Experts in Nigeria’s economic space have said that instability and uncertainty, among other factors, have made the nation’s economy risky for investments.
Speaking during the media and development conference organised by the Centre for Journalism, Innovation, and Development (CJID) in Abuja on Monday, Lola Adekanye, African programme director of the Centre for International Private Enterprise, said that the Nigerian environment was not attractive enough, adding that investors now worry about different kinds of risks.
“A combination of issues is affecting the nation’s ability to attract needed investment, but the primary one is the environment for investment and growth. You will always hear that investors like stability; there needs to be trust in the business sector and what that translates to is that if I put my money in any business, I want to be sure that my return on investment is guaranteed. I want to be sure I don’t want to put N20,000 into a business and I’ll earn N15,000 from it.
“So, the environment for investment in Nigeria is not attractive enough because investors now worry about different kinds of risks, including political risk.
“Like the investment in the Abuja Kaduna rail, and then there was the insecurity attack; I’m not sure what insurance we have to recover the loss that we experienced or are still incurring from that rail project not working optimally right now.
“So, investors before they invest look at the track record of other investments that have been in the country before and when they see that the return on investment is not as guaranteed; there are many unstable indicators, they are not attracted to invest.”
Total investment into the Nigerian economy declined by 33 percent to $1.03 billion in the second quarter of 2023, as against $1.535 billion recorded in Q2 2022.
Speaking further, Adekanye stressed the need for the government to promote stability in the economy through effective fiscal policies and boost opportunities for private sector growth.
She also decried the misuse of borrowed funds, which are spent on recurrent expenditure rather than capital expenditure. According to her, spending funds on capital expenditures can be turned into economic value over time.
“Government is borrowing to service recurring expenditures; government is borrowing to give out palliatives that do not demonstrate enough trust that the return on investment will be guaranteed. And so these are things that the government has to work on,” she said.
Umar Yakubu, executive director of the Centre for Fiscal Transparency and Integrity Watch, noted that Nigeria currently has an infrastructure deficit that can be met through investments.
He, however, said that Nigeria lagged in terms of due diligence when it comes to the use of borrowed funds.
“Our level of due diligence is very low. We sign contracts without properly understanding what we’re supposed to do. Even if we do understand them, we do not sometimes sign them for national interest and national security purposes. That is why you will see a lot of problems where the money has been collected, and when it comes to paying, you will not see the value of the money.
“Secondly, we have to also strengthen our internal systems. When you borrow money, you know that future generations are going to pay so you have to ensure that the money is properly utilised. Meanwhile, the lenders do not care if they have already borrowed the money or how you pay. Lastly, or most importantly, there needs to be more transparency.
Like I said earlier, Nigeria is indebted $250 billion. If you asked for the components of those loans, you’ll see how we borrow them. But were the citizens engaged? Were the media invited? Were people invited to see and probably scrutinise how we use the money we borrowed? You find out they were not there. So these are the three things.
“I think we just need to add due diligence, transparency, and accountability to go with what is being borrowed for effectiveness.”