Legal abroad: Doing business in West Africa

As the two largest English-speaking countries in west Africa, both with legal systems based on the common law, Ghana and Nigeria have a lot in common. But while both are among the region’s most dynamic economies, Nigeria’s GDP and population exceed those of Ghana by several orders of magnitude. Further, Nigeria’s economy is centred around oil export, while Ghana’s is more diversified.

Ease of doing business 

Ghana’s long period of political stability over the past quarter century, which has seen seven successive free and fully contested elections resulting in peaceful changes of government, has encouraged investment. This has been coupled with contributions from an offshore oil and gas industry in its early stages, and an increasingly vibrant consumer and services sector, resulting in GDP growth of at least 8.8% in 2018/2019. 

Ghana ranks 114th out of 183 for “ease of doing business” in the International Finance Corporation’s 2019 report and scores 41 out of 100 on corruption in the Transparency International Corruption Perceptions Index 2018. 

Nigeria’s oil and gas sector is well developed. The country ranks lower (146th) for “ease of doing business” and is 144th out of 180 on the corruption perceptions index. Nevertheless, it is Africa’s largest recipient of foreign direct investment, due in part to its investor-friendly legislative framework. Foreign companies can operate and repatriate dividends and capital freely, though they must obtain registration and a certificate as a “company with foreign participation”, plus a business permit.

Both Ghana and Nigeria are party to multiple bilateral investment treaties with countries around the world  and have investment treaties in place with the UK, which provide for disputes between investors and the respective government to be resolved by way of arbitration under the auspices of the International Centre for the Settlement of Investment Disputes.

Procurement 

Procurement by Ghanaian government agencies is governed by the Public Procurement Act 2003 (as amended by the Public Procurement (Amendment) Act 2016), though there are exceptions for the petroleum and mining sectors. In the petroleum sector, local content requirements are imposed that stipulate minimum levels of local participation.

In Nigeria, public contract awards are governed by the Public Procurement Act 2007, administered by the Bureau of Public Procurement. As in Ghana, local content requirements apply to projects in the petroleum sector. 

Legal systems

Both Ghana and Nigeria have common law legal systems, based on the English model. Many close parallels remain and English legal authorities can be cited with persuasive weight in the courts, unless they conflict with the constitution or domestic legislation or case law. 

An added nuance for Nigeria is the fact that it operates a federal court system in addition to the separate courts of each of its 36 states. For commercial disputes, the judicial system of Lagos state (by some distance the most populous and economically substantial state) is of greatest importance. 

In both countries the progress of cases through the court system can be slow, with frequent backlogs. The promotion of alternative dispute resolution (ADR)  represents one of the efforts directed at addressing this.

Alternative dispute resolution

Both governments have encouraged ADR in recent years. In Ghana, this was reflected in the passing of the Alternative Dispute Resolution Act 2010, which comprehensively revised the law governing domestic and international arbitration. As well as providing a modern framework for arbitration, reflecting current international standards and practices, it includes provisions governing and encouraging mediation. Both the courts and arbitrators are empowered by the act to recommend or refer disputes for settlement by mediation.

The Nigerian authorities are keen to promote ADR, especially for commercial contracts. At federal level, the 1988 Arbitration and Conciliation Act, based on the UNCITRAL Model law, governs arbitration. A bill updating this to reflect the 2006 amendments to the Model Law is now making its way through parliament. State law is also important to arbitration: the Lagos State Arbitration Law 2009 provides a modern arbitration framework and applies to all arbitrations with Lagos as the seat (unless expressly agreed otherwise). The Lagos Court of Arbitration aims to promote further the resolution of disputes in Lagos state by arbitration and other ADR mechanisms. It will provide administered arbitration proceedings, have the power to establish an arbitral tribunal and maintain a panel of arbitrators, mediators and other experts.

Both Ghana and Nigeria have signed and ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Arbitration laws in both countries reflect the terms and approach of the convention and stipulate that enforcement of an award of a foreign-seated arbitration can only be refused in narrow circumstances.

The construction, energy and infrastructure sectors in both countries offer a range of lucrative opportunities, and the hurdles can be successfully navigated. As the economies of Ghana and Nigeria continue to grow, so too do the opportunities and rewards. 

Kwadwo Sarkodie is a partner in the London office and Dany Khayat a partner in the Paris office of Mayer Brown