When Will Nigeria’s Investment Potential Materialise?

Opening Business

The government must ensure that the right investment policies are created and clear all obstacles towards ensuring that both local and international investors don’t just express passing interest in the economy but back investment announcements with action. James Emejo writes

Executive Secretary, Nigerian Investment Promotion Commission, Ms Yewande Sadiku, recently at the quarterly media interactive session, stated that investors had shown their willingness to invest a total of $8.41 billion in various sectors of the economy during the first quarter of year.

The revelation is particularly exciting, given the dearth of foreign portfolio inflows in recent times, as the impact of the COVID-19 pandemic takes its toll on global and domestic economies.

Amidst rising unemployment rate at 33.3 per cent, according to the National Bureau of Statistics (NBS), foreign capital injection to boost job creation had become inevitable for stimulate the economy.

Unfortunately, the investment announcements tracked by the NIPC are more of a wishlist, with no immediate impact.

According to Sadiku, although there’s clear gap between announcements and investments, nonetheless, this “gives us a sense of who is looking at investing in Nigeria”.

According to the report on investment announcements for Q1, the $8.41 billion investment prospects were tied to 15 projects spread across eight states of the federation with Bayelsa, accounting for $3.60 billion of the total share.

Delta, Akwa Ibom, Lagos and Bauchi followed respectively, recording $2.90 billion, $1.40 billion, $0.15 billion and $0.07 billion.

Interests were mostly indicated in the manufacturing, construction, mining and quarrying, electricity and agricultural sectors of the economy.

However, more disturbing for the country’s economic managers is the fact that investment announcements had been on the decline in recent times, partly owing to the pandemic and unfavourable investment climate.

Investment potentials stood at $66.35 billion in 2017, rising to $90.89 billion in 2018, but declined to $29.91 billion in 2019, $16.74 billion in 2020 and $8.41 billion in Q1 2021.

Sadiku, however, noted that the decline may not be unconnected with security challenges in the country as well as a lot of issues relating to foreign exchange.

She pointed out that a more proactive, all of government approach towards investor support across the federal and state governments was required to convert more announcements to actual investments.

The NIPC boss further explained that some investment announcement might not necessarily translate to actual investments in the same year the interests were made know for various reasons.

She added that while the FDI slump remained a global issue which did not affect Nigeria alone, the country had in the recent past made material policy reforms which had resulted massive inflow of capital.

Sadiku, particularly pointed out that the competition for capital remained fierce globally as countries struggle to reflate their economies – “which is why we are talking about investments going to another country because investors would go to whatever countries appeal to them”.

She said all the states of the federation had a lot to do to woo investments into their respective jurisdiction in the interest of the country in general.

“But we would like every single state in Nigeria to be trying to appeal to investors to get the to come to that state. Any state that wins at that game , Nigeria is the winner.

“The more states have the capacity to promote investments to themselves, to sell themselves the better of Nigeria as a country is, “ she said.

According to her, the government at all levels must move to clear obstacles that could hamper actualisation of investment aspirations going forward.

NIPC Director, Department of Strategic Communication, Mr. Emeka Offor, further explained that though the announcements were not actual investment, they represented “low hanging fruits and they could be actual investments if we all work to together to help the investors realise their investment potentials.”

“Basically for us, it’s a first step of what needs to be done in attracting investments to Nigeria.

“FDI flows were greatly impacted by COVID-19 and we expect that there will be some recovery. “

Offor said:”If you look at the case of Nigeria, you will find out that basically, the government needs to do much more to ensure that we increase FDI flow.

“The major spike or growth occurred when Nigeria introduced very proactive government policy. Around 2003 was the sale of GSM licenses and around 2005 to 2006 was banking consolidation and 2011 to 2012 witnessed the sale of indigenous assets.

“So, we believe at NIPC that bold and coherent policy changes and deep economic reforms will be required to reverse the decline in investment inflows seen in 2020 and even beyond.

“For us, there are low-hanging fruits that the states can work on to bring their aspirations to realisation.”

Analysts Express Concerns

However, analysts, in separate interviews with THISDAY, identified a litany of problems which may hamper investment drive as well as actualise current aspirations.

They said the current security challenges posed by terrorists and banditry, policy summersaults by the government and foreign exchange crisis, among others, constituted major risks to foreign capital inflows.

The Chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja Branch, Prof. Uche Uwaleke, while reacting to the investment announcement, said, the chances of investment intentions crystallising depended a lot on the extent to which the rising insecurity is tackled.

He said:”Any foreign investor will consider security paramount in making investment decision.

“Another important factor will be liquidity in the forex market and associated ease of repatriating profits.”

Also, Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, pointed out that with the current insecurity and political instability in the country, it will be somewhat naive to think that these investment potentials will crystallise as actual investments.

“Potential foreign investors analysing the investment opportunities in Nigeria will undoubtedly be put off by the multiple risk factors that may significantly affect their investment.

“Aside from the obvious insecurity, they may also consider foreign exchange risk given the volatile nature of the naira presently.

“Whilst Nigeria may still draw potential investors with the prospect of an abundance of natural resources and a large population, it must be noted that the current state of the economy will make it very difficult to attract significant investment.”

Shelleng further argued that there had been no obvious strategy from the government to curtail the economic malaise adding that more stable countries within the country’s geographical location will continue to attract FDI over Nigeria.

Also, commenting on the development, Managing Director/Chief Executive, Dignity Finance and Investmemt Limited, Dr. Chijioke Ekechukwu, said though the country was replete with potentials in all sectors, waiting to be harnessed, the current state of insecurity may limit results.

He said:”These investment announcements may not be actualised if we do not deal with security challenges of the country, which are worsening instead of improving.

“Every business opportunity that may come into the country can only stem from our ability to reduce insecurity.”

On his part, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, however, explained that investment announcement has a great potential of being turned to actual investment.

According to him, investment announcement had recorded higher degree of actualisation in the past years and only witness a drastic reduction during 2020, due to the COVID-19 restrictions.

Gbolade said:”Most of the investments in oil and gas and the capital markets have higher actualisation potential because of the higher margin of profit to investors in these sectors.”

He, further argued that the issue of insecurity which is a major factor determining investment pattern had not been seen to seriously affect investments in these sectors.

“However, federal and state governments policies on ease of doing business could be a major hindrance to actualisation of investment announcement in agriculture, mining among others, “ he said.