No one really doubts that every country which seeks to develop these days seek to attract foreign direct investment (FDI) to complement the level of domestic investment. FDIs not only enables investments in critical sectors of the economy, it also helps in “securing economic-wide efficiency gains through the transfer of appropriate technology, management knowledge, and business culture, access to foreign markets, increasing employment opportunities and improving living standards.”
Even the Nigerian government is gradually coming round to this realisation as it finds it does not have the huge funds needed for even the physical infrastructure needed to support Nigeria’s burgeoning population. Indeed, the government’s Economic Recovery Growth Plan (ERGP) captured the problem well:
“The value of Nigeria’s total infrastructure stock (road, rail, power, airports, water, telecoms, and seaports) represents only 35 per cent of GDP. This is far below the level of peer emerging market countries where the average is 70 per cent”
This, perhaps, explains the country’s low ranking in the Africa Competitiveness Report by the World Economic Forum, which ranks Nigeria’s infrastructure 134th out of 144 countries.
The ERGP plan stated clearly that Nigeria needs to invest $3 trillion in infrastructure over the next 30 years if it wishes to remain competitive. Of course, the government doesn’t have all those money. It must partner the private sector and leverage private capital to build these critical national infrastructure needed to kick-start development.
Like other progressive governments, the Nigerian government is beginning to design policies to ensure a robust public-private partnership where the private sector can invest massively in infrastructure. But just as this is been done, Nigeria is waking up to the realisation that FDI into Nigeria have been on the decline in recent years. Figures from UNCTAD shows that FDI inflow into Nigeria has declined from a high of $8.9 billion in 2011 to a paltry $2.2 billion in 2018. This is hardly surprising.
This is a country where the president came out to say matters-of-factly that he does not trust individuals in the private sector. In his words: “We are averse to an economic team with private sector members” because such persons “frequently steer government policy to suit their narrow interests rather than the overall national interest”.
What is more, public private partnerships (PPPs) have not been successful in Nigeria basically because the government has shown over the years that it does not regard validly executed contracts as sacred.
In many cases, the government has resorted to self help in a bid to do away with contracts that it considers not favourable to its interest. The result is a lack of trust in government and therefore reluctance by the private sector to participate in PPPs. With low interest in PPPs, the government is forced to fund infrastructure from its low revenues budget that could easily be funded through PPPs and from borrowing, sometimes, at exorbitant interest rates.
Then there is the greater problem of disregard for the rule of law and unpredictability in government policies, regulation and the undermining of the judiciary as an impartial arbiter in disputes. The president has gone about personalising power, violating the constitution and destroying critical state institutions that are essential building blocs of well ordered and sustainable society.
These reckless behaviours have consequences, which will deeply hurt the country and its corporate image among the comity of nations. First, no self-respecting country will do business with a country that doesn’t respect its laws. Second, no foreign investor will invest in a country that has no regard for its laws and where the courts are not independent or cannot be trusted to arbitrate on contract and trade disputes impartially and efficiently.
There is just no running away from the reality that the government must partner the private sector to provide modern and world class infrastructure. The government must begin to rebuild trust by returning to the path of democracy and rule of law. It is only then it can hope to get the private sector on-board efforts to invest in Nigeria’s infrastructure. Private capital has alternative uses and many countries are competing for them. The sooner we develop an attractive PPP model the better for us.
