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Italian Economy: an overview
General Framework
Italian companies in Nigeria
◦ Tariff and Non-tariff Barriers
Investments
Financial Sector

Treaties on economic and financial related matters


General Framework

The overall trade between Italy and Nigeria is quite remarkable. At year-end 2011 the Italian exportations towards Nigeria were equal to 821 million Euro, whereas importations reached around 1.57 million Euro. The total overall trade exchange was of 2.397 million Euro.

In June 2012 the Italian importations were equal to 855.5 million Euro, and the exportations were equal to 475 million; both exports and imports have raised in comparison with the corresponding period in 2011, At year-end 2012 the Italian exportations towards Nigeria were equal to 853 million Euro, whereas importations reached around 1.69 million Euro. The Trade Balance in September 2012 was 690 million Euro in favour of Nigeria.

Nigeria is indeed the main commercial partner of Italy in sub-Saharan Africa after South Africa.

The main trading products between Italy and Nigeria are, as per imports, oil and gas, leather and products of agriculture, forestry and fishing; as per exports, machinery and spare parts, metal and metal products, refined petroleum products, electrical equipment, chemicals and vehicles.

The 2013 budget has an expenditure of around 4.987 billion Naira, equivalent to about 23 billion Euro, 5% more than in 2012, based on a crude oil barrel’s price to be 79 dollars and on an average production of 2.53 millions barrels per day, with an expected GDP growth to 6.5%. This last figure lowers the average of 7% in recent years.

Budget revenues are estimated to be approximately 3.89 trillion Naira, 18.5 billion Euros, increasing of 9% compared to 2012.

The increase in capital expenditures (capital budget) is reckoned to be from 28.5% to over 31.3%.

Finally, specific changes to the tariff discipline were announced to stimulate the local industry and agriculture. These measures have been announced to be part also of the 2013 budget.

Italian companies in Nigeria

The presence of Italian companies in Nigeria dates back to the aftermath of its independence in 1960 and in some cases prior to it. Tens of them were and are based throughout the Country, from Lagos to Abuja, from Port Harcourt to Jos, Kaduna, Kano and Katsina. Their engagement is manifold: oil and gas, civilian constructions, infrastructures, housing, harbour services and engineering.  Italian companies are proud of  their contribution to the infrastructures realised in Nigeria, attending to the plans developed by the relevant Nigerian Authorities. Some symbols of the capital, Abuja, were designed and/or made by Italian companies, or are currently under construction, like the National Ecumenical Cathedral, the Cultural Centre, the Transcorp Hilton and the National Library, besides airport runways, roads and bridges in other parts of the Country.
It is worth noting that also the city of Lagos counts innumerable buildings erected by Italian companies both in the housing and in the business sectors. They are renowned for good quality and durability of their works.

In the hydrocarbon sector, the activities are focused around the area of Port Harcourt in the south. They mainly consist in off-shore and on-shore extraction of crude oil and natural gas, also associated with crude oil, besides their transportation. Italian companies and their Nigerian participated companies are also engaged in managing power plants which supply electricity to the national grid.

Growing attention is dedicated to the aspects of “corporate social responsibility” by means of engagement in favour of the development of civil society and of services to the population.
Italy is also active in the cooperation to strengthen the security sector, especially border controls.

The engagement of the Nigerian authorities in the fight against economic crimes is remarkable, especially with a view to prevent and repress frauds’ attempts perpetrated more frequently by means of internet against international companies.
Italian companies suspecting to be possible victims of a fraud attempt should address their concerns to the Embassy and to the Nigerian competent authorities, in particular to the Economic and Financial Crimes Commission-EFCC (www.efcc.gov.ng) and to the Independent Corrupt Practices and Other Related Offences Commission-ICPC (www.icpc.gov.ng).
Italian companies are invited, as a precautionary measure, to halt contacts with counterparts suspected of fraud, to refuse to make any advance payment and not to release their banking or financial references.

The Inter-Agency On Illegal Fund Managers, comprising the Central Bank of Nigeria, Securities and Exchange Commission, Nigeria Deposit Insurance Corporation, Corporate Affairs Commission, Economic and Financial Crimes Commission and the Nigeria Police, alerted the public on the resurgence of the activities of illegal fund managers or "wonder banks". These illegal operators offer extraordinary returns on deposits or investments placed with them, only to disappear after sometime thereby jeopardizing the funds. These operators are not licensed by neither the Central Bank nor by the Securities and Exchange Commission as "fund managers" or "investment managers".

Investors wishing to invest in any financial product are strongly adivsed to conduct necessary due diligence with the Central Bank or the said Commission to verify the actual status of the "fund managers". For further enquiry and clarification see www.cbn.gov.ng and www.sec.gov.ng.

Tariff Barriers and Non-tariff Barriers

The administration of the President of the Federal Republic of Nigeria, H.E. Dr. Goodluck Ebele Jonathan, has made foreign investment one of the key factors of its policy. As well as in the field of oil and gas, there are opportunities for those working in the production and distribution of electricity, infrastructure of  urban and suburban transport, agriculture, agro-industry, mining and petrochemicals.

However, imports from abroad encounter obstacles of tariff barriers and non. The level of tariffs is high with ad valorem taxes, that is on the declared value of the goods. The aim pursued by the Nigerian Government is to promote the growth of local industry. More information is available at the websites www.exports2nigeria.com and www.customs.gov.ng.

Investments

The 1995 law on foreign investment established the “Nigerian Investment Promotion Commission – NIPC” (www.nipc-nigeria.org), a governmental agency with responsibility for the promotion and assistance to foreign entrepreneurs interested in investing in the Country.

In August 2012, the Nigerian Minister of Foreign Affairs announced that FDI in Nigeria amounted to 12 billion dollars. Main countries of origin are China (which in 2010 has begun, amongst other, the renovation of the railway system of Nigeria), the United States, India and South Korea.

Financial Sector

As a result of the severe economic and financial crisis that hit the country, the Central Bank of Nigeria has injected, between 2009 and 2012, about  4.2 billion dollars in the form of capital in the banking system to avoid the default of 10 of the 24 banks present and three of them were nationalized.
Nowadays, the banking system is more stable. For instance, “First Bank of Nigeria” was ranked 14th in the top 200 African banks in 2012, according to the weekly magazine “Jeune Afrique”.

In Nigeria, from 2012, the first “non interest” bank, Jaiz Bank has started its operations in Nigeria. Its income derives from co-participating in the profits of supported economic activities (so called “non interest” or “Islamic banking”).

At the end of 2011, the inflation rate on a yearly basis was 10.3%. In October 2012 was 11.7%, in December 2012 was 12.3% and in May 2013 was 9% as reported by the Nigerian National Bureau of Statistics. 

The stock market (“Nigerian Stock Exchange”) has lost more than 18% in 2011. However, during the year 2012 a rise of 25% on an annual basis was registered.

Treaties on economic and financial related matters

Italy and Nigeria have signed on the 27th September 2000 a Treaty on the Reciprocal Promotion and Protection of Investments which has been subsequently ratified by both parties and entered into force on 22nd August 2005.
Italy and Nigeria have also concluded the following Agreements on economic related matters:
Agreement to avoid double taxation on revenues from maritime and aerial navigation, signed in 1977;
Agreements of financial characters for the settlement of Nigerian public and private debt within the terms of the Paris Club, signed in 1989, 1990, 1992 and  2004;
Agreement on cancellation of 1.5 billion Euro of outstanding Nigerian public debts signed in 2005.
Italy and Nigeria have a Bilateral Agreement on Air Services.