A renewed move by the Federal Government and the organised private sector to position the economy for investment is coming rather late in the day. Two years on, the Muhammadu Buhari administration has not made progress in transforming Nigeria into an attractive investment destination. This makes it harder for the country to emerge from recession. To reflate the economy, urgent steps should be taken to attract Foreign Direct Investment.
Experts and OPS worthies gathered at a breakfast meeting to chart a way forward for the economy in Lagos identified the failure of the government to open up the economy to foreign investment as the key element that triggered the economic crisis raging from 2015. Days earlier, acknowledging the dire situation, the Industrial Policy Competitiveness Council headed by Acting President Yemi Osinbajo had identified five priority areas and mandated its committees to come up with measures to attract investments. One on investments, incentives and anti-smuggling is chaired by the magnate, Aliko Dangote, while Atedo Peterside, an investment banker, heads another to improve access to finance by businesses.
The critical need for massive new investments accompanied by a liberalisation policy was highlighted at the OPS roundtable organised by the Lagos Chamber of Commerce and Industry. This newspaper has consistently argued that the country’s full potential can only be unleashed by the provision of an enabling and liberalised environment that gives free rein to private investment and attracts consistently huge doses of FDI. For a country with abundant, mostly untapped, natural resources; a weak infrastructure base; a large, vibrant informal sector, and a 170 million-strong population comprising more than half under 30 years old, a massive FDI is bound to propel development at double-digit rate. Alas, the reverse has been our lot. According to the National Bureau of Statistics, investment inflow fell from $9.64 billion in 2015 to $5.12 billion in 2016, a 46.86 per cent crash and the lowest since 2007.
Despite the recession brought on by the oil price crash and massive looting of the treasury in the recent past, our failure to create the right environment is hampering ability to attract FDI. Although FDI had been declining to other major African economies, Nigeria featured consistently in the top three FDI destinations between 2005 and 2014, according to UNCTAD, often outpacing South Africa and Egypt.
Our major problem is statism: whereas we could accelerate FDI by the intelligent and simple expedient of transparent, targeted privatisation of state-owned commercial assets, successive governments have continued to hold on to the massive Ajaokuta steel plant, airports, refineries, depots and pipelines and power assets. This government, especially, is tragically reluctant to let go of the loss-making refineries, forcing the country to spend N2.59 trillion importing refined petroleum products in 2016, apart from several hundreds of billions more on subsidies. The 10 power generating plants under the National Independent Power Projects ought to have since been sold while the government stubbornly holds on to the sole transmission company.
But it is such “low hanging fruits” that experts say can bring “quick wins” in the short term and give the economy the much-needed shot in the arm. Privatisation improves efficiency, frees government’s resources for social spending, stimulates credit and creates jobs. Crucially, when properly done, free of corruption, it brings FDI. Our power privatisation of 2013 failed because it was neither transparent nor did it deliberately target global champions with the technical, financial and managerial muscle to attract FDI.
Moving from rhetoric to action is what we need today. When the telecoms sector was liberalised in 2001, it became the highest magnet for FDI after the oil and gas sector for a decade and recorded the highest rise in 2016. The refineries should be sold post-haste to competent international operators. Saudi Arabia’s Aramco has taken full ownership of North America’s largest refinery, the 600,000 barrel per day Port Arthur refinery in Texas.
After reforming 87 regulations across 21 economic sectors, India attracted $60.1 billion in FDI in 2016/17. Malaysia’s target of becoming a high income economy by 2020 is hinged on FDI. Singapore, Brazil, Indonesia and Saudi Arabia are projected to be top draws for FDI in the next few years as they continue to take investment-friendly measures.
Empanelling committees is time-wasting: there are enough policy papers prepared over the years. The government should produce a clear-cut plan to implement decisions on liberalisation and privatisation already taken and fortify the institutional capacity to drive reforms through. A resolute determination to unload assets only to reputable players with the know-how and financial ability should guide privatisation. Airports and seaports are business concerns: the best operators in the world should be attracted to run ours. The single-minded pursuit of best practices by Singapore that included human relations at points of entry and a ruthless war on corruption should guide our policymakers.
Reforms should be holistic, involving tax reforms, security and skilful management of fiscal and monetary policies. According to the Nigerian Investment Promotion Council, immediate investment opportunities abound in many sectors, including agriculture ($7.8 billion), automotive ($3.5 billion), power ($50 billion), solid minerals ($40 billion) and light manufacturing ($10.3 billion).
Priority should be given to the export processing zones, tourism, mining, manufacturing and agriculture.
Henceforth, Nigerian governments, federal and state, should be judged primarily on how effectively they reduce unemployment.
