The past 12 months have seen volatility in the international energy market, continued instability in West Africa and a drive towards major legal reforms in Nigeria. In addition, with an election now less than a year away, Nigeria is in a state of added uncertainty. This has created a difficult business climate for the 154 commercial lawyers listed in our guide this year. There have been positive signs, however. Regulatory concerns regarding data usage are providing new avenues through which lawyers in the space are expanding their practices. In Nigeria’s all-important energy space, domestic demand for gas continues to grow which is fuelling a race among investors for both generation and distribution capacity. With such varied trends in the jurisdiction, high-quality legal advice continues to be essential for anyone looking to do business in the market.
Nigeria came out of recession in 2017, largely due to an increase in oil prices. The fall in oil prices had left investors shaken, with a number of questions being raised over corporations’ abilities to pay their debts. This caused a rush to restructure firms’ asset holdings, a stream of work that continues to see a number of firms kept busy. The most serious concerns appear to have abated in recent months with an uptick in oil prices leading to greater market confidence. The major question for investors now will be the coming elections in February 2019. As in any election, the uncertainty of the outcome will likely cause a short-term downturn in investment as corporations wait to see how Nigerians will vote.
Investment in the jurisdiction has been inconsistent over recent months. Sources in the immigration and labour and employment spaces highlight both the instability in the region and tough immigration laws as issues hampering foreign investment. Attempts to suppress the violence of militias in Nigeria have been frustrated by underfunding and poor coordination. Ethnic divides have intensified the issue – in June, 86 people were killed in central Nigeria over a farming dispute. Events such as these have caused hesitation among companies looking to invest in the country.
Compounding the issue, tough rules abound on the ability of foreign nationals to work in the jurisdiction. Since 2015, unemployment has doubled in the country and what one source describes as “Trump syndrome” has taken hold. Under President Buhari, companies will be prohibited from hiring foreign workers in instances where there is domestic labour available. One notable exception to this rule is in the data space where the government appears keen to increase the pool of knowledge and foster new businesses. Nigeria currently spends only 0.2 per cent of GDP on research and development and has fallen behind to international rivals for market share of a number of key industries. Lawyers working in the immigration space continue to have their work cut out for them as they navigate the myriad and at times contradictory employment policies.
Investment has been further hampered over recent years by the inability of a series of governments to pass a review of the Nigerian Petroleum Act. This has led to the underdevelopment of greenfield oil projects, and caused greater focus on existing fields. The delay in signing a new bill has, by one estimate, cost Nigeria 3 trillion naira a year. The governmental delays and low oil prices have not put off some investors from the jurisdiction. Representatives from the China National Offshore Oil Corp (CNOOC) recently announced their plan to increase investment in their existing site by an additional $3 billion. Navigating investments such as these at a time of political reform is a difficult task for companies, with lawyers likely to see a significant increase in advisory work in the coming months.
Nigeria’s economy continues to be highly responsive to global trends. With the demand for cleaner alternatives to oil and coal increasing, gas has become ever-more popular according to sources. Liquified natural gas (LNG) is being used to unlock Nigeria’s role as a global distributor while domestic demand is also growing. According to sources, although investors have been heavily focused on the generation side of production, little focus has so far been given to distribution. This is now creating serious supply issue, with a large oversupply of gas that is unable to reach Nigerians in other parts of the country. Sources note that the “regulator is currently very active in passing subsidy legislation aimed at diversifying the distribution network”. The mini-grid market continues to receive interest from investors who want to tap into domestic demand. Lawyers can expect to see a rise in regulatory advice requests over the coming months as the such networks increase in complexity and scale.
The legal market in the Nigeria continues to be a competitive one. The contraction in the economy caused many firms to cut fees in response, although this appears to be steadying now. Specialism is increasing, with a number of firms honing their expertise in niche areas such as corporate immigration. Domestic firms have seen more interest in the region from the Big Four accounting firms, who are combining a number of services to provide high-quality services for clients. International firms such as DLA Piper have also recently opened Nigerian offices, further adding to the competitiveness of the space.
The recent economic crisis, the upcoming presidential election and ongoing instability in the region create a difficult legal environmental in which to operate. Nonetheless, our research highlights the resilience of the Nigerian bar, with a number of practitioners receiving outstanding praise in our research from colleagues and clients alike. As oil prices continue to rise and the economy diversifies, practitioners in the jurisdiction can expect to see their workloads increase over coming months. Nigeria is set to remain an exciting place to do business and to practise law.