Articles
(+234-1) 463-7414
(+234) 8033-264-753
This email address is being protected from spambots. You need JavaScript enabled to view it.
Legal Alert for February 2010 – Housing Laws in Nigeria Part 1
 
In this Issue:
1. Legal Alert for February 2010 – Housing Laws in Nigeria Part 1
2. Subscribe & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
LEGAL ALERT—HOUSING LAWS IN NIGERIA – PART 1 – FEDERAL MORTGAGE BANK OF NIGERIA ACT
INTRODUCTION
The rapid growth in global population has not been matched by a reasonable availability of safe and affordable houses. The situation in Nigeria is made more excruciating by a cumbersome land tenure system, with an unbalanced short-term and expensive credit/mortgage structure meant to fund long-term housing requirements of the Nigerian populace.
The housing insufficiency in Nigeria is not only due to defects in the existing housing structures – i.e. land tenure and financing as mentioned above - but also exacerbated by the non-dissemination of information on the existing structures, with the applicability of such existing structure to the citizenry by all the stakeholders in the housing industry.
This Legal Alert and a few others following it will provide you with some information on the existing housing laws in Nigeria, how they affect you and what benefits you could derive from taking some action concerning them.
FEDERAL MORTGAGE BANK OF NIGERIA ACT
The Federal Mortgage Bank of Nigeria Act, 1993 established the Federal Mortgage Bank of Nigeria ("FMBN") to among other things provide long-term credit facilities to Mortgage Institutions in Nigeria. The FMBN is also established to encourage and promote the development of Mortgage Institutions in rural, local, State and Federal government levels in Nigeria.
Subject to the provisions of the Land Use Act, the FMBN is also authorised to acquire, hold or dispose of property, whether such property is movable or immovable. For the purpose of achieving its other objectives, the FMBN is also authorised to undertake the following activities:-
OBJECTIVES OF THE FMBN
1. Provide long-term credit facilities to other Mortgage Institutions in Nigeria at such rates and on such terms as may be determined by the Board of the FMBN in accordance with the policy directives of the Federal Government of Nigeria. The rates and terms for the long-term credit facilities are by statute required to be designed to enable Secondary Mortgage Institutions grant comparable mortgage facilities to Nigerians desiring to acquire houses of their own - See Section 5(a) FMBN Act.
2. Licence and encourage the emergency of viable Mortgage Institutions to service the housing delivery needs of Nigerians.
3. Encourage and promote the development of Mortgage Institutions in rural, Local, State, Federal levels in Nigeria.
4. Regulate the activities of all Mortgage Institutions in Nigeria.
5. Collect, manage and administer all contributions made under the National Housing Fund ("NHF") in compliance with the National Housing Fund Act.
FUNDS AND REGULATORY AUTHORITY OF THE FMBN
The FMBN is empowered to accept deposits and savings from Mortgage Institutions and other Financial Institutions. The FMBN is also empowered to issue its own securities under the Federal Government guarantees, with promissory notes and other bills of exchange for the purpose of raising Funds from other Financial Institutions.
To ensure that securities issued by FMBN are redeemed, the FMBN is required to establish a sinking Fund for the redemption of its securities. FMBN provides the contributions to this sinking Fund.
The FMBN is further statutorily required to organise and operate, in collaboration with reputable Insurance companies, a Mortgage protection system designed to guarantee liquidity to Mortgage Institutions in Nigeria, in addition to affording these mortgage institutions the opportunity of having long-term credit on liberal premium terms.
The above liabilities of the FMBN are re-discountable with the Central Bank of Nigeria. See section 6 of FMBN Act on the above powers.
CAPITAL REQUIREMENTS FOR THE FMBN AND TAXATION
The principal sources of capital to the FMBN are its authorised paid-up Share Capital, a general reserve Fund into which its net profits for each Financial year are paid, with loans from the Federal Government of Nigeria and other approved bodies or sources.
The FMBN is exempted from the payment of any form of tax on its income. The provisions of the Banks & Other Financial Institutions Act ("BOIF") are not applicable to the FMBN.
CONCLUSION
Whether the Federal Mortgage Bank of Nigeria is providing the minimum retail, supervisory and regulatory support to the housing needs of Nigerians is a matter of minimal debate. Allegations of bureaucratic practices and the inability to ensure the regular collection of monthly contributions from National Housing Fund contributors continue to plague the Federal Mortgage Bank of Nigeria.
The Federal Mortgage Bank of Nigeria has not been able to adopt a proactive strategy of providing affordable long-term loans to a double digit interest rate short-term lending economy. Statutory authority provided under the National Housing Fund Act to compel banks and insurance companies to make mandatory contributions appear to be unimplemented by the Federal Mortgage Bank of Nigeria.
The unsuccessfulness of the National Housing Fund as operated by the Federal Mortgage Bank of Nigeria also has the effect of jeopardising the various rent control legislations in Nigeria as most of these rent control legislation cannot be implemented in an environment where the housing demands outstrips the supply of available houses for rent.
The Federal Government of Nigeria must therefore restructure and modernise the Federal Mortgage Bank of Nigeria to meet the challenges of the twenty-first century. Should this be impossible, the Federal Mortgage Bank of Nigeria should be privatised to operate like other mortgage institutions while greater tax and investment incentives should be provided to mortgage institutions that provide minimum long-term loans with a tenure of not less than ten (10) years.
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally permitted to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert for January 2010 – Taxation of Charities, Trustees and NGOs in Nigeria
 
