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Flag of Nigeria
System of government: federal democratic republic
Population: 177.2 million (2014 est)
Currency: Nigerian naira (NGN)
FX regime: managed arrangement
GDP: US$594.3bn (2014 est)
IGTA member: no
FATF member: no

Financial regulatory framework

Bank supervision

The Central Bank of Nigeria (CBN) is the regulatory authority for banks (via the Banking Supervision Department) and other non-bank financial institutions (via the Other Financial Institutions Supervision Department) operating within Nigeria. The CBN supervises the financial system by issuing banking licences to financial institutions and providing regulatory oversight.

Exchange controls

Nigeria's official currency is the Nigerian naira (NGN). The NGN is subject to three separate exchange rates, with an exchange bureau, an interbank market exchange and an official exchange rate. Due to the frequent changes in the foreign exchange operational framework the de facto exchange rate for the NGN is ‘other managed arrangement'. Nigeria belongs to the West African Monetary Zone (WAMZ), a group of six countries (Guinea, The Gambia, Ghana, Liberia, Nigeria and Sierra Leone), which intends to introduce a common currency, the Eco. However, only Nigeria has thus far met WAMZ convergence criteria for monetary union. Foreign exchange controls in Nigeria are administered by the CBN. Domestic currency exceeding NGN20,000 is not permitted to be imported to or exported from Nigeria without being declared to Nigeria's customs authorities. Foreign currency exceeding US$5,000 or the equivalent is not permitted to be imported to or exported from Nigeria without being declared to Nigeria's customs authorities. Export proceeds must be repatriated within 90 days of the shipment date for oil exports and within 180 days for non-oil exports. Non-oil exporters may use funds from export proceeds to finance eligible transactions, or can sell the proceeds to banks at interbank rates. There are no financing requirements for exports or export proceeds. Proceeds from invisible transactions and current transfers must be received through banks and repatriated within 90 days of the shipment date for oil exports and within 180 days for non-oil exports. Some controls apply to capital transactions, but these are not subject to repatriation requirements.

Taxation framework

Corporate taxation

Nigerian companies are taxed on worldwide income, while companies registered in a foreign jurisdiction with a fixed base or PE are taxed only on Nigerian-sourced income. Taxable income is a company's income, less allowable deductions and losses. Income of a capital nature is not included in taxable income. The corporate tax rate for non-oil and gas companies is 30%. A minimum tax is levied to ensure that, unless exempt, every company pays a certain amount of corporate income tax. PPT, rather than corporate tax, is imposed on petroleum companies. For PPT purposes income is the value of the oil and related substances extracted, except gas, plus any other income of the company. Various deductions are allowed. The tax rate is normally 85%, although a reduced rate of 65.75% is used for companies operating for less than five years and 50% is used for production sharing contracts.

Withholding tax (subject to tax treaties)

See table below.

Table 1: Withholding tax (subject to tax treaties)
Payments to: Interest1 Dividends Royalties Service Fees1
Resident companies 10% 10%2 10% 10%
Non-resident companies 10% 10% 10% 10%

1 Exempt interest includes interest on savings accounts, provided the amount deposited is below NGN 50,000.

2 Dividends paid between two Nigerian companies are exempt.

3 Payments, such as management consultancy fees and fees for technical services and commissions, are subject to withholding tax at a rate of 10% for corporate recipients and 5% for individuals. A 10% withholding tax applies to all rental payments and director’s fees. These withholding taxes are final for non-resident recipients, but may not be final for residents.

Sales taxes/VAT (inc financial services)

VAT is payable on taxable supplies of goods and services, including imports. The VAT rate is 5%. Exempt goods and services include basic foodstuffs, medicines, medical devices and medical services, and exported goods and services. Some items are zero-rated. Most businesses are obliged to register for VAT purposes.

Tax treaties

Nigeria has double tax treaties with 17 countries.

Source: All tax information supplied by Deloitte Touche Tohmatsu ( Data updated June 2015.

Accounting framework

The Financial Reporting Council of Nigeria (FRCN) is an independent body responsible for developing accounting standards in the country. It has unified regulatory powers to oversee corporate reporting, actuarial practice, valuation and corporate governance as well as the responsibility to monitor accounting and auditing standards in Nigeria. On 20 July 2011 the Financial Reporting Council of Nigeria Act was passed. Under the FRCN Act, Nigeria has phased in the adoption of International Financial Reporting Standards (IFRS) since 1 January 2012 and worked to improve transparency, particularly within the banking sector. Banks in Nigeria are now required to comply with IFRS accounting standards, as set out by the International Accounting Standards Board. Auditors signing off the accounts of a company must be members of an Accounting professional body registered, recognised and created by an enabling statute in Nigeria. Companies listed on the Nigerian Stock Exchange apply the local accounting standards.

