The Paradox of Investing in Nigeria

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Peter Obi

The present reality – encapsulated in the dynamics of the world economy has made the imperative of investing in Nigeria more acute, anecdotal and seemingly tragic. As a principal participant, my extensive observations reveals that no genuine investor has had memorable tales about Nigeria at the point they were harassed by suffocating procedures, though the returns are often commensurate to the effort. For our collective sakes, we must deliberately render our environment investors-friendly – a hallmark of productive-based economies.

The Nigeria Diaspora have been seeking ways to invest meaningfully in the country, but express conflicting concerns exists: would they invest in a country where they are ostensibly unappreciated or pursue a bleak alternative in a country, which forms part of the African mosaic recently categorised by Donald Trump with a very colourful expletive?

On the Paradox of Diaspora Investment in our country; first, Nigeria Diaspora remittances, estimated at about US$23 billion annually, are second only to oil as our source of national revenue. Most of these remittances are informal and uncategorised. Yet, we cannot discount their value-added to nation-building if properly leveraged; what with our huge demographic and consumer market!

Nigeria is sometimes seen as conflict-prone. To any investor, “the first weakness or challenge that Nigeria confronts him with is a stability deficit reflected in the militant insurgencies, kidnapping, and periodic eruptions of violence in various parts of the country – all which pose a threat to political stability.” The reality is that very few investors have lost their investment in Nigeria, through egregious policies or unprofitability occasioned by the harsh operating environment.

The fear of red tape and unbending bureaucracy tends to keep investors at bay, even as policy vacillations and whimsical ad-hoc import prohibitions can wreak havoc on well-laid plans. As Ngozi Okonjo-Iweala admitted, “ad-hoc import prohibitions and waivers illustrate the damage vested interests can do to the overall economy.” Nevertheless, as a business man, I know that every investment involves a modicum of risk; and it cannot be any different in Nigeria. Diaspora investing will have some risks.

As Nigeria seeks to look beyond oil and its expansive value-chain, there are other sectors of the economy that are robust and making progress. These include entertainment, notably Nollywood and music; and fashion. Hotels/restaurants and hospitality are expanding, but need added impetus for a holistic development of tourism. Of course, there are areas where there exist and will always be cross-cutting niche sectors where government, consortia and individuals can partner, under Public-Private Partnerships (PPPs). These include: independent power generation and alternative energy, light rail and other mass transit systems, information technology, healthcare, and food production and preservation technology. Above all, infrastructure remains critical.

Nigeria has a seven million housing deficit against a burgeoning population; the aviation sector is not doing very well; our GSM telephony system is operational and vibrant, but we are totally bereft of a land-line system; and the waste management system is a crying shame. These are huge sectors waiting to be tapped.

Why is Diaspora investment critical despite prevailing challenges and concerns? We must appreciate the cliché: “There’s no free lunch”. As attractive as seems to seek Foreign Direct Investments (FDIs) over Diaspora investment, there are pitfalls. As we are told, “Aid has failed broadly, and evidence of its failure abounds” and “Based on false comprehension of globalisation, we criss-cross the globe canvassing for foreign Direct Investment (FDI) and foreign technical assistance not minding that foreign capital is neither given as a favour nor charity.”

After ranking consistently among the top-three destinations for FDIs between 2004 and 2014, when “yield-hungry investors targeted the oil, gas, real estate, communications and consumers sectors of Africa’s largest economy,” capital in-flow into Nigeria has been dwindling. The phenomenon, which represents a unique investment opportunity for Diaspora investing, is not peculiar to Nigeria. Whereas Nigeria’s FDIs fell by 34 per cent, those for South Africa fell by 69 per cent; Australia 44 per cent and Canada 17 per cent during the corresponding period.

Fear, especially of taking business risks, can kill ideas, inspirations and accomplishments. The world is facing halting economic instability, and social and political challenges. Though every nation has its peculiarities, problems beget initiatives. Innovative strategies, pursued keenly, soon enough become the norm and profit-makers in other nations; while boosting the economy in the originating nation. As new opportunities are researched, identified and assessed, diverse entrepreneurships become vital tools to implement innovated strategies. The role of entrepreneurs is to put heads together and boost economic activities by taking risks.

Besides the business climate, there are other critical factors any investor would consider to determine an enabling environment. These include: power supply, road infrastructure, and availability of water, land, raw materials, labour, market and security; the latter of which includes security of lives, investment and property. The ability to overcome these challenges goes a long way to attracting and keeping investors. Some states, beyond offering deals in form of tax relief and related concessions, also invest in equity as a show of good faith.

Though out of government for over four years, I have been analysing public policies and governance methods that work and those that do not add value. If Anambra State where I served for eight years is a worthy case study, I should dwell on it briefly.

One of the five South-Eastern states in Nigeria, Anambra is characterised by its industrious and entrepreneurial people. As governor, the first challenge was to bring some sanity into the dysfunctional political institutions in the state and link them to global realities. To create focus and measurable bench-marks, we adopted the Millennium Development Goals (MDGs), which we integrated into our home-grown Anambra State Integrated Development Strategy (ANIDS) the basic philosophy being “No Community Is Left Behind”. ANIDS enabled the state government to plan carefully, budget properly, implement the plan and encourage participation and feed-back from the communities and other stakeholders where various projects were being executed. The strategy also facilitated seamless inter-facing with our development partners, and foreign and domestic investors.

With ANIDS, planning, budgeting and request for investment became needs-based and demand-driven. We undertook poverty mapping for a Poverty Profile of the State, which made our budgets results-based and investment-oriented. We amplified subsistent agriculture with investments in mechanisation; and created a network of access roads to the farming communities, which enabled local farmers to evacuate their products and boost their incomes.

Even as capital-intensive investments are desirable for wealth creation and employment generation, we also supported our small and middle enterprises (SMEs) and provided counterpart-funding of some foreign investments. We applied accountability, transparency and a very heavy dose of frugality in managing the state resources and investors’ interests.

We built strong institutions, managed and monitored projects efficiently, tackled infrastructure, enhanced security, minimized instability, provided skilled labour, developed and expanded domestic markets, and patronised our investors. Among others, we ensured that vehicles for our security teams, secondary schools, MDAs and traditional rulers were procured from Innoson Vehicle Manufacturing (IVM), Nnewi. SABMiller Brewery in Onitsha, from South Africa, had an envisaged turn-around time of seven years, but got there in three years, due to our large market.

Nigerian states are competing to attract investors; many of them with designated areas, including industrial and business parks for investors who require land. Some operate one-stop-shops for processing investors’ requirements; and American and European type shopping malls are springing up without displacing the open markets. What is essential is to match the needs of the respective states with what the investors offer.

The potentials of Diaspora investment is Nigeria are boundless. There are challenges, but this is the best time to make that foray before the competition gets stiff. China is fully on board in Africa. As Diaspora investors, you know the language, culture and terrain. Bring home the investments; Nigeria needs them.

.Excerpts from a Presentation by Obi at the Inaugural Conference of Nigeria-America Business Forum (NABF) on ‘Investing in Nigeria from the Diaspora: Challenges and Opportunities’ at The Westshore Grand, Tampa, Florida