In this Issue:
1. Legal Alert for January 2010 – Charities, Trustees and NGOs in Nigeria
2. Subscribe & Unsubscribe to Legal Alerts.
3. Disclaimer Notice.
Charities, Trustees and NGOs in Nigeria – Legal and Tax Regulations
The separation of the Church from state political power has always historically being a matter of conflict and apprehension. The same could be said of Trustees and registered or unregistered charitable organisations, which are more popularly referred to as Non-Governmental Organisations (NGOs) in Nigeria. The regulation of the latter is primarily hampered in the practice by the non-separation of the individual trustees from the direct personal ownership and benefits of the trust assets belonging to the NGOs.
Attempts by governments to apply existing statutory regulations to the above organisations are always met with political resistance as a result of the government's inability to explain clearly the remarkable legal distinction between the incomes of the individual operators of the charities or trusteeship or NGOs, from the organisations that they are entrusted to administer.
This Alert is a summarisation of the legal and tax requirements for registered companies in Nigeria that are limited by guarantee and therefore entitled to carry on charitable objectives without the shareholders distributing the profits of the company among themselves. This Alert also summarises the legal and tax obligations of registered trustees under Nigerian Law.
REGISTERED CHARITABLE COMPANIES IN NIGERIA
Generally in Nigeria, only companies that are registered under the Companies and Allied Matters Act ("CAMA") can carry on business in Nigeria. The nature of such business or businesses are those approved and incorporated as the company's objects at the time of registration with the Corporate Affairs Commission ("CAC"). Companies that are not registered under CAMA are deemed to be associations lacking the capacity to enter into any legally binding agreements within the territory of Nigeria.
There are three forms of business associations recognised under Nigeria Law. These are: (a) Companies; (b) Partnerships; and (c) Sole Proprietorship. The First form of business, which are Companies, do in turn have three different types namely: Companies limited by shares, unlimited companies and companies limited by guarantee. A company limited by guarantee will be treated in this presentation.
COMPANIES LIMITED BY GUARANTEE
A company limited by Guarantee is one that is incorporated primarily to promote the objects of such a company with its shareholders barred from distributing its profits among its members, as dividend or otherwise. Also, the liability of the shareholders of a company limited by guarantee is restricted to the amount that they have subscribed to pay in the event that the company limited by guarantee is wound up or dissolved.
A company limited by guarantee is not registered with a share capital and requires the prior approval of the Attorney General of the Federation before it can be incorporated.
In practice, companies limited by guarantee are registered in Nigeria to undertake strictly charitable objectives. The members/shareholders of such a company are aware that the income and other assets of the company must be applied solely towards the promotion of the objects of the company and no portion of its profits can inure to the private benefit of the members or shareholders of the company. In the event of the dissolution or winding up of a company limited by guarantee, its assets, after the liquidation of its liabilities, cannot also be distributed to its shareholders; in its stead, such profits must be transferred to another charitable organisation with objects similar to that of the company that is been dissolved.
Where however a company limited by guarantee carries on business for the purpose of distributing profits among its members, such members or officers of such a company who are aware of this statutory contravention shall be liable for the payment and discharge of all the debts and liabilities of the company. The infringing officers or members shall also be liable to a fine not exceeding N100 for every day during which the company carries on business for the profit of its members.
EXEMPTION FROM TAXATION OF COMPANIES LIMITED BY GUARANTEE
All companies in Nigeria are liable to pay Companies Income Tax on their global profits accruing in, brought into, derived from or received in Nigeria. However, the profits of any statutory, charitable, ecclesiastical, educational or other similar associations are exempted from Companies' Income Tax obligations provided such profits are not derived from any trade or business carried on by such an organisation or association, and distributed among the members, trustees or shareholders of such a company, association or organisation. See Section 23 of the Companies Income Tax Act ("CITA").
What constitute a "trade" or "business" is however not defined or described in the Companies Income Tax Act (as amended). Because of this difficulty, Dr. J. Orojo, in his book "Company Law and Practice in Nigeria", Fifth Edition, referred to the Supreme Court of Nigeria decision in the matter of Arbico v. FBIR (1966) NCLR 401 @ 410 where the Supreme Court applied the dictionary meaning which is that a trade or business is "....... The practice of some occupation, business or profession habitually carried on especially when practiced as a means of livelihood". It was also decided in this case that the question of whether or not the activity in question is a trade or business is a matter of fact and not of law.
LEGAL REPORTING FOR LIMITED LIABILITY COMPANIES
The Company and Allied Matters Act requires every company in Nigeria, including companies limited by guarantee, to keep proper accounting records that sufficiently show and explain the financial affairs and position of the company.
At the end of every financial year, each company must deliver to CAC an annual returns filing, duly accompanied by a copy of its balance sheet, profit and loss account, and notes on the statement. Failure to discharge this duty is an offence.
REGISTERED ASSOCIATION OR TRUSTEES
An unregistered body or association is not recognised under Nigerian law. It cannot enter into legally binding contracts; it cannot sue or be sued in the name of the association save where each individual member or principal officers of the association are sued or sue others in their individual capacity. To assume legal protection, every association must be registered under Nigerian law.
The Companies and Allied Matters Act provides that where one or more trustees are appointed by a community of other people, bound together by a common custom, religion, kinship or nationality, for the promotion of specific religious, educational, literary, scientific, social development, cultural, sporting or other charitable purpose, such trustees are required, with due authorisation of its members, to apply to the Corporate Affairs Commission for registration as a body corporate.
It is the law that from the date of registration or incorporation, the association becomes a body corporate with perpetual succession and a common seal, the power to sue or be sued in their corporate name and the power to hold and acquire, transfer, assign or otherwise dispose of any property or interest belonging to or held for the benefit of the association.
The income and property of an incorporated body or association shall be applied solely towards the promotion of the objectives of such a body or association. It is legally forbidden for any portion of the income or property of a registered body or association to be paid to or transferred directly or indirectly, by way of dividend, bonus or otherwise, or by way of profit, to any of the members or trustees of the association. See Section 603(1) CAMA.
The exception to the above rule is that "... payments, in good faith, of reasonable and proper remuneration to an officer or servant of the body in return for any service actually rendered to the body or association..." is exempted from the rule against the distribution of trust income.
Also exempted from the rule against the distribution of trust income are the reimbursements of out-of–pocket expenses or reasonable and proper rent or reasonable fees for services rendered by members of the association to the association.
The penalty for breach of the restrictive provisions on the non distribution of trust income is captured in Section 603(3) of CAMA which provides that "if any person knowingly acts or joins in acting in contravention of this Section, he shall be liable to refund such income or property so misapplied to the association".
LEGAL REPORTING FOR REGISTERED TRUSTEES
The trustees of all incorporated associations must not earlier than the 30th of June and not later than the 31st day of December of each calendar year file the annual returns of their registered Associations. Such a return must show the name of the association, the names, addresses and occupation of the trustees of the association, the members of its Governing Council, particulars of any changes which may have taken place with regard to the constitution of the association during the preceding year, etc.
Where the trustees of an association fail to comply with the above reporting requirement, they shall individually be liable to a fine of N5 for each day that the default continues unremedied.
TAXATION OF CHARITIES AND TRUSTEES
The tax exemption provisions enumerated above, with regard to companies limited by guarantee, are also applicable to associations also known as incorporated trustees.
Whether income derived by the trustees of an association are liable to personal income tax has been a matter of much political debate. The Personal lncome Tax Act provides that the income of individuals, communities, families and others arising from or due to a trustee or estate are liable to the imposition and payment of personal income tax.
Also, the income of all individuals from any source within or outside Nigeria including income from any trade, business, profession or vocation, or profit from any employment including compensation, bonuses, premiums or benefits are liable to personal income tax.
The tax exemption provision in Section 13 of the Third Schedule of the Personal Income Tax Act (as amended) only exempts the income of the associations themselves and not the income of the individual trustees, their employees, etc from the payment of tax.
OTHER TAX EXEMPTIONS FOR REGISTERED CHARITIES
The Capital Gains Tax Act requires that a capital gains tax must be paid on the gains accruing to any person on the disposal of such a person's asset. The rate of this tax on such a gain is ten per cent (10%).
Section 26 of the Capital Gain Tax Act however grants an exemption to the payment of this tax by any ecclesiastical, charitable, educational institutions of a public character, any statutory or registered friendship society, any registered co-operative society of any state and trade union registered under the Trade Unions Act, provided that such a "... gain is derived from any disposal of any asset acquired in connection with any trade or business carried or by the institution or society and the gain is applied purely for the purpose of the institution or society, as the case may be."
The Customs, Exercise Tariff, etc (Consolidation) Act 2004, Section 8, Second Schedule, exempts from the payment of import duty, certain goods meant for charitable or humanitarian purposes. The exemption from the payment of this duty is granted by the Minister of Finance.
CONCLUSION
The income of charitable organisations and other similar associations are exempted from tax liability. It is arguable in law whether the profit of a registered association is liable to tax assessment and payment where such profits are channeled exclusively to the promotion of the objectives of the charitable institution.
It is also the law that income derived by the members of a charitable organisation, save for the exempted items like reimbursable out-of-pocket expenses, are also liable to the payment of personal tax. A contrary interpretation will lead to an inequitable tax system and tax evasion.
Ultimately, tax compliance will only be enhanced when good corporate governance and responsibility, in accordance with the rule of law, are practised by both the governed and especially those in government. The opposite situation will be maintained when the governing class disregards the rule of law.
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally permitted to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached.
Legal Alert – October, 2011 – Money Laundering (Prohibition) Act, 2011
 
