information that directly addresses Nigeria's compliance with this standard. More »

Nigeria does not have any national auditing standards. Companies are recommended to use the International Standards on Auditing (ISAs), according to the assessment of accounting and auditing environment in Nigeria conducted by the World Bank in 2004. However, the Institute of Chartered Accountants (ICAN), whose members use ISAs, has advised that Nigerian compliance with ISAs is optional but not required. The World Bank noted that compliance with existing auditing requirements is weak, ethical requirements for auditors are not in line with international standards, and enforcement mechanisms are inadequate outside of the banking sector. One major recommendation was the creation of an independent oversight body responsible for the adoption and enforcement by public interest entities of accounting and auditing standards that are based on international standards. The World Bank also recommended developing simplified reporting requirements for Small and Medium-size Enterprises. Following the 2004 assessment, the World Bank and Nigerian authorities agreed on an action plan to introduce ISAs in Nigeria by March 2005. However, as of October 2007, no information on the actual implementation of the action plan is publicly available. More »

The Financial Action Task Force (FATF) placed Nigeria on its list of non-cooperative countries and territories (NCCT) in combating money laundering in June 2001. However, the FATF's May 2006 evaluation of the reforms in the Nigerian anti-money laundering (AML) regime recognized the progress Nigeria made in implementing AML policies and establishing a financial intelligence unit (FIU). As a result, it removed Nigeria from the NCCT list in June 2006, but continued to monitor it for compliance with international standards. In June 2007, the FATF ended this monitoring process. Nigeria also became the first country in the West African sub-region to be admitted into full membership of the Egmont Group of FIUs on May 30, 2007. Nigeria is one of the 15 founding members of the Groupe Inter-gouvernemental d'Action contre le Blanchiment de l'Argent en Afrique (GIABA), which was established in 1999. All these developments demonstrate Nigeria's willingness to fight money laundering and meet FATF standards. A 2007 International Monetary Fund Report on Nigeria notes that in order to remain off of the FATF's NCCT list, Nigeria's central agency for combating economic and financial crimes, the Economic and Financial Crimes Commission and other agencies are intensifying their AML efforts and strengthening their legislative framework. However, the assessments found weaknesses in the implementation of laws, judicial delays in prosecutions and convictions, and a paucity of resources and powers of major crime fighting agencies. This information notwithstanding, there is little information addressing Nigeria's actual compliance with the FATF's Recommendations and Special Recommendations. More »

In a 2006 Report, the International Monetary Fund (IMF) notes that the Central Bank of Nigeria (CBN) introduced a Real Time Gross Settlement (RTGS) system in November 2005 as part of its move toward electronic banking. The CBN website states that the country's RTGS system, the Central Bank of Nigeria Inter-bank Fund Transfer (CIFT), is expected to achieve secure interoperability with other payment and settlement systems in the country, thereby ensuring immediate payment settlement with intraday finality as well as delivery versus payment in all securities transactions. Further, the website reports that the CBN is the main regulator of the payment systems, which comprise of banks, discount houses, the Nigerian Inter-Bank Settlement System, the Nigerian Stock Exchange, and card and switching companies as key players. The Nigeria Deposit Insurance Corporation complements the oversight function of the CBN to ensure the efficiency and effectiveness of the payment systems. The CBN adds that all the systems operate largely in accordance with the Core Principles for Systemically Important Payment Systems (CPSIPS) and the Lumfallussy Standards. However there is no validation of this information from a third party source, and no further information is publicly available regarding Nigeria's compliance with the CPSIPS. More »

Financial Regulation and Supervision

According to the 2007 International Monetary Fund (IMF) report, the consolidation of the banking sector and ongoing reform have re-instilled confidence in the Nigerian financial system. Nigeria, according to the report, is in the process of introducing risk-based supervision. It is also submitting legislation to the National Assembly to amend the Central Bank of Nigeria Act of 1991 and the Banks and Other Financial Institutions Act of 1991, in order to strengthen the CBN's regulatory capacity and improve creditor rights. The IMF report notes that the CBN has enlisted expert assistance to strengthen banking supervision, carry out a financial stability diagnostic, and develop a medium-to-long-term financial sector strategy (called the FSS 2020) in order to enhance financial stability and development in Nigeria. The CBN, in its 2005 Banking Supervision Annual Report, indicates that an African zone-wide assessment undertaken by the FIRST Initiative on national compliance with the Basel Core Principles (BCPs) found that Nigeria fully met 10 and largely satisfied 15 of the 25 BCPs, and adds that Nigeria was making further improvements following the recommendations of an earlier (2003) study. However, the FIRST Initiative assessment is not publicly available. Apart from the information provided in the CBN's 2005 Annual Report, there is little information directly addressing Nigeria's compliance with the BCPs for Effective Banking Supervision. More »

The principal regulatory agency of the Nigerian capital market is the Securities and Exchange Commission (SEC). It is under the supervision of the Federal Ministry of Finance, but remains independent in its regulatory and developmental activities. Its powers are derived from the Investments and Securities Act of 1999, which charges the SEC with the registration and supervision of market operators, exchanges, and public securities. The SEC has responded to increased market activities by implementing mechanisms to improve the SEC's oversight capacity and effectiveness as a regulator. The Nigerian Stock Exchange (NSE) supports the SEC, supervises securities market operation, and regulates the second-tier capital market. Companies have been suspended from the NSE for noncompliance with financial reporting requirements. The 2004 World Bank Report on the Observance of Standards and Codes for Accounting and Auditing judges that the SEC does not successfully fulfill its supervisory or enforcement roles. However, there is insufficient publicly available information to fully assess Nigeria's compliance with the International Organization of Securities Commissions' Principles of Securities Regulation. More »

The objective of the Financial System Strategy 2020 (FSS 2020) initiative launched by the Nigerian government is to reform the financial system in Nigeria in order to make the country the financial hub of Africa by the year 2020. A number of documents prepared for the 2007 conference on the implementation of the FSS 2020 pointed out that the insurance sector is the "weakest link" in the Nigerian financial system. Inadequate supervision and regulation, a negative image of the insurance sector, low awareness of the public, poor financial reporting, and weak management and technology were identified as the major challenges facing the industry. Y. Soladoye, in his presentation at the conference, outlined the main strategic objectives of the reforms in the insurance sector and pointed out the initiatives with a defined time frame designed to implement the objectives. The authorities plan to revise existing insurance laws in order to bring them in line with the "internationally recognized legal system" by 2010; introduce International Accounting Standards, best practices in corporate governance, and stringent solvency rules; and strengthen protection of policy holders, along with other measures. However, there is no information publicly available as to Nigeria's compliance with the Insurance Core Principles promulgated by the International Association of Insurance Supervisors. More »

Legend:

Credit Ratings

Moody's Not rated

Fitch BB-/Stable

Standard & Poor's BB-/Stable

Macroeconomic Data

2007 GDP (Current Prices): 166.778 billion USD (IMF)

2007 GDP (Per Capita): 1,159 USD (IMF)

2008 GDP (Growth Forecast): 9.1% (IMF)

2008 Inflation (CPI): 8.6% (IMF)

2007 Unemployment: 5.8% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 5.445 billion USD (UNCTAD)

FDI (Outward): 0.228 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 11,434 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)