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The legal regimes of protection of investments in Nigeria have over the years suffered not only from a lack of policy drive, but also a sustainable and development driven legal framework. Policy inconsistencies and consequent uncertainty on investment issues in the Nigerian economy has impacted somehow negatively on the psyche of both local and foreign investors who are genuinely desirous of investing in Nigeria. From all indications, the quest for greater economic development on the part of the developing host nation in any foreign investment is a primary motive for foreign investment. The maximization of capital and profit on the part of the foreign partner is the main objective of such investors. Hence the need for an elaborate legal framework for the promotion and protection for foreign investments in Nigeria becomes very fundamental.. The methodology to be employed in this research is doctrinal which includes the primary and secondary sources. This work has x-rayed the relevant Nigerian legal framework for the promotion and protection of foreign investments in Nigeria. This work has diagnosed relevant Nigerian laws as they relate to the promotion and protection of foreign investment in Nigeria. The historical evolution of foreign investment in Nigeria has been discussed. The determinant factors of and sectorial analysis of foreign investment is also treated. Issues like investment dispute resolutions, and arbitration have equally been discussed and fully analysed with proffered recommendations. Issues like privatization as they relate to investments and Nigerian economy have equally been discussed with solutions proffered. The regulatory institutions and legal mechanisms of foreign investment in Nigeria have equally been examined where some shortcomings have been observed and solutions proffered in that regard. The research established that the legal framework for the promotion of foreign direct investment in Nigeria is inadequate. The research also recommends establishing a strong legal system for the promotion of foreign investment and strengthening the relevant institutions promoting foreign investments in Nigeria.



Foreign Direct Investment is widely regarded as the potential source of funding for growth and development and is generally a global policy of many countries, whether developed or developing. The United Nation Industrial Development Organization reported that the flow of foreign direct investment (FDI) globally reached an all time high of USD 1.3 trillion during the year 20001. Investment promotion agencies (IPAs) in many parts of the world, especially in the highly developed economies of Europe and North America, and also booming Asian economies of China, recorded high volumes of business and celebrated further success in attracting new investment to their countries.2
Most of this investment flow however, was concentrated in the highly developed areas of European Union, the United States of America and Japan which together accounted for 71% of world inflows of FDI. Consequently the African share of world investment fell from its previous 1% to a further low of a mere 0.67%. 3As a consequence, African countries were encouraged and supported to create an investment friendly environment so as to “market” their attractions and to smooth the pathway for incoming investors.
In the case of Nigeria, foreign direct investment has been a pivotal government policy even before her attaining political independence in 1960. This situation has for long stimulated a great desire and need for the reappraisal of the already existing legal framework on foreign investment against the background and the need for a larger foreign investment development in Nigeria.
There is in existence legal framework for regulating foreign direct investment in Nigeria, but how effective these frameworks have been in the promotion of foreign investment has continued to be a subject of varying economic and academic opinions in different circles. Although the various institutional and legal mechanisms have long been established for the regulation of foreign investment in Nigeria, the effectiveness or otherwise of some of these mechanisms in meeting the yearnings and aspirations of the state, as well as, foreign investors on the other hand, has been a re-occurring decimal point that needs a lot of further academic research.
The fact still remains that, notwithstanding the various governmental policies and regulations, the general in built legal mechanisms and regulations, have not given the desired goal or effect in terms of the promotion of foreign investment in Nigeria. Foreign investment is inevitable towards the sustainability of any meaningful socio-economic development in Nigeria. This argument is further strengthened on the premise that the overall development of any given state has depended to some extent on an increased net flow of its investment both foreign and internal.
Ajomo puts it this way:
Foreign investment is inevitable from the point of view of any state, be it developed or developing. However, the odds are weighted more against the developing countries that lack the technical know-how and the capital for economic development. In consequence, governments of developing countries have endeavoured to formulate laws, regulations and adopt policies that would attract foreign investment and technology in the face of competition from even the developed countries4.
