Tackling ungoverned FDI presence in Nigeria

Attracting the right kinds of investment is necessary for any serious government to pursue as a critical development programme for their nation. It is not a gift to their numerous citizens; instead, it is a mandate that befell them upon assumption of office. They owe it to their citizens.

Several scholars and analysts have produced tons of materials that address the need for foreign direct investments (FDIs) into nations that need them. Most of these scholarly submissions jump the gun, focusing mainly on one side of the divide as they highlight the various advantages that accrue to hosting FDIs.

It is true, however, that FDIs hold inherent opportunities toward their target hosts. FDIs can drive growth; they serve as exogenous augments of domestic capital. They galvanise resource efficiency through technology transfer, knowledge spillovers, innovation, and the introduction of global best practices in production and business communication. FDIs also serve as conduits through which financial flows as a result of transnational agreements between partner nations can be tapped.

Furthermore, adopting nations of foreign investments can benefit from forward and backward linkage effects that accrue to FDI operations in host countries. Production externalities from trans-national activities have the potency of boosting local supply and at the same time, helping foreign firms utilise local industry output in place of foreign-sourced alternatives.

In all, FDI activity can influence growth in their host communities. But, the ability of these multinational corporates to have real, lasting effects will be determined by host-specific conditions.

Read Also: Nigeria’s $2bn yearly FDI too low to drive economic growth- NIPC

Nigeria, Africa’s economic giant, is constantly praised for its massive growth potentials. With vast human and natural resources spread across the thirty-six states and the federal capital territory, Nigeria’s potency to be one of the world’s most prosperous nations is undeniable. Still, there are many challenges to this wishful possibility.

Nigeria’s potentially prosperous nation is plagued with bad leadership, a weak macroeconomic environment, policy inconsistency, insecurity, among others. With these, the need for the country to outsource its growth source is not uncommon. Nigeria’s policy formula has continually shown that it lacks the internal capacity to improve the prosperity and quality of life of its over 200 million citizens. Furthermore, its endogenous attempts to model a workable Nigeria have failed to usher in a real structural and transformative change. Neither has it largely weaned the country from subsistence. The country’s industrial and manufacturing space still suffers excessive underutilisation of readily available resources. At the same time, its services sector still has more potentials for growth.

However, augmenting local efforts with foreign investments has not yielded its desired targets since the country opened up for cross-border investment flows. This is because these foreign investments are primarily profit-driven, and they will always maintain that priority even at the expense of the host nation. Also, the host country’s governments lack a well-defined strategy for these foreign ushered investments and for this reason, many FDIs are replicated in non-priority sectors or sectors that do not need them.

Making FDI inflows work both for the investor and the host country can be achieved if sovereign passage is highly scrutinised with the good of the host nation in mind first, then for the investor next. In due consideration, it is the responsibility of host governments to ensure that bidding investors from abroad establish businesses whose major goal will be to serve strategic national interests. If foreign investors are aware that recipient nations are unwilling to create room for undue profiting, extraction of raw materials at the expense of the hosting country, utilise cheap labour without a proper plan to educate and strategically position them to take over sensitive tasks or responsibilities, then, they will work towards seeking genuine investments that will benefit all in the long run.

It is essential that Nigeria’s government properly calibrate its FDI reception strategies to favour domestic needs. This can be done by entering legally-backed, realistic agreements that protect local resources, prevent undue usage of cheap labour, ensure the commitment of the investing entity towards corporate social responsibility causes, and ensure that inbound foreign interests are value-adding oriented rather than just extractive in purpose. The government must make foreign investors agree towards capacity development causes for unemployed youths in their chosen domain of operation, and that illegal activity, especially in the least governed areas, will attract stiff penalties.

Indeed, FDIs play a complementary role in driving growth and development. But this can happen if investments are channelled towards priority sectors such as electricity, manufacturing, services, and export-oriented industries. Appropriate investments in these sectors with local efforts are set to boost the nation’s aggregate production base for growth.

Suppose Nigeria must benefit from a well-governed FDI presence. In that case, appropriate infrastructure and a ready skilled workforce must be in place to absorb all advantages that accrue to the foreign establishment in the country. Should Nigeria’s government place appropriate focus on development-directed foreign investments, then the nation can experience levels of growth that are all-inclusive in the various investment sectors.