In this Issue:-
1. Legal Alert – October 2011 – Money Laundering (Prohibition) Act, 2011
2. Disclaimer
3. Subscribe & Unsubscribe
Legal Alert – October 2011 - Money Laundering (Prohibition) Act, 2011
Introduction:
The Money Laundering (Prohibition) Act, 2011 has repealed the Money Laundering (Prohibition) Act, 2004 by providing for, among other things, that no person or body corporate shall, except in a transaction executed through a licensed financial institution, make or accept cash payments of a sum exceeding N5,000,000 (Five Million Naira) or its equivalent in the case of an individual, or N10,000,000 (Ten Million Naira) or its equivalent in the case of a body corporate
Any Financial Institution or Designated-Financial Institution that fails to comply with the above provision by making the appropriate compliance report to the regulatory authorities commits an offence and is liable on conviction to a fine of not less than N250,000:00 (Two Hundred and Fifty Thousand Naira) for an individual and not more than N1,000,000 (One Million Naira) for a body corporate, for each day that the contravention continues unabated.
Foreign Exchange Transfers
Also, any transfer to or from a foreign country of funds or securities in excess of US$10,000 (Ten Thousand United States Dollars) or its equivalent must be reported to the Central Bank of Nigeria ("CBN"), the Securities & Exchange Commission ("SEC") and the Economic & Financial Crimes Commission ("EFCC") within seven days from the date of the transfer transaction in question. The Report must indicate the names and addresses of the Sender, and of the Receiver of the funds or securities.
Customs Declarations
Any transportation of cash or of any negotiable instrument in excess of US$10,000 or its equivalent by individuals in or out of Nigeria must be declared to the Nigeria Custom Service who in turn is obligated to report such declarations to the CBN and the EFCC.
Any person who falsely declares or fails to make a declaration to the Nigeria Custom Service in pursuance of Section 12 of the Foreign Exchange (Monitoring and Miscellaneous) Act commits an offence and is liable on conviction to forfeit not less than 25% of the undeclared funds or negotiable instrument, or to a term of imprisonment of not less than two (2) years, or to both the term of imprisonment and the forfeiture of the undeclared amount.
Know Your Customers ("KYC")
All financial institutions in Nigeria with all designated non-financial institutions like Jewelers, Car and Luxury goods distributors, Chartered Accountants, Audit Firms, Tax Practitioners, Casinos, Clearing and Settlement agents, Legal Practitioners, Supermarkets, etc are required to verify the identity of their customers and update all relevant information on the customers regularly.
Financial Institutions and designated non-financial institutions are also obligated to scrutinise all on-going transactions that they undertake on behalf of their customers by ensuring that their customers' transactions are consistent with the business and risk profile of the customers.
Where the customer is a public officer entrusted with performing a prominent public function, both within and outside Nigeria, the financial institution shall put in place for such a customer, an appropriate risk management system in addition to obtaining senior management approval to maintaining any business relationship with the public officer.
Declaration of Nature of Business – DNF
A designated non-financial institution whose business involves the one of cash transactions shall before commencing business submit to the Federal Ministry of Commerce a declaration of the nature of its business along with subsequently submitting a returns register of all its cash transactions above the limited set out in the Money Laundering (Prohibition) Act, 2011.
Also, prior to any transaction involving a sum of US$1,000 or its equivalent, the designated non-financial institution must identify the customer by requiring him to fill a standard data form and have the customer submit copies of his or her international passport, driving license, national identity card or such other document bearing his or her photograph and or as may be prescribed by the Federal Ministry of Commerce.
A designated non-financial institution that fails to comply with the collation of data on its customers, the process that is more commonly referred to as KYC, and submit the returns requirements as above stated within seven days from the date of each relevant transaction, commits an offence and is liable on conviction to a fine of N250,000:00 (Two Hundred and Fifty Thousand Naira) for each day during which the offence continues unabated.
In addition to the above-mentioned penalty, the offending party could also suffer a suspension or a revocation or a withdrawal of his or her or its operating license by the appropriate licensing authority, and as the circumstances of the offence may demand.
Surveillance of Suspicious Transactions
Suspicious transactions of a frequent, unjustifiable or unreasonable nature, surrounded with unusual and unjustifiable complexity, and that appears to have no economic justification or lawful objective, and that may involve financing or are inconsistent with the known pattern of the account or business relationship with a customer are required to the reported to the Economic and Financial Crimes Commission ("EFFC") within seven days of each of such transaction.
It is the responsibility of financial institutions and designated non-financial institutions to take all appropriate action to prevent the laundering of the proceeds of a crime or any illegal activity.
The Economic and Financial Crimes Commission with the Central Bank of Nigeria are authorised to, whenever they receive a report such as the one mentioned above, among other things, place a stop order not exceeding 72 hours on the account or transaction if it is suspected that such account is involved in the commission of a crime. This period could be extended where an application is made to the Federal High Court for such an extension.
The Federal High Court also has power to order that the funds and the accounts or securities referred to in the financial or designated non-financial Institution's report should be block forthwith.
Any institution that fails to comply with the above provisions commits an offence and is liable on conviction to a fine of N1,000,000:00 (One Million Naira) for each day during which the offence continues to be committed.
Exemption from Liability
The Directors, officers and employees of any financial institution or designated non-financial institution who complies with the provisions of this Act, in good faith, are not liable to having any civil or criminal proceedings bought against them by their customers for making a money laundering report.
Prohibition of Operating Anonymous Accounts
The opening and or maintaining of numbered or anonymous accounts by any person, financial institution or corporate body is prohibited by the Money Laundering (Prohibition) Act, 2011.
Any individual or financial institution or corporate body that contravenes the above prohibition commits an offence and is liable on conviction to a term of imprisonment of not less than two years but not more than five years in the case of an individual offender.
Corporate and financial institution contraveners of the above prohibition are liable if convicted to a fine of not less than N10Million, and not more than N50Million, for each offence committed.
Banking Secrecy and Confidentiality
Section 13(4) of the 2011 Money Laundering (Prohibition) Act provides that "banking secrecy or the preservation of customer confidentiality shall not be invoked as a ground for objecting to the measures set out in sub-section (1) and (2) of this Section or for refusing to be a witness to facts likely to constitute an offence under this Act, the Economic and Financial Crimes Commission (Establishment, etc.) Act or any other law."
Legal Practitioners & Clients Confidentiality Communications
Section 192(1) of the Evidence Act, 2011 protects professional communication between a client and his Legal Practitioner. Professional communications that are however made in furtherance of any illegal purpose or that are of any criminal or fraudulent nature are not protected from disclosure by the Lawyer/Client confidentiality rule even after the professional engagement of the Legal Practitioner has ceased.
However, where the Client elects to be a Witness in a judicial proceeding, the communication between the Client as a Witness and his Legal Practitioner will no longer be privileged provided that the subject matter of the evidence of the client is relevant to the judicial proceedings.
The parameters of a Client and Legal Practitioner privilege was tested in the matter of Abubakar v. Chuks (2007) 12 SC 1 @ 15-16 where the Supreme Court considered the provisions of the repealed Section 170 of the Evidence Act, 1945 and held that the restriction on a Legal Practitioner not to disclose at any time, confidential information between him and his client except where the Legal Practitioner has the express instructions of the client to disclose such information, does not apply to confidential communication or correspondence that are already in the public domain.
Money Laundering Offences and Penalties
Any person, whether an individual or a corporate body, who converts or transfers the resources or properties directly derived from any illegal trafficking in narcotic drugs and substances, or participates in any organised criminal group or undertakes terrorist activity, or engages in terrorism financing, human trafficking, sexual exploitation, smuggling, tax evasion, bribery and corruption, or carries out environmental crimes, kidnapping and hostage taking, illegal bunkering, illegal mining, insider trading and market manipulation, especially where these crimes are committed with the aim of either concealing or disguising the illicit origin of the resources or property or concealing any person involved in these crime(s) to evade the illegal consequences of the crimes, commits an offence under the Money Laundering (Prohibition) Act, 2011.
Barring a repetition, it is also an offence for any individual or corporation or both to collaborate in concealing or disguising the genuine nature, origin, location, disposition, movement or ownership of the resources, property or rights derived directly or indirectly from the acts mentioned above.
The penalty on conviction for any of the offences mentioned above is a term of imprisonment of not less than five years but not more than 10 years.
It is immaterial when imposing punishment that the various aspects of the subject matter offence were committed in different jurisdictions or in different parts of the world.
Other Money Laundering Offences
Additional Money Laundering Offences include:-
i) Warning or in any way intimating the owner of suspected money laundering funds, of the making of any statutory report or refraining from making such a report.
ii) Destroying or removing a register or record required to be kept under the Money Laundering (Prohibition) Act.
iii) Making or accepting cash payments contrary to the provisions of the Money Laundering (Prohibition) Act.
iv) Failing to report an international transfer of funds or securities.
v) Carrying out or attempting to carry out a money laundering offence under a false identity.
The penalties, on conviction, for the above listed offences (i) to (iii) is a term of imprisonment of not less than two years but not more than three years, or a fine of N500,000 and not more than N1,000,000.
The penalty for making or accepting cash contrary to the provisions of the Money Laundering (Prohibition) Act 2011 is a forfeiture of 25% of the excess amount received or transferred.
It is also an offence to knowingly retain the proceeds of a criminal activity, or to conspire, aid and abet the commission of a money laundering offence.
Professional Ban or Suspension
Any person that is found guilty of an offence under this law may also be banned indefinitely or for a period of five years from practicing the profession which provided the opportunity for the money laundering offence to be committed.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally free to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.

