Nigeria has ranked among the top global places investors should avoid due to its poor governance ratings, according to the latest World Economic Governance Index.
On Tuesday, the rating agency graded Africa’s biggest economy D, which indicates poor governance and a level shy of other economically challenged countries like Lebanon, Syria and Yemen.
On the World Economic Governance Index, Nigeria was ranked 40.8. For rule of law, it got 30.9; press freedom, 52.1; political rights, 53.5; and corruption, 26.7.
Countries with less than 100 score are rated poor while countries with above 100 are rated high in terms governance indicators.
“Don’t invest in countries with poor governance. They can cost you billions and expose you to legal and political troubles,” the World Economic Governaance report said.
Experts said this development alongside other many challenges have spooked foreign investors out of Africa’s most populous nation.
That has coincided with the race by other African countries to attract investment. These smaller countries relative to Nigeria are offering investors more than Nigeria is willing to and are therefore stealing a march on the “giant of Africa”.
For instance, in the latest 2023 Rule of Law Index released by the World Justice Project, Nigeria finds itself placed 120th out of 142 countries and 23rd among 34 countries in Sub-Saharan Africa regarding adherence to the rule of law.
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Countries ahead of Nigeria in the Sub-Saharan region include Rwanda, Namibia, Mauritius, Botswana, South Africa, Senegal, Ghana, Malawi, The Gambia, Benin, Burkina Faso, Tanzania, Kenya, Togo, Zambia, Ivory Coast, Niger, Sierra Leone, Liberia, Madagascar, Angola and Guinea.
The WJP report employed eight key indicators to assess countries’ performance: constraints on government powers, absence of corruption, open government, fundamental rights, order and security, regulatory enforcement, civil justice, and criminal justice.
“Nigerians will pay the ultimate price of the country becoming less of an investment destination, particularly in the form of jobs. For a country whose population will surpass that of the United States by 2050 to become the third most populous nation globally, jobs are critically needed,” Charles Akinbobola, analyst at Sofidam Capital, said.
He added: “This minute, you are in business in Nigeria, and the next minute you could be out by the stroke of the pen of a clueless government official who seeks to protect his ego more than the jobs of thousands of people.
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“Other times a government policy is enough to frustrate foreign investors and send them packing. The upside for these investors is that there are growing options in other African markets”.
In August, GlaxoSmithKline (GSK), a British multinational pharmaceutical and biotechnology company, announced plans to exit Nigeria, after 51 years of operation in Nigeria.
GSK’s eventual exit from Nigeria has been a long time coming and adds the healthcare company to a list of foreign companies that have dumped Nigeria.
The list includes South African retailer Shoprite, Abu-Dhabi Based-telecommunication company Etisalat and UK-based Intercontinental Group.
The exit of another multinational makes the job of President Bola Tinubu to lure foreign direct investment (FDI) even harder.
“The evidence at hand is that Nigeria is extremely harsh to foreign companies and that does the country no favours in its bid to lure new investments and create jobs for its teeming youth population,” a senior business leader told BusinessDay.
FDI inflow into Nigeria has tumbled in recent years, slipping to a 10-year low in 2022. Total FDI in the first quarter of 2023 was a paltry $48 million, a 69 percent decline from $155 million recorded in the first quarter of 2022.
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In March, Unilever’s Nigerian subsidiary said it would stop manufacturing homecare and skin-cleansing products as it sought to make its business “competitive and profitable.”
Unilever recorded a foreign exchange loss of N14.36 billion in the second quarter of 2023, up from N1.06 billion in Q1.
The company said the revaluation loss arose from foreign currency-denominated balances related to trade loans.
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