• Thursday, March 28, 2024
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Infrastructure decay, insecurity, hinders Foreign Direct Investment inflow to Nigeria, Study reveals

Infrastructure decay, insecurity, exchange rate instability and lack of ease in doing business, among others, have been identified as the major factors hindering Foreign Direct Investment (FDI) inflow to the Nigerian economy.

Presenting the Report of its latest research on the response of Foreign Direct Investment to Government Policies in Nigeria in Ibadan on Tuesday, the Macro Group of NISER’s Surveillance and Forecasting Department identified other important factors,  include inflation, corruption, political will and competitiveness.

According to the outcome of a research finding from the Nigerian Institute of Social and Economic Research (NISER), Ibadan stated  that even though FDI is highly desirable to grow the national economy, especially at this time that Government is doing everything possible to take the economy out of recession, “the key policy variables found to affect FDI inflows to Nigeria are the exchange rate and the interest rate captured by the monetary policy rate”.

“Inflation is a key variable which is seen to adversely impact on FDI inflows.  The degree of openness of the economy positively affects FDI inflows,”  Sade Taiwo of the Macro Group stated while presenting report on the occasion of the NISER monthly seminar series presided over by Olatunji Sobodu, a notable Lagos-based investor.

To further stimulate Foreign Direct Investment inflows to Nigeria, the NISER team tasked the various tiers of Government in the country to fast-track development efforts on infrastructure and security in the nation “to reduce cost of doing business and create better attract for FDI inflow”.

“Government should deliver on promises made e.g. development of modular refineries to enhance confidence,” the research team further advocated.

While noting that the Exchange rate stability is very crucial for attracting FDI flows to Nigeria, the NISER team advised the Central Bank of Nigeria (CBN) to collapse the various foreign exchange markets into one shop with a guided market sensitive single exchange rate.

Its other recommendations include the following:

*MPR should be reduced to further encourage FDI inflows.  Rather than use MFR to reduce inflation rate, more investment consequent on low MPR would improve productivity and output resulting in a drop in inflation rate. Improved FDI inflow is one of the antidotes.

*FDI policies must be applied with discretion from a multi-sectoral  perspective in order to avoid crowding out of domestic investment and foreign domination of the economy.

*In tackling corruption, possible abuses associated with plea bargaining practice should be cautiously applied to discourage new forms of corrupt practices.

*Stricter law enforcement efforts are needed to fight corruption both in the public and private sectors and ensure corporate governance compliance.

Speaking earlier, the Director-General of NISER, Folarin Gbadebo-Smith reiterated the crucial role of  infrastructure as tools of stimulating Foreign Direct Investment inflows into the economy and pleaded with Nigerian Government to attach much more importance to this.

The Director-General who spoke through  Soji Adesanya, a Professor and  Director, Economic Policy Research Department lamented the prostrate situation in which the national economy found itself in the wake of recession and canvassed for all needed motivation for Foreign Direct Investors to enable them intervene effectively in bailing out the nation from the mess.

Akinremi Feyisipo, Ibadan