Legal Alert – October, 2011 – Money Laundering (Prohibition) Act, 2011

 

In this Issue:-

 

1.                 Legal Alert – October 2011 – Money Laundering (Prohibition) Act, 2011

2.                 Disclaimer

3.                 Subscribe & Unsubscribe

 

Legal Alert – October 2011 - Money Laundering (Prohibition) Act, 2011

 

Introduction:

 

The Money Laundering (Prohibition) Act, 2011 has repealed the Money Laundering (Prohibition) Act, 2004 by providing for, among other things, that no person or body corporate shall, except in a transaction executed through a licensed financial institution, make or accept cash payments of a sum exceeding N5,000,000 (Five Million Naira) or its equivalent in the case of an individual, or N10,000,000 (Ten Million Naira) or its equivalent in the case of a body corporate

 

Any Financial Institution or Designated-Financial Institution that fails to comply with the above provision by making the appropriate compliance report to the regulatory authorities commits an offence and is liable on conviction to a fine of not less than N250,000:00 (Two Hundred and Fifty Thousand Naira) for an individual and not more than N1,000,000 (One Million Naira) for a body corporate, for each day that the contravention continues unabated.

 

Foreign Exchange Transfers

 

Also, any transfer to or from a foreign country of funds or securities in excess of US$10,000 (Ten Thousand United States Dollars) or its equivalent must be reported to the Central Bank of Nigeria (“CBN”), the Securities & Exchange Commission (“SEC”) and the Economic & Financial Crimes Commission (“EFCC”) within seven days from the date of the transfer transaction in question. The Report must indicate the names and addresses of the Sender, and of the Receiver of the funds or securities.

 

Customs Declarations

 

Any transportation of cash or of any negotiable instrument in excess of US$10,000 or its equivalent by individuals in or out of Nigeria must be declared to the Nigeria Custom Service who in turn is obligated to report such declarations to the CBN and the EFCC.

 

Any person who falsely declares or fails to make a declaration to the Nigeria Custom Service in pursuance of Section 12 of the Foreign Exchange (Monitoring and Miscellaneous) Act commits an offence and is liable on conviction to forfeit not less than 25% of the undeclared funds or negotiable instrument, or to a term of imprisonment of not less than two (2) years, or to both the term of imprisonment and the forfeiture of the undeclared amount.

