Need for Guided Regulation of Foreign Direct Investment in Nigeria, Post-COVID-19


By Seye Adetunmbi

The impact of Covid19 on the economy of most of the countries globally cannot be over emphasized. As at April 27th 2020, over 30 million Americans have lost their jobs due to ravaging coronavirus pandemic. Apart from the fact that the lockdown has caused distress among some companies in Nigeria, the 2020 budget has been rendered prostrate due to the economy that has suffered a setback from the collapse of the oil price globally. The reality today is that Bonny Light (Nigeria’s crude oil) traded below $11 per barrel, which is half the cost of producing a barrel. Even at this price, Nigeria could not sell her crude oil. The nation has tens of millions of barrels of crude oil in scores of vessels cruising the seas looking for buyers. At some point, Nigeria offered more than $5 discount per barrel yet no prospect of sales. Why would anyone buy when U.S. shale oil sold for $2 and no one bought it either.

The bigger picture of major concern is the implication of the global lockdown on virtually all the key sectors of the Nigerian economy. What we are experiencing now is loss of businesses; some companies will survive others will be forced to close down or sell their ventures. After the world has overcome Covid19, some of the formal sector players are going to be down for acquisition or takeover through Foreign Direct Investment (FDI) while the portfolio investment hawks around the world would be out to make a kill. The “rogue lions” are on the prowl to devour desperate companies and acquire distressed assets at the lowest price possible. The reality is that helpless key sector institutions have become vulnerable and may not have no other option than to cave-in at any offer made to them for their equity shares or debt buyout which practically will cause them to let-go control over their establishments.

Nigeria shouldn’t wait until our situation degenerates to the level of an African country where the Chinese had to takeover the management of some government agencies due to inability to meet debt obligations. The statement credited to Warren Buffet is instructive in the prevailing circumstance: “Be fearful when others are greedy and be greedy when others are fearful”

The news is in the public domain on how India, Germany, Spain, Italy, Australia and other countries have taken decisive steps to moderate incursion of FDI and hostile takeovers or outright acquisition of major businesses in their territories. In India as at today, its government has to give a nod before any major FDI transaction can be consummated.

No doubt, we have more than enough laws guiding foreign investment policies in Nigeria. The challenge is how prepared or efficient are the gatekeepers in all the federal regulatory agencies to arrest “rogue lions” and halt FDI purveyors with hidden agenda? This is why this message is to call on the Federal Government of Nigeria to be proactively decisive and intervene with dispatch.

Consequently, the National Assembly is hereby put on notice to complement the executive arm of the government with the appropriate legislation. There is need to quickly develop a fresh guideline for FDI and portfolio investors in Nigeria for the implementation of the Securities and Exchange Commission, Central Bank of Nigeria, Nigerian Investment Promotion Council and other relevant regulatory agencies. A well coordinated response to FDI in Nigeria becomes imperative. Until the situation is back to normal, make it mandatory for the presidency to have a nod to any major takeover through FDI in Nigeria before such major deal is sealed.

Tough guidelines become imperative for both direct and indirect investments be it stakes in existing ventures or fresh business initiatives. Critical situation requires critical thinking and critical strategic intervention. We have sufficient time to prevent avoidable and regrettable repercussion. Hence, Nigeria should not be caught napping. The time to act is now.

…Adetunmbi wrote in from Lagos.