Nigeria, like several countries in the 1970s and 1980s embarked on expropriation of foreign investments, imposed trade restrictions and capital controls as part of a policy of import-substitution industrialization aimed at protecting domestic industries and conserving scarce foreign exchange reserves. There is now substantial evidence that this inward-looking development strategy discouraged trade as well as foreign direct investment (FDI) and had deleterious effects on economic growth and living conditions in the country.5
The disappointing economic performance of most of these countries like Nigeria beginning in the late 1970s up till the mid 1990s, coupled with the globalization of activities in the world economy, has led to a regime shift in favour of outward-looking development strategies. Since the mid-1990s, there has been a relative improvement in economic performance in a number of developing countries as a result of the change in policy framework
One learned Professor puts it this way:
the period between 1985 and 1991 witnessed the promulgation of many laws in various areas of the economy. Since independence in 1960, no period has witnessed such legal development. This legal development can easily be linked with the leadership role played by the Attorney-General of the Federation. The various laws have become powerful structures in bringing about economic, political and social changes. One of the areas which witnessed these changes is in our investment policy which is linked with the various investment laws6
It is not in doubt that during the last two decades, the role of Nigeria in foreign economic affairs has undergone a fundamental transformation. This can be attributed to the role of the new global economic order as well as the emerging markets in the under industrialized nations especially the third world countries. These are positive developments that have made Nigeria‟s hitherto traditional international trade and investment policies and legal framework to be quite obsolete. The overall dynamic evolution of international trade and investment has poised challenges to most countries‟ legal system and practice on so many ways. Nigeria cannot be an isolated case in this regard.
These challenges and changes have caused policy makers and formulators of the regulatory legal framework to catch up with the emerging trend in Nigeria as it is in other places. In the course of this research, I shall examine International Investment laws and policies as they apply to some foreign countries, and also consider important changes that have taken place in both foreign and domestic jurisdictions as well as factors that guide international economic integration, such as WTO, Free Trade Zones, AGOA, ECOWAS, European Common Market, Trade Tariff, etc. A critical examination of the existing legal framework is important in this discourse with a view to determining its performance, the challenges it has encountered so far in promoting foreign investment in Nigeria.The responsibilities of government in creating an investment friendly environment will be highlighted in this research.
Since the basic issue between both developing and developed world economies is no longer the desirability or usefulness of promoting trade and investment across borders, the basic problems facing most states have been “methods capable of achieving specific business objectives in the midst of a growing and ever expanding international economic order.”7
Any average scholar or practitioner of international economic law, or commerce, cannot dismiss the fact that a lot of the legal requirements regulating foreign investment in Nigeria are encouraging. The reoccurring question in the minds of scholars and indeed the average Nigerian, and the international community, is why there has not been any appreciable level of promotion of foreign investment in the Nigerian economy after more than fifty years of independence.
The existing legal framework from pre-colonial Nigeria has proved to be quite inadequate in surmounting the attendant socio-economic, political, legal and allied problems always associated with foreign investments in this globalized world economy. This scenario becomes more complex and complicated against the background that trade by barter has given way to a technological and much sought after economic pace of development, influenced mostly by present day modus operandi of international commerce. In view of the above obvious facts, the general concept of the legal framework regulating foreign investment in Nigeria has equally become complex in nature as well as its application.
Therefore the statement of research problem is:
1. Is the legal framework regulating foreign investment in Nigeria is adequate to attract and maintain the desired Foreign Investments?
Under the above research question, the following questions will guide us in examining the adequacy or otherwise of the Legal Framework regulating foreign investment in Nigeria.
a. Does the legal framework conform to international standards and practice.
b. What are those factors that have inhibited foreign investment promotion and protection in Nigeria?
c. Have the policy drive of the previous and present administrations in Nigeria encouraged or deterred foreign investment development?
d. What are the necessary things to be done if the answer to some of these questions is not in the affirmative?
e. Is there any need for foreign investment in Nigeria?
The aim of this work is to critically examine the basic legal framework establishing, as well as, regulating foreign investments in Nigeria, vis-à-vis the problems of the promotion of foreign direct investments in Nigeria.