 

Know Your Customers (“KYC”)

 

All financial institutions in Nigeria with all designated non-financial institutions like Jewelers, Car and Luxury goods distributors, Chartered Accountants, Audit Firms, Tax Practitioners, Casinos, Clearing and Settlement agents, Legal Practitioners, Supermarkets, etc are required to verify the identity of their customers and update all relevant information on the customers regularly.

 

Financial Institutions and designated non-financial institutions are also obligated to scrutinise all on-going transactions that they undertake on behalf of their customers by ensuring that their customers’ transactions are consistent with the business and risk profile of the customers.

 

Where the customer is a public officer entrusted with performing a prominent public function, both within and outside Nigeria, the financial institution shall put in place for such a customer, an appropriate risk management system in addition to obtaining senior management approval to maintaining any business relationship with the public officer.

 

Declaration of Nature of Business – DNF

 

A designated non-financial institution whose business involves the one of cash transactions shall before commencing business submit to the Federal Ministry of Commerce a declaration of the nature of its business along with subsequently submitting a returns register of all its cash transactions above the limited set out in the Money Laundering (Prohibition) Act, 2011.

 

Also, prior to any transaction involving a sum of US$1,000 or its equivalent, the designated non-financial institution must identify the customer by requiring him to fill a standard data form and have the customer submit copies of his or her international passport, driving license, national identity card or such other document bearing his or her photograph and or as may be prescribed by the Federal Ministry of Commerce.

 

A designated non-financial institution that fails to comply with the collation of data on its customers, the process that is more commonly referred to as KYC, and submit the returns requirements as above stated within seven days from the date of each relevant transaction, commits an offence and is liable on conviction to a fine of N250,000:00 (Two Hundred and Fifty Thousand Naira) for each day during which the offence continues unabated.

 

In addition to the above-mentioned penalty, the offending party could also suffer a suspension or a revocation or a withdrawal of his or her or its operating license by the appropriate licensing authority, and as the circumstances of the offence may demand.

 

Surveillance of Suspicious Transactions

 

Suspicious transactions of a frequent, unjustifiable or unreasonable nature, surrounded with unusual and unjustifiable complexity, and that appears to have no economic justification or lawful objective, and that may involve financing or are inconsistent with the known pattern of the account or business relationship with a customer are required to the reported to the Economic and Financial Crimes Commission (“EFFC”) within seven days of each of such transaction.

 

It is the responsibility of financial institutions and designated non-financial institutions to take all appropriate action to prevent the laundering of the proceeds of a crime or any illegal activity.

 

The Economic and Financial Crimes Commission with the Central Bank of Nigeria are authorised to, whenever they receive a report such as the one mentioned above, among other things, place a stop order not exceeding 72 hours on the account or transaction if it is suspected that such account is involved in the commission of a crime. This period could be extended where an application is made to the Federal High Court for such an extension.

 

The Federal High Court also has power to order that the funds and the accounts or securities referred to in the financial or designated non-financial Institution’s report should be block forthwith.

 

Any institution that fails to comply with the above provisions commits an offence and is liable on conviction to a fine of N1,000,000:00 (One Million Naira) for each day during which the offence continues to be committed.

 

Exemption from Liability

 

The Directors, officers and employees of any financial institution or designated non-financial institution who complies with the provisions of this Act, in good faith, are not liable to having any civil or criminal proceedings bought against them by their customers for making a money laundering report.

 

Prohibition of Operating Anonymous Accounts

 

The opening and or maintaining of numbered or anonymous accounts by any person, financial institution or corporate body is prohibited by the Money Laundering (Prohibition) Act, 2011.

 

Any individual or financial institution or corporate body that contravenes the above prohibition commits an offence and is liable on conviction to a term of imprisonment of not less than two years but not more than five years in the case of an individual offender.

 

Corporate and financial institution contraveners of the above prohibition are liable if convicted to a fine of not less than N10Million, and not more than N50Million, for each offence committed.

 

Banking Secrecy and Confidentiality

 

Section 13(4) of the 2011 Money Laundering (Prohibition) Act provides that “banking secrecy or the preservation of customer confidentiality shall not be invoked as a ground for objecting to the measures set out in sub-section (1) and (2) of this Section or for refusing to be a witness to facts likely to constitute an offence under this Act, the Economic and Financial Crimes Commission (Establishment, etc.) Act or any other law.”

 

Legal Practitioners & Clients Confidentiality Communications

 

Section 192(1) of the Evidence Act, 2011 protects professional communication between a client and his Legal Practitioner. Professional communications that are however made in furtherance of any illegal purpose or that are of any criminal or fraudulent nature are not protected from disclosure by the Lawyer/Client confidentiality rule even after the professional engagement of the Legal Practitioner has ceased.

 

However, where the Client elects to be a Witness in a judicial proceeding, the communication between the Client as a Witness and his Legal Practitioner will no longer be privileged provided that the subject matter of the evidence of the client is relevant to the judicial proceedings.

 

The parameters of a Client and Legal Practitioner privilege was tested in the matter of Abubakar v. Chuks (2007) 12 SC 1 @ 15-16 where the Supreme Court considered the provisions of the repealed Section 170 of the Evidence Act, 1945 and held that the restriction on a Legal Practitioner not to disclose at any time, confidential information between him and his client except where the Legal Practitioner has the express instructions of the client to disclose such information, does not apply to confidential communication or correspondence that are already in the public domain.

 

Money Laundering Offences and Penalties

 

Any person, whether an individual or a corporate body, who converts or transfers the resources or properties directly derived from any illegal trafficking in narcotic drugs and substances, or participates in any organised criminal group or undertakes terrorist activity, or engages in terrorism financing, human trafficking, sexual exploitation, smuggling, tax evasion, bribery and corruption, or carries out environmental crimes, kidnapping and hostage taking, illegal bunkering, illegal mining, insider trading and market manipulation, especially where these crimes are committed with the aim of either concealing or disguising the illicit origin of the resources or property or concealing any person involved in these crime(s) to evade the illegal consequences of the crimes, commits an offence under the Money Laundering (Prohibition) Act, 2011.

 

Barring a repetition, it is also an offence for any individual or corporation or both to collaborate in concealing or disguising the genuine nature, origin, location, disposition, movement or ownership of the resources, property or rights derived directly or indirectly from the acts mentioned above.

 

The penalty on conviction for any of the offences mentioned above is a term of imprisonment of not less than five years but not more than 10 years.

 

It is immaterial when imposing punishment that the various aspects of the subject matter offence were committed in different jurisdictions or in different parts of the world.

 

Other Money Laundering Offences

 

Additional Money Laundering Offences include:-

 

i)                 Warning or in any way intimating the owner of suspected money laundering funds, of the making of any statutory report or refraining from making such a report.

 

ii)               Destroying or removing a register or record required to be kept under the Money Laundering (Prohibition) Act.