Banking service provision

There are 21 commercial banks operating in Nigeria. There also exists a network of highly structured community, development and microfinance banks and financial institutions, which serve SMEs and microfinance needs. The Nigerian financial market is largely dominated by domestic players, with a few foreign banks such as Standard Chartered, Stanbic IBTC Bank, which is part of the Standard Bank group, Citibank and EcoBank. The key domestic players are First Bank, Zenith Bank, Guaranty Trust Bank and United Bank for Africa (UBA). These banks have a wide branch network (unlike the foreign banks, Stanbic IBTC being an exception) beyond the main commercial cities of Abuja, Lagos, Ibadan, Port-Harcourt, Kano and Calabar. The Nigerian banking sector was severely affected by the global economic crisis. In late 2010, Nigeria's government announced fundamental changes to the structure of the banking sector, forgoing the universal banking model, and splitting the banking sector into three categories: commercial banks, merchant banks (which are restricted to investment) and wholesale banking activities or specialised banks (which are non-interest banks). Nigeria's universal banking model ceased during May 2012. Nigeria has also been engaged in the full implementation of Basel II framework for the banking system, which now requires a higher capital adequacy ratio of a minimum of 10 per cent for regional/national banks and 15 per cent for banks with an international banking licence..

Clearing and payment systems

Nigeria has two main payment systems:

  • the new RTGS system; and
  • the Nigerian Automated Clearing System (NACS), for all retail payments, including cheques, cards, mobile money, funds transfers, and ATM transactions.

The new RTGS system replaced the Central Bank Interbank Funds Transfer System (CIFTS) on 16 December 2013. It is owned and operated by the CBN. The new RTGS system is an upgrade on the CIFTS system designed to align better with global payment standards. It processes high-value and urgent, NGN-denominated funds transfers. It settles all transactions electronically, in real-time and with immediate finality during its operating hours. It also settles net balances deriving from NACS. During 2013, CIFTS processed 398,138 transactions, with a total value of NGN 101,616, representing a decline of 17.5% and 10.1% respectively on 2012. The Nigeria Inter-bank Settlement System (NIBSS) is an institution set up in 1993 to streamline payments and settlement in Nigeria, which is owned by all the licensed banks, discount houses and the CBN. NACS, was established by the CBN but is managed and operated by the NIBSS. It provides automated clearing activities for cheque payments from Abuja and Lagos, electronic fund transfers and transactions from point-of-sale (POS) terminals. Payments are usually settled on a T+2 basis (across the 36 states of the federation). Automated credit transfers are cleared and settled on a same day basis. There are various forms of electronic fund transfers including the NIBSS Fast Fund, NIBSS Electronic Funds Transfer (NEFT) which operates GIRO payments for retail transfers of banks customers, and NIBSS Instant Payments (NIP). There are also a series of non-NACS, semi-automated clearing houses for the manual processing and clearing of cheques. The CBN introduced a centralised biometric identification system for the banking industry, a Bank Verification Number (BVN) in February 2014. The BVN is a number that enables a bank customer to have a single identity in the banking system and is aimed at strengthening the safety and reliability of the payment system.

Payment instruments

Cash is the most important payment method in Nigeria. Cheques are rarely used in transactions where the counterparties to the transaction do not have a strong relationship. As a norm, bankers' drafts are used to mitigate the counterparty credit risk. Cheque truncation has been fully implemented in Nigeria after being introduced for cheques processed around the cities of Lagos and Abuja. All cheques are now processed electronically by NACS and are cleared on a T+1 basis. Funds are available to beneficiaries within two days. In 2013, the volume and value of cheques cleared were NGN 29.4 million and NGN 15.6 trillion, a decline of 21.2 and 21.4 per cent, respectively from 2012, mainly attributed to an increase in the use of e-payment channels. The use of credit cards, debit cards and direct debits for retail and commercial payments has rapidly increased in recent years. The value of card payments rose by 51.7 per cent over the level in 2012 to NGN 3,180.1 billion, although the volume declined by 15.5 per cent to 323,408,103, from 382,616,953 in the preceding year. In particular, mobile card payments have grown strongly, where the volume and value of mobile payments increased by 588.19 and 353.33 per cent to 15,812,435 and NGN 142.80 billion, respectively, from 2,297,688 and NGN 31.50 billion in 2012. The significant increase in transactions was attributed to increased awareness and acceptance of mobile payments channel. Local currency-denominated debit cards and local and foreign currency-denominated credit cards are available. Stringent account opening requirements currently limit the widespread use of credit cards. The use of electronic banking platforms, in particular electronic funds transfers (NEFTs) and direct debits, is growing rapidly in Nigeria. The ATM and point of sale (POS) infrastructure base is also developing in Nigeria. There were 14,764 ATMs and 121,886 POS terminals in operation in Nigeria at the end of June 2014.

