The ripple effect of perceived negative regulatory actions against MTN Nigeria is spreading as investors and their representatives question whether it is still worthwhile to do business in Africa’s biggest economy.
The Central Bank of Nigeria in August asked MTN Nigeria to refund $8.134 billion which it said the telecoms giant illegally repatriated. This was followed in September by an imposition of $2 billion tax arrears by Nigeria’s attorney-general.
“There is a huge interest in the UK to invest in Africa, especially Nigeria. Investors from the UK see Nigeria as huge potential, given the size of the market. But the MTN issue shakes the confidence of investors and questions whether investing in Nigeria is worthwhile,” Laure Beaufils, deputy high commissioner, British High Commission, said on Thursday at the International Investment Conference organised by Lagos Chamber of Commerce and Industry (LCCI) in Lagos.
Beaufils said investors are worried about regulations in Nigeria and rule of law, stressing the need for government officials to be upfront about the risks in the economy and how to mitigate them.
Ifeanyi Okeleke, CEO of Kenfrancis Integrated Farms Limited, an agriculture and agro processing firm, told BusinessDay in an exclusive interview that he wanted to bring two partners from the UK but met a brick wall when they pulled out citing regulations.
“They specifically told me that it was better to go to Ghana, and they eventually went to Ghana. They told me that if the government could turn against MTN, it could as well turn against them any time,” Okeleke said.
F. John Bray, consul-general of US High Commission, said American private firms have invested $1.3 billion across six sectors in Nigeria, but warned that Nigeria must buckle down as more businesses are moving to its neighbours, notably Ghana and Ivory Coast.
“It is a great market and I want it to succeed. But it is a global market. Nigeria is not just competing with Ghana and Ivory Coast but also Singapore,” Bray said.
“We have a lot of entities visiting Nigeria from the United States. Yesterday (Wednesday) we had the Federal Express. This is a hub, a great location. But issues like the MTN scare a lot of investors. It creates more uncertainty.”
Nigeria dropped to 146th spot (from 145 last year) on the World Bank 2019 Doing Business Index despite an improvement in the business score from 51.52 to 52.89 points. The country had, last year, moved up 24 places from 169 to 145 on the basis of federal government’s fronted reforms on taxes, and ports, among others. The government set up the Presidential Enabling Business Environment Council (PEBEC) to undertake reforms on various sectors, but investors still see risks in enforcement of contracts, getting credit (above 20 percent interest), protecting investors and resolving insolvency.
Babatunde Fagbohunlu, chairman of LCCI International Arbitration Centre, said there is a similar problem like the MTN saga looming across other sectors of the economy such as the oil and gas, where the government plans to recoup $1.4 trillion from losses it incurred in production sharing contracts of 1993. Fagbohunlu said doing this could scare away foreign investors.
Funke Opeke CEO of MainOne Cable Company Nigeria Limited, said there is an incredible appetite by international investors for Nigeria but noted that the local market is still inefficient.
“Foreign investors find it very challenging to operate in this environment and when they look at the obstacles, they go elsewhere,” Opeke said at the event, moderated by BusinessDay editor Anthony Osae-Brown.
“We need to move beyond attracting investment and make sure the investments already made are successful,” Opeke said.
Opeke noted that the biggest risk facing investments in the telecom sector are macroeconomic challenges and enabling environment because the telecoms sector is borderless.
Moses Imayi CEO of Skool Media Limited, said being an investor in Nigeria’s education sector is tough because many do not prioritise education.
“Working in Nigeria as a local investor is very tough because there is no enabling framework to support the system as everything seems to focus on foreign investors,” Imayi told the audience.
ODINAKA ANUDU
