In October 2017, The Guardian, a Nigerian newspaper, did a TV documentary on drug abuse, featuring codeine, tramadol and cannabis. To my knowledge, there was, from Nigeria’s establishment, only lip service. No other reaction. A few months later, the BBC published a report on the same thing, and promptly, the Nigerian government banned codeine.
On 20 August this year, without warning, the government closed Nigeria’s busiest border posts: Seme and Idiroko, a few days after a shipment of codeine and a similar drug, tramadol, were found in a warehouse in Lagos. For a week, it was believed that the border closures were as a result of that seizure, and then on 28 August, President Buhari told President Patrice Talon of Benin Republic something to the effect that the border was closed because of rice smuggling.
On the same day, Nigeria, on the whims of a newly installed minister, Rauf Aregbesola, unilaterally reduced the prices that our consulates in the US charge American citizens for visa applications. The day before, the Americans had raised the prices for visa applications by Nigerians, in retaliation for what they considered to be unreasonably high prices for Nigerian visas. According to the Americans, they had been trying to get the Nigeria to be reasonable for 18 months, and there was no response.
These three incidents provide a window into how the Nigerian system, and the government, works. They work only to serve narrow interests, their reactions are kneejerk, without any long term thinking, and they are very disruptive. This does not augur well for the economy.
Start with the closure of the Benin border. Why a seizure of banned goods should result in the closure of the two busiest border crossings on the African continent is a thing of wonder. It is in character with how the Nigerian law enforcement thinks. In most cases, they believe being disruptive as possible creates the impression of doing their jobs, regardless of the economic losses and social chaos such disruptions may create.
In speaking with President Talon, President Buhari confirmed what analysts had feared – that the order to shut the borders came from his office, and just like the recent instruction to the CBN to restrict forex for food imports, this order came without a proper assessment of possible consequences.
For instance, the African Continental Free Trade Agreement (AfCFTA) which the Buhari administration only recently, and with great reluctance assented to, calls for the opening of borders, and free movement of goods, persons, and investments across the continent. It is clear that the federal government did not consider the impression, of its kneejerk decision to shut the border, on foreign investors’ about its willingness to adhere to the terms of the AfCFTA.
Consider the visa palaver. Was anyone surprised when on Friday the US did not immediately reduce their newly announced visa fees just because we could not be bothered to go through due process to reduce ours? The Americans tried to get our government to respond to this issue for several months, to no avail. The convenient appearance of a “Committee Report” requesting the reduction in the visa fees payable by Americans right when the egg appeared on the government’s face, is merely an attempt to save face, and present some semblance of guided policy.
For a country desperate to appear open to foreign investors, the reduced visa fee of $160 is actually tantamount to price gouging. And is just another indicator of the rent-seeking tendencies of the government. It could take the US several months to reciprocate with a reduction in visa fees; such policy changes take time and have to be carefully studied.
In fact, given the prominent anti-immigrant rhetoric of the present US government, and the fact that the Trump administration is also focused on reducing legal immigration from countries and regions it dislikes, the new high visa fees could well be seen as a valid deterrent to visa applicants, and might be here to stay.
This arbitrary behaviour is one of the reasons why the foreign direct investments Nigeria desperately needs loathe parking their money here. The risk, that someone will wake up and change the rules in the middle of the game without a care as to the results of their actions, is too great.
As has become quite clear over the tenure of this administration, decision-makers do not consider the views of prospective foreign investors when making and implementing policy. The capital flight experienced during this administration, and the consequent desperate bids by the Central Bank of Nigeria to shore up the value of the Naira, only further buttress this point.
Foreign investors do not see Nigeria as a viable long-term investment destination, and a big reason for this is that the government is unpredictable. Some might want to counter this by saying that the US also has an unpredictable president in Donald Trump, but the US has the sort of long history of stability and investor-friendliness that Nigeria simply does not. As such, investors in the US are far more willing to ride out the market swings occasioned by President Trump’s mercurial tweeting.
As for Nigeria, a highly reactionary government of a 20-year old democracy is not the recipe for booming markets and happy investors.
CHETA NWANZE
Nwanze is Lead Partner and Head of Research at SBM Intelligence