The objectives of this research are:
a. To critically analyze the basic legal framework establishing, as well as, regulating foreign investments in Nigeria.
b. To establish if the existing legal framework is adequate and conforms to international standards and practice.
c. To undertake an in-depth analysis of the various challenges and issues hampering the flow and progress of Foreign Direct Investments in the Nigerian economy.
d. To highlight some other relevant economic, social and political issues which have adversely affected the growth of Foreign Direct Investment in Nigeria.
The methodology used in this research is Doctrinal. This will include the primary and secondary sources. The primary sources of materials to be utilized are:
Relevant legislative enactments (present and past)
a. Judicial decisions, rules and relevant pronouncements of both municipal and international courts/tribunals
b. Legislative and various conventions of United Nations Agencies.
The secondary sources are:
a. Relevant published textbooks on the subject matter
b. Articles, magazines and periodicals
The need for an elaborate, and all embracing legal framework for the promotion of foreign investment in Nigeria is already an over-due expectation. The reason for this is that as days roll by, the ever dynamic nature of international trade with its accompanying sophistication always has bearings on every-growing or developed economies. The Nigerian situation cannot be an exception because the world is now a global village.
A research project of this nature therefore becomes imperative most especially now that we have a democratic system of government where the positions of some of these laws could be freely canvassed for amendments or outright change where the need arises.
This research will adequately contribute significantly in giving an insight into the regulatory and legislative enactments on foreign investment law in Nigeria vis-a- vis International Investment Law and will be a comprehensive and single compendium for scholars, students, investors, and policy makers for easy reference. This work will contribute in scholarly efforts in x-raying the several legislations that relate to foreign investment laws and commerce in Nigeria with accompanying suggestions and solutions to some of these legislations where there are lacunas.
This work will also discuss the responsibilities of the Federal Government in terms of transparency and accountability in its policies of liberalization of companies or the privatization programme and the impact on Foreign Investment in Nigeria. This study will articulate the need for review of some of the existing regulatory and legislative organs of foreign direct investment in Nigeria so as to meet up with what is obtainable in larger developed economies of the world today.
Since the study of foreign investment is a subject matter that cuts across other disciplines like economics, law, political science, international relations, banking, etc. we shall for the purpose of this study be restricting ourselves mostly to the legal phenomenon of foreign investment needs.
This study will focus on the importance of having a detailed legal framework for promoting foreign direct investment in Nigeria. It will take a comprehensive look at the various legislative and institutional responses of Government in promoting Foreign Direct Investment in Nigeria since independence in 1960. It will also examine the issues and challenges faced so far; the responsibilities of government in ensuring best practices in governance that will encourage Foreign Direct Investment in Nigeria and the performance of the various institutions towards ensuring that there should be Foreign Direct Investment in Nigeria. The research will also explore several major milestones in the history of International Investment law and Foreign Investment in Nigeria.
International Investment law enjoys growing practical as well as scholarly attention. With increasing number of multilateral and bilateral investment treaties, investment provisions in preferential trade agreements and investment treaty arbitrations, international law scholars, legal practitioners, civil society, investment law policy makers, international law organizations and investment treaty negotiators increasingly focus their interest on this field of International law. At the same time, many conceptual questions relating to international investment law remain insufficiently studied.
However the topic of this research encompasses other related disciplines apart from law. It is in this regard that attention would be paid to those other related disciplines in the course of this research.
Some examples of such related disciplines are:
(i) economics
(ii) political science (e.g. political economy)
(iii) international relations
(iv) history, etc.
While it is true that texts and materials abound in some of these interrelated disciplines apart from law, it is difficult to say so when such interrelated disciplines are merged together with law. Suffice it to say also that in some of these areas where these materials abound, they have been very inadequate and so have not desirably addressed or tackled the problems of the promoting foreign direct investments in Nigeria as would have been expected.
The desirability of an urgent review of these existing literatures now becomes imperative and timely. It is obvious that some of these existing texts and materials have fallen short of recent municipal and international legislative overhauls that have been brought to bear on present day international commerce and investment needs.
This paucity of texts appears to be threatening the comfortable socio-economic equilibrium of Nigeria, its economies and to some extent even associated business partners. It is therefore, the intention that this research work would provide the missing links or lacuna in the area of promoting foreign investments in Nigeria and underscore the challenges to Foreign Direct Investment as well the achievements so far.