 

iii)         Making or accepting cash payments contrary to the provisions of the Money Laundering (Prohibition) Act.

 

iv)         Failing to report an international transfer of funds or securities.

 

v)              Carrying out or attempting to carry out a money laundering offence under a false identity.

 

The penalties, on conviction, for the above listed offences (i) to (iii) is a term of imprisonment of not less than two years but not more than three years, or a fine of N500,000 and not more than N1,000,000.

 

The penalty for making or accepting cash contrary to the provisions of the Money Laundering (Prohibition) Act 2011 is a forfeiture of 25% of the excess amount received or transferred.

 

It is also an offence to knowingly retain the proceeds of a criminal activity, or to conspire, aid and abet the commission of a money laundering offence.

 

Professional Ban or Suspension

 

Any person that is found guilty of an offence under this law may also be banned indefinitely or for a period of five years from practicing the profession which provided the opportunity for the money laundering offence to be committed.

 

 

DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.

 

This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached

 

Subscribe & Unsubscribe to Legal Alerts

 

This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words “Subscribe – Legal Alerts” followed by the desired email address.

 

You are equally free to terminate your subscription by sending to us a one line email with the words “Unsubscribe - Legal Alerts” and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.

Legal Alert – September 2011 – Sovereign Investment Authority Act, 2011
 
In this Issue:-
1. Legal News – Lagos State Home Ownership Mortgage Scheme
2. Legal Alert – September 2011 – Nigeria's Sovereign Investment Authority (Establishment, Etc.) Act, 2011
3. Disclaimer
4. Subscribe & Unsubscribe
Legal News
To address the insufficient housing stock associated with the efficient implementation of the new Tenancy Law in Lagos State, the Lagos State Government has introduced a Home Ownership Mortgage Scheme to assist first-time home buyers, resident in Lagos State, the opportunity to own their own homes.
Also, a Housing Arbitration Rules, to be read in conjunction with the Lagos State Arbitration Law 2009, have also being published to cater for any dispute arising from the Lagos Home Ownership Mortgage Scheme.
For more details on the above, you can visit the Lagos State website, www.lagosstate.gov.ng
Legal Alert – Nigeria Sovereign Wealth Fund -Introduction
The Nigerian Government has passed into law the Sovereign Investment Authority (Establishment, Etc.) Act, 2011 ("NSWF Act"), to among other things, establish a Nigerian Sovereign Investment Authority. This Authority has the responsibility to receive, manage and invest in diversified portfolios the medium and long-term revenue of the Federal Government of Nigeria, the 36 State Governments, the Federal Capital Territory, all the Local Government Areas and all the Area Councils in Nigeria.
The NSWF legislation is necessitated by the depletion and the non-renewable nature of the hydrocarbon resources in Nigeria, and the need to develop critical infrastructure that would attract investment and diverse the Nigerian economy.
Nigeria Sovereign Investment Authority – Establishment
In addition to the objective stated above, the Nigeria Sovereign Investment Authority ("NSIA") is established to acquire, hold and dispose of movable and immovable assets for the purpose of building a savings base for the Nigerian people, in addition to enhancing the development of infrastructural facilities in Nigeria, and further, providing a stabilisation support to Nigeria in times of economic stress.
Independent Authority
The NSIA is an independent authority that is not subject to the direction or control of any person or body except as provided for in the NSWF Act.
Some of the measures designed to protect the assets of the Authority include the statutory provision that the assets of the Authority are to be diversified while no Asset Manager to the Authority shall be appointed or act as its Custodian at the same time in respect of the assets of the Authority and or of the Fund. In addition, one or more Custodians are to be appointed for the investments held by the Authority.
Funding of the SWF Authority
The take-off funds to be managed by the Authority is the Naira equivalent sum of $1,000,000,000 (One Billion United States Dollars). This sum is to be contributed by the Federal Government, the State Governments, the Federal Capital Territory, the Local Governments and the Area Councils in the pro-rata basis of their share of the total Revenue from the Federation Account as provided for in the Allocation of Revenue (Federation Account, etc) Act, 2004.
Subsequent funds to be managed by the Sovereign Wealth Authority are to be derived from the Residual funds in the Federation Account with the derivation portion of the revenue allocation expressly excluded from this arrangement.
The various tiers of governments in Nigeria, as owners of the sovereign wealth fund, are not allowed to transfer, redeem, assign, dispose, sell, mortgage, pledge or otherwise encumber any of their interest in the SWF.
Insurance, Indemnities, Taxation, etc
The Directors of the SWF Authority are protected by insurance policies and indemnified in line with best International Standards whilst they carry out their duties in accordance with the NSWF Act.
The provisions of the Public Officers' Protection Act, which provides, among other things, that law suits against public officers can only be commenced within three (3) months after the act, neglect or default complained about, is also available to the SWF Authority, its Directors, Board and officers.
On the matters of taxation, the SWF Authority, its wholly owned subsidiaries and affiliates are exempted from the provisions of any and all taxes, imports and similar fiscal laws and regulations enacted by any tier of government in Nigeria.
The employees of the Authority and its wholly owned subsidiary are however liable to pay personal income tax and claim any tax benefits as provided for in any international treaty to which Nigeria is a signatory.
The SWF Authority and any Financial Instrument created by this Authority in furtherance of its statutory objectives are also exempted from the provisions of the Investments and Securities Act 2007, and the Banks and Other Financial Institutions Act 2004, and any amendments to these legislation from time to time shall not apply to the SWF Authority.
The provisions of the NWSF Act shall prevail where any law or enactment relating to or similar to its operations are inconsistent with the NSWF Act.
Constitutionality of Nigeria Sovereign Investment Authority Act
The legislative powers of the Federal Republic of Nigeria is vested in the National Assembly who have the powers to legislate on the matters enumerated in the Exclusive Legislative List as set out in Part 1 of the Second Schedule of the 1999 Constitution (as amended).
Section 80 (1) of the 1999 Constitution (as amended) provides that all revenues received or raised by the Federal Republic of Nigeria shall be paid into one Consolidated Revenue Fund for the benefit of the entire Federation of Nigeria. The exception to this provision is where by a Law passed by the National Assembly, a specific public fund is created for a specific public purpose, like the Sovereign Investment Authority to manage Nigeria's Sovereign Wealth Fund.
Conclusion
Opposition to the constitutionality or legality of the NSWF Act will remain misplaced until the 1999 Constitution (as amended) is further amended to devolve more legislative authority, responsibilities and revenues on the States and Local Governments Areas as should be the case in a Federal System of Government, as opposed to the current "Unitary'' System of government in Nigeria.
Pending the further amendment to the 1999 Constitution, to be reflective of a true Federal system of government, the method of appointments and representations on the Council and the Board of Directors of the Sovereign Investment Authority of Nigeria needs to reflect true independence and the protection of the contributors from a very strong Federal Government or a conniving group of State Governments. The machinery to enshrine good corporate governance and prevent conflict of interest in the entire present structure cannot be guaranteed until the 1999 Constitution (as amended) and the NSWF Act are amended.
The last comment is that the NSWF Act does not provide for a transparent incentive package for the managers of the fund as is the practice in the private sector. The likelihood of public sector bureaucracy and non-meritocracy could therefore erode this fund.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally free to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
Legal Alert – August 2011 – Oil and Gas Local Content Act
 
