President Muhammadu Buhari’s recent pitch for foreign direct investment in certain priority sectors of Nigeria’s economy will yield positive response only when the country significantly improves the operating environment and reforms its institutions. He was upbeat while addressing participants at the Seventh Tokyo International Conference on African Development, urging investors to tap into Nigeria’s key infrastructure and productive sectors. On his shoulders, however, lies the responsibility to reform the environment and make it attractive for international capital.
Since taking office mid-2015, his administration has been a repellent, not a magnet, for Foreign Direct Investment. Listening to his sales pitch to his Japanese hosts and 4,000 odd heads of government and business leaders from around the world, one could be beguiled into viewing Nigeria as an investment-friendly field. But nothing could be further from the truth. The country, he said, is eager for and ready for investments in power, renewable energy, petrochemicals and gas, maritime, ports and shipping, automobiles, mining, agribusiness, ICT, textiles, healthcare, pharmaceuticals and railways.
He claimed to have initiated reforms to liberalise the environment and guarantee very good returns. Among these, he cited a Presidential Committee on Enabling Business Environment to ease the constricting operating space and ongoing efforts to remove impediments to greater private sector participation in the critical sectors. Buhari particularly wants Japanese firms to bring their famed prowess in industrial production to bear by responding to Nigeria’s invite.
There is the need for a plan, a multi-pronged and multi-sectoral realistic programme; a capable team and a purposeful leader; and consistency and the political will to drive policies through to the end. Today, beyond pronouncements and committees, the organised private sector cannot see any robust policy. UNCTAD’s 2019 World Investment Report estimated $1.9 billion total FDI inflows to Nigeria in 2018, lower than the $2.2 billion estimated by the World Bank. Though the Central Bank of Nigeria disputes figures by the global agencies, insisting on FDI of $7.78 billion in 2018, UNCTAD reported steady decline from $4.49 billion in 2016 to $3.5 billion in 2017; Greenfield investments (funded investments from ground up) declined from 51 projects in 2016 to 36 in 2017, but rose to 55 in 2018.
Buhari’s purported reforms are obviously not delivering, as seen in Nigeria’s ranking of 146th on the World Bank’s 2019 Ease of Doing Business report, a drop from 145th in the 2018 report. In the 2019 edition of its annual study, Where to Invest in Africa, RMB, the Johannesburg-based investment advisory firm, ranked Nigeria No.8 in Africa, where Egypt, South Africa and Morocco that took the first three spots respectively were cited for their economic diversity and improved environment. Ethiopia, Kenya and Rwanda at fourth, fifth and sixth places are also credited with robust growth, strong macroeconomic policies and investment in infrastructure. As he spoke in Japan, Toyota, the world’s top automotive manufacturer, announced plans to establish its West African production hub in Ghana, even when Nigeria is the largest importer of Toyota vehicles in the sub-region, a telling reflection of our poor prospects.
When they find themselves in a rut, leaders think outside the box: RMB experts insist: “Structural change is essentially the only hope for sustainable growth.” Also essential are large doses of FDI, as the country’s stock of domestic capital is inadequate to kick-start industrialisation and fill the gaping infrastructure and unemployment gap. A 2016 research by the Cogent Social Sciences journal recommends adoption of the Japan and Asian Tigers growth model with local modification, implementing similar reforms that cut across economic, legal, political, socio-cultural spheres to transit from developing to developed economies.
Nigeria can leap by going for the low-hanging fruits: liberalise and open up the railways, ports, airports, steel, mining, agriculture and downstream oil and gas sectors. As the licensing of two GSM operators in 2001 facilitated massive FDI, skills acquisition and telecoms services penetration, liberal policies opening up these sectors will do even better. Total investments today in our telecoms sector is $70 billion, while the telecoms sector provides over 174 million telephone lines, compared to the less than 500,000 active lines in 2001, and added 11.39 per cent to GDP in Q1 2019.
Buhari should empanel and empower an economic team, partner closely the organised private sector and adopt a hands-on approach. Nigeria’s situation requires that he engage with OPS operators and work with states that are willing to join the Federal Government in promoting private capital and FDI in agriculture, mining, manufacturing, power and infrastructure. Retrogressive and primitive attitudes that hamper development and scare investors like promoting the anachronistic nomadic pastoralism, state monopoly of petroleum refining and seeking vainly to single-handedly fund railways, ports, airports or running steel plants, should give way to full, transparent privatisation. There should be a deliberate policy to attract the most reputable multinationals to invest in key sectors.
Capital moves only to where it is safe; you cannot lure investors when the world’s leading industrialised countries are issuing travel advisories to their nationals to avoid Nigeria where terrorists, bandits, kidnappers and sundry criminal gangs are running riot, lawlessness and impunity abound and the police are inefficient and under-equipped. Buhari should tame insecurity and separate politics from law enforcement and economic decisions. Cutting red tape, reining in corruption and enforcing contracts are also critical.
Japan is the world’s third largest economy, fourth largest trading nation and is listed among the most innovative, has “considerable investment surplus” and holds 13.7 per cent of global private financial assets. Its companies, and those of other countries, will swoop on Nigeria in droves only when we get it right.