The United Nations Conference on Trade and Development (UNCTAD), in its 2018 World Investment Report, stated that Foreign Direct Investment (FDI) to Nigeria fell by 21 per cent in 2017 to $3.5 billion. The global agency cited economic depression as the cause of the dip in investment flow into the country. Indeed, FDI decline has been the pattern in Nigeria since 2015, according to both the UNCTAD and the National Bureau of Statistics (NBS). The consistent slide over the past three years is contrary to what obtained between 2004 and 2014 when Nigeria, according to UNCTAD, was one of the top three destinations for FDI in Africa with inflows ranging between $5 billion and $7 billion annually.
However, neither the surge in FDI experienced in the decade that ended in 2014 nor the slump of the immediate past was due to the ingenuity of the past administrations or the lack of same by the current government. Rather, it was a consequence of the correlation of FDI to the commodity cycle. FDI to a commodity-exporting country like Nigeria swings between the peak and the trough of commodity prices. So, the rise in the FDI flow into the country from 2004 to 2014 was largely precipitated by the rise in oil prices. In a similar vein, the decline witnessed in FDI in the last three years was an effect of the plunge in the prices of crude oil from 2014 to 2017.
Given that trend, FDI is likely to be on the rise again as the prices of crude oil have been on the upswing since late last year. But that expectation should not lure the incumbent government into complacency because one of the primary responsibilities of leaders is to effect positive changes in their spheres of influence. Therefore, the onus is on the incumbent administration to do what it should to make Nigeria attractive to investors irrespective of how much a barrel of crude oil is sold at the world market.
To its credit, the current administration, last year, issued an Executive Order which was meant to facilitate the ease of doing business. This, coupled with other steps which the government had taken previously, culminated in the country moving up 24 points from the 170th position on the 2016 ranking to 145 in the 2017 ranking in the World Bank’s Ease of Doing Business Index released last year. But that left the country with mere little cheer because in the same year, Quantum Global ranked Nigeria as the 19th most attractive destination for foreign investment in Africa in its Africa Investment Index (AII). According to that report, Nigeria trailed behind countries like Botswana, Morocco, Egypt, South Africa, and Zambia, all of which have simplified their processes of business transactions.
The import of this is that Nigeria must understand that it is in competition with other African countries for FDI. Therefore, for it to be the destination of choice for foreign investors and pull in more FDI, it has to create an enabling environment for industrial growth and development to facilitate both regional and international trade. It also has to eliminate all impediments to business, ensure speedy resolution of legal issues and scale up its provision of infrastructure because FDI flows to countries where every obstacle on its pathway has been cleared.