One of the authors that have written extensively on the subject of Foreign Investment is Professor George Schwanzenber, who in his book titled “Foreign Investments and International Law”8 stated that:
the status and protection of investments abroad are central and perennial, but are governed by the ever-changing themes of international economic law. In one way or another, these problems have concerned me for over forty years. My interest in them dates from the late twenties when I studied the impact of Soviet Union on international law and was surprised to find that this impact was considerably less than that of international law on former Soviet Union. When at the same time, I examined the legal aspects of the activities of Ivan Kreuger and his transnational watch empire; I was again confronted with the limitations imposed by international law on the discretion of the state parties to such government contracts.
One obvious factor in this book is the fact that the author concentrated his efforts on the developed economies and did not give any practical attention to third world economies of which Nigeria belongs. The insufficient nature of materials on this subject that reflects the framework for the promotion of foreign investment in Nigeria has provided a veritable ground for this research to be carried out.
Professor Ray August stated that:9
the regulations governing foreign investments are commonly set out in “investment laws,” and “investment codes.” In socialist countries (such as the People‟s Republic of China and Vietnam) which only allow investments in form of joint ventures, the regulations are usually called “joint venture laws.” The purpose of these laws is the erection of a legal framework that will attract and put to work foreign capital … While the form that investment regulations take arises from country to country and the underlying purpose of the regulations are generally the same worldwide. These include (a) promoting local productivity and technological development, (b) encouraging local participation, and (c) minimizing foreign competition in economic areas already well served by local businesses.
It is trite to say that there is no single framework that has proved to be all embracing without taking into considerations, the varied socio-economic factors of each state and its people.
Professor Sornarajah in his book titled “The International Law on Foreign Investment”10 dwelt so much on this area of the law. In the book, there was no where the promotion and protection of foreign investments through legal framework was given a chapter. Although there were sporadic mention of the promotion and protection of foreign investments through the legal framework, this was not adequately tackled. A research work of this nature would be desirable so as to address the missing materials.
The works of Wolfgang Friedman11 has equally contributed in no small measures in the area of foreign investment and international law. One basic problem of this great scholar‟s works in this perspective is the fact that recent legislative, investment and international trade codes have not being embodied into these works.
There have equally being some indigenous texts in Nigeria dealing with foreign investment laws and practice. The works of the learned Ajomo in “Regulation of Trade and Investment in an Era of Structural Adjustment: The African Experience”12 and “New Dimensions in Nigerian Law”13 are some of the materials that are readily available in respect of the subject matter of this research work. However these works are not all encompassing because they did not examine the legal framework regulating foreign investment in Nigeria.
Professor Osita Eze14 is another Nigerian author that has equally written vastly on this area of the law specifically the area dealing with investment laws and transfer of technology. But just like the other texts or materials earlier on mentioned, the non- examination of the basic legal frameworks make these materials not to be comprehensive enough. But taking a look at the work under reference, it would be observed that a lot of changes have taken place within the country‟s socio-economic laws and policies.
Dr. Kachikwu‟s work titled “Nigeria Foreign Investments Law and Policy”15 is another indigenous work in the area of foreign investments law and policy in Nigeria. This text was published in the year 1988 which is about twenty years to the date of this present research. Even though some basic legal frameworks were considered within the contemporary Nigerian context, the fact that several legislations have emerged after the publication of this work makes the work not to be comprehensive enough.
The work of Professor Olufemi16 represents another scholarly contribution in this area of discussion. Just like the problems associated with most of the texts and materials referred to earlier, this work has not provided the nexus as far as normative and regulatory foreign investment policies and legal framework that contemporary Nigeria desires is concerned. These texts have not only being restrictive in dealing with the subject of this research work but also not comprehensive enough with up-to-date legislative enactments and foreign investment laws and practice.
In Adamu‟s (2004)17 opinion, direct investment implies provision of capitals from a foreign nation in shares or any other equity, securities or corporate entities, which could be in form of foreign direct investment of the host nation. This work dwelt more on economic indices and did not make reference to the relevant laws that encourage foreign Direct Investment in Nigeria.
