When measures to ameliorate an undesirable and unnecessary situation are ignored, the avoidable becomes reality. Sadly, this is the story of Nigeria as it squanders opportunities for foreign direct investment (FDI); opportunities which ordinarily attract investments to frontier markets with less potentials. In a recent report released by the National Bureau of Statistics (NBS), foreign investments into Nigeria dropped to $200.8 million, declining by more than half (62.29 percent) and the lowest in four quarters as far back as 2018 – so far in 2019, foreign investments have averaged $222 million quarter on quarter.
This is a paltry amount; Vietnam, Indonesia, Egypt, South Africa and Argentina, who attracted on average FDIs of $2.2 billion, $7.04 billion, $3.5 billion, $1.3 billion and N681 million respectively during the same period. It is less than 1 percent of GDP, and so small that if shared equally among 190 million Nigerians each person will get only $1.2 per quarter. That’s like making do with $1.2 for a period of 90 days, which is far worse than the World Bank’s international poverty line of $1.90 per day.
For an economy that needs about $31 billion every year for ten years to bridge its infrastructure gap with approximately 200 million people and an unemployment rate of 23.1 percent it’s absurd that attracting more investments isn’t paramount in our policy actions.
The importance of FDI in the growth and development of an economy cannot be overemphasised. Emerging markets have developed through the investment of large and highly competitive companies. FDI inflows, complemented by infrastructure, increase productivity and generate jobs.
Based on the miniscule investment Nigeria is attracting, we believe that the current low growth cycle of the economy will continue because there is no other assured path to robust growth based solely on government. The government’s “I-can-do-it-alone” approach without attracting foreign direct investment is making Nigerians poorer.
Also, we are at a critical stage where the government’s lack of urgency in implementing the reforms that will open the economy to investment has gone beyond the tipping point. The World Bank warns that “Unless the government quickly embarks on needed reforms, the number of Nigerians living in extreme poverty could increase by more than 30 million by 2030, pushing the country to account for 25 percent of the world’s extremely poor population.”
What will attract these long term foreign investors? The answer seems simple but increasingly seems like rocket science for the current administration. The clamour for bold reforms in key sectors of the economy cannot be over reiterated.
Delay of reforms in the power sector, full deregulation in the petroleum sector value-chain, removal of multiple exchange rates, are among the risks that constrain investments and long-term growth, according to PricewaterhouseCoopers, a consulting firm.
Nigeria’s treatment of some of its largest foreign direct investors such as oil companies, who are being accused of owing billions of dollars in unpaid taxes, and MTN who has been on the receiving end of a number of hefty fines, is surely not the best way to sell the country to potential investors.
With long term foreign investors shying away from the Nigerian market, the federal government should be worried as intra-Africa trade draws near. This only strengthens the argument that foreign investors would be more attracted to economies with lower cost of production and better infrastructures hence, positioning Nigeria as a dumping ground for these products. The best time to enact these reforms is yesterday.
