For healthy and continuous in flow of Foreign Direct Investments (FDIs) to Nigeria, the country has over the years put in place friendly legal framework for Foreign Direct Investments (FDIs) protection.
In this Foreign Investors’ Guidelines for Doing Business in Nigeria Series, we shall be examining the legal mechanisms put in place for the purpose of encouraging an increasing FDIs inflow and ensuring foreign investors’ confidence in the country.
We shall be discussing foreign investors’ protections ranging from certainty of arbitral proceedings and other dispute resolution mechanisms in the country.
The fact with modern economic systems is that no country can be an island economically; Foreign Direct Investment (FDI) protection is very essential to the successful attainment of foreign investors’ business objective(s) and economic development of any economy.
There are steps that host countries can lawfully take in the exercise of their sovereignty and power can lead to depriving foreign investors of reaping the fruits of their investments.
Host government actions that can affect foreign investment adversely includes nationalization; the act of a government taking control of a private enterprise and converting it to state or public ownership.
Expropriation; the act of a government taking possession of or otherwise meddling with privately held assets or property for the use and benefit of the public, or in the public interest.
The legislative and administrative acts of the government as government action can also have adverse effects on foreign investors’ businesses in Nigeria.
This is the indirect or creeping form of expropriation. The only difference is that, it mode of operation shifted attention from the physical and actual taking-over of an investor’s assets to the legislative and administrative acts of the government.
While not depriving a foreign investor of the ownership of an asset in this type of government control, it is capable of significantly reducing the value of properties and investments of the foreign owner.
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Foreign investors don’t like investing in country’s with risk such as arbitrary revocation of a license; permit or a concession after the investor has made the requisite investments.
The advancement and expansion of international business relationships and the importance of foreign direct investment to the economic development of Nigeria has made the country to put in place some foreign business protection laws for the purpose of encouraging foreign investors.