How Abia rose to attract third highest foreign investment in 2020

Micheal Ani and Godfrey Ofurum Feb 18, 2021

Abia-shoe-factory — BusinessDay gathered that the state government released a N12 million (about $31,000) grant to support tailors to make protective gear.

Abia State became a top destination for foreign investors in the year 2020 after the COVID-19 pandemic created opportunities for the South-eastern state.

The state rose from attracting zero investment in 2019 to become the third-attractive destination for foreign capital 2020, drawing a total investment of $56.1 million, according to data by the National Bureau of Statistics (NBS).

Abia was behind Nigeria’s commercial capital, Lagos, and political capital, Abuja, with investment inflows of $8.3 billion and $1.3 billion, respectively, the data show.

Nevertheless, Abia’s growth in attracting foreign investments has some unique features worthy of note.

Not only did it overtook states like Ogun, Niger, Kaduna and Kano that ranked tops in terms of attracting investments, Abia was also the only Nigerian state where foreign investments increased in 2020.

Foreign investment inflows to Lagos plunged by 112.9 percent from 2019 levels of $17.67 billion, while that of Abuja fell by 79.5 percent from $6.2 billion in 2019.

To better understand how the South-eastern state could muster such high investment in 2020, BusinessDay spoke with a host of industry stakeholders in the state.

These stakeholders cut across the private and public sectors, including members of the Manufacturers Association of Nigeria (MAN), Abia State chapter, representatives of the state government, economists and experts.

Adversity turned opportunity

At the heart of the pandemic last April, there were supply chain disruptions following widespread measures including lockdown that led to the closure of factories in China, aimed at limiting the spread of the virus.

With supply disruptions in major Personal Protective Equipment (PPE) exporting countries, Aba began the massive production of medical items.

Sam Hart, director-general at Abia State Marketing and Quality Management Agency, said the state saw the huge supply gap, and it had to go into massive production to meet the local demand for COVID-19 essential medical requirements, and by so doing the state was able to keep the money that should have gone out of the country.

“Before the pandemic struck, nobody had ever produced facemasks or PPE in Aba because there was no need for it since there was no market. As such, facemasks and PPEs were 100 percent imported.

“At a point, China came to Aba to mop up all the once they have sold before the pandemic, to meet increasing demand in their country. When people could no longer import from China, Aba began mass production,” he said.

According to Hart, who is also the convener of the “Made in Aba” campaign, an initiative that promotes locally made goods, no fewer than $5 million went into the production of facemasks and other PPE materials alone.

Hart noted that the state got approval to produce facemasks and PPEs in large quantities for the Victim Support Fund, a non-governmental organisation (NGO), chaired by TY Danjuma and run by Toyosi Akerele.

The NGO approached the South-eastern commercial hub for the production of around 300,000 – 500,000 facemasks, which was distributed nationwide as COVID-19 support funds. The military also approached Aba for the production of a truckload of facemasks meant for Abuja and the Defence Industries Corporation of Nigeria (DICON) in Kaduna.

“That alone was a lot of money,” according to Hart, in a phone response to BusinessDay.

“It also tells you the volume of production that was done last year, if one entity alone could order 500,000 quantities. In addition to that, we also had conglomerates, banks and corporate organisations that came to Aba to order personalised facemasks. So, all the funds that could have left the shores of Nigeria were retained locally,” he said further.

Aside from the production of COVID-19 essentials, the state also saw huge inflows of multinational retail conglomerates coming to establish a presence in the state.

Notable of these were retail and grocery firm, Market Square, which came to set up shop in Aba last year; Cold Stone & Domino’s Pizza also, started up business in Aba.

There was also the multi-million dollar Enyimba Automated Shoe Factory, which had been in existence before but started production last year. Several companies that were pre-existing in the state also had to expand their operations, including Chinese-based Inner-Galaxy Steel Company, setting up a new plant last year.

The aforementioned companies and many others put together enabled the $56 million inflows into the state last year, Hart said.

The state success story would not be complete without the contributions of the government.

BusinessDay gathered from reliable sources that the state government released a N12 million (about $31,000) grant to support tailors to make protective gear.

The grant, which was disbursed to 100 selected tailors at the start of April, gave the tailors legroom to acquire additional equipment, source materials and employ more people.

Klotplanet Global Limited, a garment manufacturing outfit, which spearheaded mass production of facemasks and PPE in Aba, also had a field day last year, courtesy of government’s sustained support.

Obinna Anoruo, manager, Klotplanet, in an interview with BusinessDay in Aba, explained that the company branched into protective kits for COVID-19 production to meet the needs of Nigerians and reduce the cost of imported ones.

According to Anoruo, even after COVID-19 wanes-off, the firm will still sustain the production of these masks and PPE, especially for hospitals and eateries.

What Abia’s $56m teaches others

Abia’s rise to attract the third highest foreign investment in Nigeria last year sure holds a lesson for states that have continued to rely on monthly allocations from Abuja.

The growth in foreign investments tells a lot that if states can look-inwards and prioritise, strengthen, concentrate on and build capacity around resources they have a comparative advantage, they can sustain themselves, attract investments, create jobs for its teeming population, and to a large extent minimise or eradicate their dependence on monthly federal allocation.

NBS data show that a total of 26 Nigerian states failed to attract foreign investments in 2020, up from 19 in 2019.

Most Nigerian states have continued to depend on oil revenue shared monthly from the Federation Account, thereby failing to grow their internally generated revenues.

As most advanced countries adopt electric cars and clean energy, fossil fuels and the revenues from them are waning.

At the peak of the pandemic last year that caused a crash in oil prices, wiping out nearly half of government revenue, most Nigerian states were hard hit, finding it extremely difficult even to pay salaries, much less build hospitals, roads and schools.

But attracting foreign capital by way of direct investments would go a long way in boosting revenues for states by way of taxes.