• Wednesday, June 19, 2024
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Protectionist policies in Nigeria discourage private investment – Report

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Protectionist policies in Nigeria are discouraging private investment and making the country reliant on imports to meet domestic demand, a new report has said.

The Africa Risk-Reward Index 2022 report, which was released on Wednesday, said: “In Nigeria, the government prohibits the import of raw or processed sugar and also promotes import substitution for sugar through locally sourced raw materials, granting only three locally-owned sugar refining companies exclusive rights to import raw sugar and secure foreign exchange for importing raw sugar into Nigeria.

“Although these protectionist policies allow local farmers and producers to continue to own their land and sell their crop at favourable prices, it disincentivises private investment, leads to inefficiencies in production, and ultimately makes these countries reliant on imports to meet domestic demand.”

According to the report, in Africa, the share of food in the consumer baskets exceeds 25 percent for most countries, with some countries including Ethiopia, Zambia, Sudan, and Nigeria having food weightings above 50 percent.

Zainab Animashaun, a senior analyst at Control Risks, said the lack of infrastructure and high level of demand made Nigeria heavily dependent on foreign commodities.

She said this at a webinar on ‘Africa Risk-Reward Index 2022: Opportunity through uncertainty’ hosted by Control Risks and Oxford Economics Africa.

According to the National Bureau of Statistics, Nigeria’s total imports increased by 15.9 percent on a year-on-year basis to N5.4 trillion in the second quarter of this year.

Read also: Private sector lending hits N40.2tn yet Nigeria remains underbanked

“There is an immense benefit to supplying a market like Nigeria. Nigeria is the largest consumer market on the continent; we have over 200 million citizens, and that is a huge market,” Animashaun said.

Speaking on opportunities for investors, she advised investors to be mindful of the current realities on the ground. “The constraint that agro entrepreneurs have are mainly infrastructure, insecurity and the regulatory environment.”

“In terms of infrastructure, there are difficulties with access to utilities, power, and transportation from the farm, local technology required to support farming does not exist, upskilling of farmers, and insecurity challenges for farmers.” she said.

“In a large economy like Nigeria’s economy, the country has benefitted from large oil prices but production has dropped off considerably. Nigeria a while ago lost the title of Africa’s largest oil producer,” Jacques Nel, head of Africa Macro at Oxford Economics Africa, said.

“The Nigerian government spends around a third of its fiscal revenue on just debt servicing, although the liquidity situation has improved due to high oil prices. Unemployment is still above pre-pandemic levels in Nigeria, inflation hit a 17-year high of nearly 20 percent year-on-year,” Nel added.