The Impact of Intellectual Property Laws on Foreign Direct Investment in Nigeria

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By Blessing Adebayo

INTRODUCTION

The alarming rate of insecurity in Nigeria has contributed greatly to the significant reduction in the rate of  investment in Nigeria, undoubtedly translating to a deep plunge in the country’s economical development.

The instability and unpredictability of Nigeria’s economic and investment space viz à viz regulatory highhandedness have led many notable foreign organizations like Twitter, Amazon, Microsoft and Google to declare intentions to establish their entities in other African countries, relegating the supposedly “giant of Africa” to the yard, as they are not willing to jeopardize the lives of employees and their assets in such volatile and sometimes violent environment.

While we cannot deny that the impetuous state of security in Nigeria influenced the decisions of these investors on one hand, it is also pertinent to critically examine the influence of the flexibility or otherwise of intellectual property laws on foreign participation, on the other hand.

The relationship between intellectual property and the consistence of Foreign Direct Investment (FDI) in Nigeria is one that cannot be overlooked, regardless of how seemingly parallel these concepts may appear. It has been rightly posited that the relative strength or weakness of intellectual property laws is a major pedestal upon which foreign participation is based. Thus, intellectual property rights and the effectiveness of its enforcement has become a sine qua non in determining the nation’s economy, with particular reference to Foreign Direct Investment.

FOREIGN DIRECT INVESTMENT

Foreign Direct Investment (FDI) is a measure of foreign ownership of productive assets such as factories, mines and land. It is an investment from a party in one country into a business or corporation in another country with the intention of establishing a lasting interest which may be achieved through any of the following:

  • Mergers and Acquisitions
  • Joint Ventures with foreign corporations
  • Starting the subsidiary of a domestic firm in a foreign country.
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What makes a foreign investment direct is the establishment of either effective control or at least, substantial influence over the decision making process of a foreign business.

Foreign Direct Investment must be distinguished from Foreign Portfolio Investment in that while the former indicates a level of complete control or substantial interest, the latter refers to investing in the financial assets of a foreign company such as stocks and it merely evidences purchase of equities.

INTELLECTUAL PROPERTY AND FOREIGN DIRECT INVESTMENT

Basically, the protection of intellectual property rights and the feasibility of its enforcement should be of utmost importance to any country pursuing a competitive advantage in the global economy, especially when such pursuit is to be achieved through FDI.

In developing countries, especially one faced with hindering complexities like Nigeria, it is important for the government to create through its laws, solid intellectual property rights’ protection mechanism with effective enforcement measures which will increase the influx of foreign participation and boost inventors’ confidence that their investments are secured and protected, and that in the case of infringement, efficient Intellectual property laws are in place to secure such investment.

The United Nations Conference on Trade and Development (UNCTAD) through its Investment Trends Monitor reported that global FDI collapsed in 2020, falling 42% from 1.5trillion US dollars in 2019 to an estimated sum of 859billon dollars, while Nigeria attracted a total FDI of 2.6 billion dollars in 2020, down from the 3.3 billion dollars it attracted the previous year, showing a 48.5% decrease. It is interesting to note that Nigeria’s foreign direct investment began to plummet in 2017 when it reached a mediocre $981million, a far cry from its previous peak of $5 billion in 2008, and this was attributed to weak Intellectual Property Rights legislations, unreliable dispute settlement mechanism, underdeveloped transport and energy infrastructure, among others.

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It is baffling that despite the importance of intellectual property on the economy, there is no single body of legislature regulating intellectual property in Nigeria. While the Copyright Act regulates copyright issues, the Trademark Act cap T13 LFN 2004 and the Patent and Designs Act, cap P2 LFN 2004, regulates trademarks and patents respectively. It should be noted that, an intense study of these laws evinces rigid  measures contributing to the underdevelopment of infrastructural and administrative set up for IPR registration.

Furthermore, regulation of IPR which is characterized by overly stringent government policies, bureaucratic bottlenecks for securing permits, weak legal framework for protection of intellectual property, unnecessary publication of IPR in the national gazette, limited infrastructural facilities at the registries, archaic laws unsuitable for an evolving business environment, lack of indigenous laws to address evolving IPR issues, among others, has contributed immensely to the poor investment climate witnessed by Nigeria.

Most notorious among the aforementioned is the unwillingness and tardiness of law makers to critically review and make amendments to laws regulating intellectual property in Nigeria to reflect current economic realities in line with best global practices, to add. It is apparent that most Nigerian IP laws are archaic and old. A glaring example is the Trademark Act enacted in 1967 which is a re-enactment of the United Kingdom’s 1938 Trademarks Act. It is totally unreasonable that a 1938 law still regulates and controls a 2021 business prospect.

Further to the above is the lack of an efficient deterrent enforcement system. Undoubtedly, reforming our intellectual property legislation alone may not achieve the desired results in protecting IPR holders, except the mechanism for enforcing the law is equally enhanced.

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Another problem posed by a weak IPR regime is the reluctance of technological investment by foreign investors. As opined by Maskus, 1997, though the impact of FDI and licensing on transfer of technology vary across developing countries, it holds promise for improving productivity and growth only in countries with strong IPR regimes and policy system that promotes maximum gains from FDI.

CONCLUSION

The competitive advantage of any developing nation’s economy partly lies in the viability of its business structure which, without doubt, intertwines with the puissance exhibited by the laws governing such structure and the ability to become an omphalos for a comprehensive and unrivaled economy. To achieve this, the re-organization of intellectual property laws is inevitable, as IP protection plays a catalytic role in Research and Development, and its effective commercialization will indeed be a significant stimulus to the economic growth of Nigeria if properly managed and adequately protected.

Blessing Adebayo recently graduated from the Nigerian Law School. She has interest in Corporate Practice and Finance, Capital Markets, Oil and Gas and Intellectual Property. She can be reached at adebayoblessing41@gmail.com

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