In this Issue:-
1. Legal News – New Tenancy Law in Lagos.
2. Executive Summary on the Nigerian Oil and Gas Industry Content Development Act.
3. Full Legal Alert – August 2011 – The Nigerian Oil and Gas Industry Content Development Act
4. Disclaimer
5. Subscribe & Unsubscribe
Legal News – New Lagos State Tenancy Law
The Lagos State Government has signed into law a new Tenancy legislation which prohibits Landlords in Lagos State from collecting rentals in excess of six (6) months from a sitting (existing) tenant, and not more than one (1) year's rent from a new tenant. On conviction, the penalty for a breach of these provisions, is a three (3) months jail time or a fine of N100,000:00 (One Hundred Thousand Naira).
Fuller details of the provisions of this Law and how it affects you will be provided in our subsequent newsletters.
Executive Summary – Oil and Gas Local Content Law
This is a very important legislation to which it is recommended that some time be dedicated to appreciate its provisions. A summary of the high points of this law are provided in this section while fuller details are provided after the summaries.
a. The Nigerian Oil and Gas Industry Content Development Act, 2010 ("the Oil and Gas Local Content Act") was enacted to provide for the development of an-all inclusive Nigerian Local Content to maximise the benefits in the Nigerian Oil and Gas Industry.
b. The provisions of the Oil and Gas Local Content Act now supersede similar provisions in the Petroleum Act or in any other enactment or law pertaining to the development of a local content in the Nigerian oil and gas industry.
c. Nigerian Independent Operators, with proven capacity, shall be given the first consideration in the award of oil blocks, oil field licences, oil lifting licences and in all projects for which a contract is to be awarded in the Nigerian oil and gas industry subject to such conditions as may be specified from time to time by the Minister of Petroleum.
d. The Nigerian Oil and Gas Content Development and Monitoring Board ("the Content Monitoring Board") is established, as regulator, to among other things implement, supervise, coordinate, administer, monitor and manage the various provisions of the Oil and Gas Local Content Development Act, with the Regulations that will be made by the Minister for Petroleum Resources, in furtherance of the provisions of this Law.
e. Any bid for any license, permit or interest in the Nigerian oil and gas industry must be accompanied by a Nigerian Content Plan which the local content regulator must review and issue a certificate of authorisation if the Content Plan complies with the provisions of the Nigerian Oil and Gas Local Content Act.
f. All operators and promoters in the Nigerian oil and gas industry are required to give to Nigerians, especially those operating in the oil and gas producing communities, the first consideration when acquiring goods and services, employing personnel or training existing personnel. Operators are compulsorily required to submit at regular intervals, a employment, training and succession plan.
g. Operators and Promoters in the Nigerian oil and gas industry are also required to engage the services of only financial institutions and professionals registered and licensed by Nigerian professional bodies.
h. Operations and corporations in breach of the provisions of this law are liable on conviction to a fine of 5% of the value of the contract in addition to a possible cancellation of such a contract or contracts.
Legal Alert – Oil and Gas Content Law
The enactment of the Nigerian Oil and Gas Industry Content Development Act, which is now more commonly referred to as "the Oil and Gas Local Content Act", is the accumulation of many years of agitation for more protectionist legislation for Nigerian Citizens who have always desired to have a greater participation in the very profitable Oil and Gas sector of the Nigerian economy.
An examination of the provisions of the Nigerian Oil and Gas Industry Content Development Act ("the Oil and Gas Local Content Act") is desirable in the light of previous government policies and regulations governing the Department of Petroleum Resources ("DPR") and the Nigerian National Petroleum Corporation ("NNPC"), which policies and regulations did not develop a competitive Nigerian local content in the oil and gas industry.
The Oil and Gas Local Content Act – Introduction
The Nigerian Oil and Gas Industry Content Development Act, 2010 ("the Oil and Gas Local Content Act") was enacted to provide for the development of an all inclusive Nigerian Local Content to maximise the benefits in the Nigerian Oil and Gas Industry, plan, supervise, coordinate, monitor and implement the Nigerian Oil and Gas local content policies, and other matters related to the development of the Nigerian content or capacity in the oil and gas industry.
The provisions of the Oil and Gas Local Content Act accordingly now supersede similar provisions in the Petroleum Act or in any other enactment or law pertaining to the development of a local content in the Nigerian oil and gas industry.
Nigerian Operators – First Consideration
The Oil and Gas Local Content Act requires that "Nigerian Independent Operators shall be given the first consideration in the award of oil blocks, oil field licences, oil lifting licences and in all projects for which a contract is to be awarded in the Nigerian oil and gas industry subject to such conditions as may be specified by the Minister."
Similarly, Nigerian Indigenous service companies that demonstrate ownership of sufficient equipment, sufficient Nigerian personnel and capacity to execute such works on land and in swampy operating areas of the Nigerian oil and gas industry are to be given exclusive consideration in the award of contracts in the areas where the projects are located.
Compliance with the provisions of the Nigerian Oil and Gas Local Content Development Act is a major criteria in considering firms and corporations to whom licenses, permits and any other commercial interest in any oil and gas exploration, production, transportation, development, and any other operations in the Nigerian oil and gas industry, will be granted.
Nigerian Local Content Monitoring Board
The regulator and enforcer of the Nigerian Oil and Gas Local Content Development legislation is the Nigerian Content Development and Monitoring Board. This Board is mandated to make procedures that will guide, monitor, coordinate and implement the provisions of the Oil and Gas Local Content Development Act.
The Oil and Gas Local Content Development and Monitoring Board ("the Board") is also statutorily required to ensure that, in a measurable manner, there is the continuous growth of Nigerian local content in all oil and gas arrangements, projects, operations, activities or transactions in the Nigerian oil and gas industry.
Nigerian Content Plan – Evaluation
Any bid for any license, permit or interest in the Nigerian oil and gas industry must be accompanied by a Nigerian Content Plan which the local content regulator must review and issue a certificate of authorisation if the Content Plan complies with the provisions of the Nigerian Oil and Gas Local Content Act.
Also, all operators and project promoters are mandatorily required to consider a Nigerian content when evaluating any bid where the bids or bids are within 1% of each other at commercial stage, and the bid with the highest level of Nigerian content is to be selected provided that the selected bid is at least 5% higher than its closest competitor.
Other attempts to develop a genuine Nigerian Content in the Oil and Gas Industry in Nigerian include:-
(a) Operators and alliance partners in the oil and gas industry in Nigeria must maintain a biding process for acquiring goods and services which give full and fair opportunity to Nigerian indigenous contractors and companies.
(b) A Nigerian indigenous company's bid, with proven capacity, shall not be disqualified solely on the basis that it is not the lowest financial bid provided that the value of such a bid does not exceed the lowest bid price by 10% (ten per cent).
Employment, Training and Succession Plan for Nigerians in the Oil & Gas Industry
