Stemming the perpetual loss of foreign investors

Earlier this month, the National Bureau of Statistics released data indicating that Nigeria generated a total of $698.7 million from Foreign Direct Investment (FDI) in 2021. This NBS data shows the FDI generated in 2021 was the lowest the country recorded in 10 years. The FDI is one of the three major types of investment and a critical source of capital inflow into the country. Other sources include foreign portfolio investment, foreign loans and trade credits. The NBS defines FDI as an investment where the investor has some control or a significant degree of influence on the management of a domestic enterprise. It notes that the FDI occurs when the investor has enough equity in the enterprise to entitle them to 10 percent or more of the voting rights in that company. A breakdown of FDI in Nigeria over the last 10 years shows that in 2012, FDI stood at $2.60 billion. It declined to $1.27 billion in 2013 but rose to $2.27 billion in 2014. The FDI fell again in 2015 to $1.41 billion, it fell further to $1.04 billion in 2016 and to $981.75 million in 2017. Further analysis of NBS data revealed that FDI again rose to $1.19 billion in 2018 but dropped by $256 million to $934.34 million in 2019. The latest capital importation report from the bureau stated that FDI fell by $332 million to $698.78 million in 2021 from $1.028 billion in 2020. The report also showed that 24 states in Nigeria failed to attract any foreign investment last year. These states are Adamawa, Bauchi, Bayelsa,Benue, Borno, Cross River, Ebonyi, Edo, Enugu, Gombe, Imo, Jigawa, Kaduna, Katsina, Kebbi, Kogi, Nasarawa, Niger, Ondo, Plateau, Sokoto, Taraba, Yobe and Zamfara. Also, 10 out of the 24 states failed to attract foreign investments in the last three years. The states are Bayelsa, Ebonyi, Gombe, Jigawa, Kebbi, Kogi, Plateau, Taraba, Yobe and Zamfara. Economists blame capital flight on the on-going insecurity in the land, absence of electricity in Nigeria; the cost of getting power to will make the product manufactured unprofitable. Other causes of capital flight include policy inconsistence. Years ago, the directors of Dunlop Nigeria Limited established tyre manufacturing factories in Nigeria. The state of the arts factory in Lagos was opened by the then President, Chief Olusegun Obasanjo. Five weeks after opening the ulta modern factory, government crashed the price of tyre by ordering the importation of tyres from abroad. The owners of Dunlop had no choice other than turning their factories to sales depots for tyres from their factories abroad. The same fate forced Michelin, Berec batteries and other companies to relocate to neighboring countries. Also, many investors have been affected by the pandemic. Investments thrive where there is peace and security. People normally invest in the productive sector, this sector cannot operate without a reliable, adequate and affordable electricity. We haven’t made the stride in terms of adequate supply of electricity. That is yet another stumbling block for Foreign Direct Investment. Apart from policy inconsistence, there are foreign exchange hazards with the constant devaluation of the naira by the government. Since 1990, the value of the naira has been on the decline and projecting that for the next decade or two does not show any significant difference. The Deputy President of the Lagos Chamber of Commerce, Gabriel Idahosa noted that investors were reluctant to invest in a country where the cost of doing business is high. The unpredictability of the value of the naira makes investors skeptical of investing in Nigeria because the value of their returns would have declined in the future due to constant naira devaluation. Other factors militating against foreign investment include but not limited to the inefficient port, rail and transportation systems. Also, Nigeria’s income tax is the highest in the world. Most countries have about 15 percent tax but ours is 32.5 percent, a very hateful tax system in a developing country. Which is why investors are going to places where taxes are low and are moving to countries where government wish to create more jobs rather than high taxes. Investors are looking for economies that are growing. Prior to last year, the Nigerian economy contracted in 2020. Foreign Direct Investment goes to countries with very good investment climate. Among those things investors are looking for are economic and political stability. They are also looking at the rate of growth of the economy. In another way, investors are apprehensive of the level of insecurity in the country; which is why they are loath to invest. In his own take, the Chief Executive Officer, Centre for the Promotion of Private Enterprise Dr Muda Yusuf stressed the need for urgent reforms to strengthen the interests of investors. For Benue State, its commissioner for Finance, David Olofu blamed the lack of FDI in the state on the Federal Government who is conniving with terrorists to ravage the Middle Belt states. In Zamfara State investors made enquiries but never turned up. The Managing Director of Zamfara State Investment Corporation, said security challenges were responsible for scaring away investors from the state. But the Adviser to the Enugu State governor on Information Steve Oruruo averred that his state had been working assiduously to create a stable and secure environment to attract foreign investment, businesses to thrive and that had placed the state as the most secure state in the South East. All these go to show that aside of insecurity, government has no policy of creating an enabling environment for the importation of investment to Nigeria.