Cross-border payments

Cross-border payments are routed via SWIFT and settled through accounts held with correspondent banks abroad. Internationally issued payment cards and money transfer services are also used for cross-border payments.

Cash and bank account management

Account availability

Residents can hold foreign currency accounts domestically and abroad, but cannot hold domestic currency (NGN) accounts abroad. Resident domestic currency accounts can be converted into foreign currency, but only in regard to balances remaining after the completion of contracts or of the account holder's business in Nigeria.

  • Non-residents can hold foreign currency accounts and domestic currency (NGN) accounts in Nigeria.
  • Non-resident domestic currency accounts are convertible into foreign currency.
  • Interest can be offered on current, savings and fixed-term deposit accounts.
  • Overdraft facilities are permitted.

Money laundering

Nigeria has enacted anti-money laundering legislation: the Banking and Other Financial Institutions (Amendment) Act 2002; the Economic and Financial Crimes Commission (Establishment) Act 2004; the Anti-Money Laundering/ Combating Financing of Terrorism Regulation 2009; the Terrorism (Prevention) Act 2011, as amended 2013; the Money Laundering (Prohibition) Act 2011, as amended 2012; and the Terrorism Prevention (Amendment) Act 2013. The Central Bank of Nigeria has also issued related guidelines. Nigeria is a member of the Intergovernmental Action Group against Money Laundering in West Africa (GIABA), a Financial Action Task Force (FATF)-style regional body. Nigeria has established a financial intelligence unit – the Nigeria Financial Intelligence Unit (NFIU) – housed within the Economic and Financial Crimes Commission, which is a member of the Egmont Group.

Supplied by BCL Burton Copeland ( Data as at April February 2015.

Cash management arrangements

Cash concentration and notional pooling services are available domestically from the larger domestic banks. Exchange controls restrict the cross-border use of these services.

Electronic and internet banking

Electronic banking availability is expanding rapidly in Nigeria and services are available from the leading domestic and international banks. There is no industry-wide electronic banking standard in Nigeria; banks offer their own proprietary systems for corporate banking purposes. Services available usually include balance and transaction reporting, as well as EFT requests. Internet banking and e-payments via ATM terminals are widely available from commercial banks. Services include balance reporting and transaction initiation. As of mid-2014, there were 67.1 million internet users in the country, a penetration rate of 38%. Mobile banking is still in its infancy in Nigeria, but is rapidly increasingly in availability. Nigeria has around 18 mobile payment schemes authorised by the CBN. Providers include: FirstBank/FirstMonie, Fortis Mobile Money, UBA/Afripay, GTBank, Mobile Money, Pagatech, eTranzact, Monetise, Eartholeum, Paycom, FET, Ecobank and Kudi. Nigeria has around 146 million mobile phone service subscribers, a penetration rate of 82% in April 2015, providing large scope for the development of mobile banking services.

Liquidity management

Short-term investment instruments

The more common instruments include bank deposits, banker's acceptance and treasury bills. Government treasury bills (usually for a tenor of 91 days, 182 days and 364 days) tend to be used by the more sophisticated corporates and within the banking sector because of their liquidity. However, a majority of corporates tend to invest in banker's acceptance in the local arena, which offers steady rates of return. The rates are usually subject to negotiation. There is a small but efficient secondary market for these securities. Money market funds are available in Nigeria from some leading domestic banks for short-term investment in low-risk money market securities.

Short-term borrowing instruments

Overdrafts, term loans, lease finance, and letters of credit for import and export financing are commonly used to fund short-term positions and working capital. Typically overdrafts and term loans are the instruments used by corporates to finance short-term positions. Letters of credit are often used by the mid-sized corporates, particularly those operating and trading in the energy sector.

Corporate finance

The common forms of long-term funding are equity and debentures. Debentures were more common in the 1970s and 1980s but equity financing is an increasingly common form of funding for the more established companies. Almost all IPOs before the downturn were oversubscribed, with little need to underwrite these issues. Until recently access to capital for small companies was relatively poor. However, this has improved, with government schemes aimed to develop certain sectors.


Central Bank of Nigeria

Debt Management Office of Nigeria

Securities and Exchange Commission

Pensions Commission of Nigeria

Economic and Financial Crimes Commission

Chartered Institute of Taxation of Nigeria

Nigerian Stock Exchange

Institute of Chartered Accountants of Nigeria (ICAN)

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