Every operator is required to establish in its catchment area of operation(s) or in the community in Nigeria where it carries on its oil and gas operations, a project office where its project management and procurement decisions making processes must take place. All operators are also required by this Law to give Nigerians the first consideration when employing personnel, or training any of their existing personnel in any project to be executed by any of the operators or by any project promoter in the Nigerian Oil and Gas Industry.
It is in turn the responsibility of the Oil and Gas Local Content Board to ensure that all operators and project promoters' maintain a reasonable number of personnel from within the indigenous community where the operator or promoter has a significant oil and gas operation or operations. The Board undertakes this responsibility by, among other things, requiring the operators or promoters to regularly submit a Employment, Training and Succession Plan.
All foreign operators and promoters in the Oil and Gas Industry in Nigeria are further required to retain a maximum of 5% (five per cent) of all management positions to cater for their investors interests. Only Nigerians can however be employed in the junior and intermediate cadre or grades. Applications for Expatriate Quota positions can now only be made after the prior written approval of the Nigerian Oil and Gas Local Content Board has been obtained.
Local Content Research and Development
The Minister for Petroleum Resources ("the Minister) is required by this law to make regulations with requirements and targets for the growth of research and development in the Nigerian oil and gas industry. This Minister is also required to make regulations establishing the minimum standards, facilities, personnel and technology for training in the oil and gas industry.
All operators and promoters are also required to submit a Research and Development Plan ("R & D Plan") which encompasses the promotion of education, industrial attachments, employees training, research and development in Nigerian in relation to the operators and promoters activities in Nigeria. The R & D Plan must be updated every six months.
The Minister is also empowered, after consulting with other stakeholders in the oil and gas industry, to develop a fiscal framework with tax incentives for investors in the oil and gas manufacturing and fabrication sectors, who locally produce such products or services which were previously imported into Nigeria.
Professional Services.
Operators and promoters engaged in the provision of engineering and other professional services in the Nigerian Oil and Gas Industry are required to engage the services of only professionals registered with the relevant professional bodies in Nigeria.
INSURANCE. All operators, alliance partners and Nigerian indigenous companies engaged in any form of business, operation or contract in the Nigerian Oil and Gas Industry must insure all their insurable risks relating to their oil and gas businesses, operations or contracts with a Nigerian registered and licensed insurance company through an insurance broker, all of whom must be licensed in accordance with the provisions of the Insurance Act (as amended).
Section 50 of the Oil and Gas Local Content Act also provides that no insurance risk in the Nigerian oil and gas industry shall be placed offshore without the written approval of the Nigerian Insurance Commission, and this Insurance Commission must ensure that all local insurance capacity have been exhausted before giving such a waiver.
LEGAL SERVICES. All operators, contractors and other entities engaged in any operation, business or transaction in the Nigerian Oil and Gas industry who require legal services must retain only the services of a Nigerian Barrister and Solicitor whose name is on the roll of Barristers and Solicitors at the Supreme Court of Nigeria, or a firm of Nigerian Legal Practitioners whose office is located in any part of Nigeria.
FINANCIAL SERVICES. All operators, contractors and any other entity engaged in any operation or business transaction in the Nigerian Oil and Gas industry requiring financial services must retain the services of a Nigerian licensed financial institution or organisation except where the Oil and Gas Local Content Board is satisfied that it is impracticable to do so.
The Oil and Gas Local Content Act also requires that 10% (ten per cent) of the total revenue accruing to any operator from its activities in the Nigerian oil and gas industry must be retained in a Nigerian bank account.
WELDING & FABRICATION. All operators, project promoters, contractors and any other entity engaged in the Nigerian oil and gas industry must carry out all fabrication and welding activities inside Nigeria.
Nigerian Content Monitoring Board
A Nigerian Oil and Gas Content Monitoring Board ("the Content Monitoring Board") is established to among other things implement, supervise, coordinate, administer, monitor and manage the various provisions of the Nigerian Oil and Gas Content Development Act and the Regulations made by the Minister for Petroleum Resources, in furtherance of the provisions of this Law.
A Governing Council is also established to manage and superintend the affairs of the Content Monitoring Board, in addition to making rules and regulations for the proper functioning of this Board.
All the functions and powers previously conferred on any government agency or Department to implement a Nigerian Content Development policy for the oil and gas industry are now exclusively vested in the Oil and Gas Local Development Board.
Nigerian Content Development Fund
A Nigerian Content Development Fund ("the Content Fund") is created by the Oil and Gas Local Content Act to assist in the funding of the implementation of the Nigerian Oil and Gas Content Development and Monitoring activities.
One per cent (1%) of the value of every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector of the Nigerian oil and gas industry shall be deducted at source and paid to the Oil and Gas Local Content Development Fund.
Offences and Penalties
Any Operator or Corporation that fails to comply with any of the provisions of the Oil and Gas Local Content Act commits an offence and is liable on conviction to a fine of 5% of the contract sum or sums, in addition to a possible cancellation of the contract.
Conclusion
The Oil and Gas Local Content Act is a continuation of the promotion of the oil and gas industry as the principal, if not the sole, foreign exchange earner for the Nigerian government. This is in contrast with other major oil and gas producing countries who have continued to use their oil and gas resources to diverse their economies to non-oil and gas segments in recognition of the reality that oil and gas is not a renewable energy resource.
Also, previous Nigerian Government regulations and or policies for the development of a local content for Nigerians operating or intending to operate in the oil and gas sector of the Nigerian economy failed because, among other reasons, Nigeria has not developed sufficient twenty-first century human capacity that is properly trained to regulate and participate in the Nigerian Oil and Gas Industry.
The transitional period of three years before the implementation of the full localisation of the production of many items for the oil and gas industry is unrealistic in the light of poor public power generation and distribution, high costs of private power generation from private generators, in addition to untrained local manpower to run the factories.
The attempt by government to impose a competitive educational development system on the operators and other stakeholders in the Nigerian oil and gas sector will not meet the economic development objectives of the Nigerian economy as this function is the constitutional responsibility of the Nigerian government.
The Oil and Gas Local Content Development Act is however commended as the first legislation that consolidates in a single legislation the various prior local content development legislations, from petroleum to engineering, to labour to legal, to financial and insurance services.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally free to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.