Empirical results on the complex series of connection between Foreign Direct Investment and economic growth have been a recurring subject of debate. One of the earlier studies was Voivodas (1973),18 who investigated the relationship between exports, foreign Capital Inflow and the rate of growth in domestic product. This work did not discuss the legal framework for the promotion of Foreign Direct Investment in Nigeria and focused more on economies of developed countries.
Blejer and Khan (1984),19 in their empirical studies of foreign capital flow to developing countries, indicated that changes in output are the most important determinations of private foreign capital flow. However, Serven, (1992)20, recognized the sensitive of investment to cyclical variations in output, suggesting that a short-term recession may have long-term effects by causing a deep investment slump that permanently traps the economy in a low – growth, low-investment equilibrium.
The above mentioned publications are not indigenous and so have not taken into consideration many socio-economic factors like governmental policies, new legislative or legal regime of Nigeria and other third world countries before arriving at some of their conclusions or proffering some of the solutions contained therein the said papers. The publication has equally not taken into consideration recent legislative enactments both within the municipal and international law framework and context.
Oyaide (1977)21 study the role of direct foreign private investment (DFPI) in the economic development of Nigeria. Using indexes of dependence and development as parameters of Nigeria‟s economic dependence and development, he suggested that studies on the role of foreign investment in host countries should entail time series analysis of specific features of the host countries and of technology by which (DFPI) reveals it‟s most important effects as a means of delineating the need and proper use of foreign investment in economic growth. He concluded that DFPI caused both economic dependence and development. This work did not specifically mention the legal instruments that encourage economic vide Foreign Direct Investment.
Eke et al. (2003)22 in their study used causality test to analyze the impact of FDI on economic growth in Nigeria. They investigated the causal test from foreign private investment to GDP and causality test from GDP to foreign private investment. The results indicate that causality runs in both directions. They concluded that foreign direct investment is relevant and also a significant determinant of real development in Nigeria. This work dwelt on the economic parameters for Foreign Direct Investment and did not discuss the instruments that provide the backbone for such growth.
In a survey of African countries Dupasquier, and Osakwe (2006)23identified poor corporate governance, unstable political and economic policies, weak infrastructure, unwelcoming regulatory environments and global competition for FDI flows as impediments standing in the way of attracting significant FDI flows. This corroborates the findings of Jerome and Ogunkola (2004)24 which assessed the magnitude, direction and prospect of FDI in Nigeria. The authors ascribed the low level of FDI in Nigeria to deficiency in the country’s legal framework concerning corporate law, bankruptcy and labour law, in addition to institutional uncertainty. The above works did not elaborate on the legal framework that would address the problems militating against Foreign Direct Investment in Nigeria.
In his study of the determinants of FDI in Nigeria, Anyanwu (2011)25 identified change in domestic investment, change in domestic output or market size, indigenization policy and change in openness of the economy as major determinants of the FDI. He further noted that the abrogation of the indigenization policy in 1995 encouraged FDI inflow into Nigerian and that effort must be made to raise the nation’s economic growth so as to be able to attract more FDI. Much as this literature comprehensively attempted to x-ray the factors responsible for the growth of Foreign Direct Investment in Nigeria, it did not make explicit analysis of the role to be played by the legal framework in determining this economic growth.
This research work would provide those missing links in order to give a comprehensive outlook to the general legal framework with clear intent and purposes desired of being achieved in this research work.
This thesis comprises of six chapters. Chapter one deals with the general introduction of the work and consists of background of the study, statement of research problems, objectives and scope of research, justification for the research, research methodology and literature review.
Chapter two deals with the definition and history of foreign investment in Nigeria and also an analysis of the Nigerian perspective on foreign investment. Chapter three deals with the scope and forms of foreign investments, and evaluation of the legal framework regulating foreign investment in Nigeria.
Chapter four deals with the sectoral analysis of foreign investment and appraisal of the privatisation programme and investment trends in Nigeria. While chapter five deals with the international legal perspective on foreign direct investment in Nigeria.
Chapter six deals with the conclusion, which includes the summary of the study, findings and recommendations on how promotion of foreign investment will be accelerated.

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