By Danlami Nasir Isah
In view of the declining foreign direct investments in Nigeria, an Adjutant Professor of the North Dakota University, USA, Dr Wisdom Patrick Enang, has identified a number of risk factors including insecurity, foreign exchange risks, poor infrastructure, and policy uncertainties as impediments to Foreign Direct Investments (FDIs) in the country.
Speaking to newsmen in his Uyo office, recently, Dr. Enang noted that the prevalent climate of low foreign investment has worsened the economic situation of the country, adding that, the government at all levels must quickly rise up to the occasion by addressing these inclement factors so as to restore investors’ confidence in the Nigerian economy.
Dr Enang, who is the Chairman Board of Trustees of the Sarah Enang Humanitarian Foundation (SEHF), stressed that Nigeria presents a huge opportunity for decent returns in virtually every sector, but that a number of the potentials are constrained by risk factors.
The renowned energy expert emphasized that these factors make the country’s risk-adjusted return on investment unattractive and unappealing, subsequently aiding the continuous significant decline in the flow of FDIs into the country, describing the situation as both unsurprising and unfortunate.
Dr. Enang revealed that the total value of capital importation into Nigeria according to the National Bureau of Statistics (NBS) report, and the Nigerian Investment Promotion Council (NIPC) declined to $875.6 million in the second quarter of 2021, from $1.9 billion in the first quarter of the same year.
Explaining further, he highlighted that the reported figure represents a decrease of 54.06% compared to the first quarter of 2021, and a decrease of 32.36% compared to the second quarter of 2020, adding that, the largest amount of capital importation in the second quarter of 2021 was received through foreign portfolio investments, which accounted for 62.97% ($551.37 million) of the total capital importation, followed by other investments which accounted for 28.13% ($246.27 million) of the total capital importation. In addition, FDIs accounted for 8.90% ($77.97 million) of the total capital importation, according to him.
The Nigerian-born, British-trained Chartered Engineer said that in line with what the Nigerian Economic Summit Group (NESG) has already irrefutably established, Nigeria’s current economic problems is mainly as a result of the following factors: a steep decline in FDIs in recent years; a high divestment rate by multi-national firms; and the lack of an enabling environment for local businesses to thrive competitively in the domestic and export market. According to him, foreign investors pulled out N1.77 trillion from the Nation’s stock market in the last two years, citing insecurity and economic uncertainties.
He emphasized that citizens are worried about the spillover effect and economic volatility caused by the non-attractiveness of the country to foreign investors, linking the huge investment outflow from foreign investors to uncertainties that currently shroud the Nation’s economic outlook, adding that considering Nigeria’s natural resource base and large market size, the country should be a major recipient of FDI in Africa.
He also highlighted that one of the pillars on which the New Partnership for Africa’s Development (NEPAD) was launched by the African Union, was to increase available capital to US$64 billion through a combination of reforms, resource mobilization, and a conducive environment for investment, lamenting however that the level of FDI attracted by Nigeria in recent years was unimpressive.
He bemoaned the negative trend where Nigeria in the last five years has witnessed the exit of a significant number of key foreign companies to other African countries like Ghana and South Africa, owing to several market frictions impeding trade like: insecurity; volatility of the exchange rate market; high cost of business operations due to poor electricity supply; and lack of a conducive business environment.
The erudite scholar listed the benefits of FDI to Nigeria to include: contributing to the creation of decent and value-adding jobs; enhancing the skill base of host economies; facilitating the transfer of technology, knowledge and technical know-how; as well as boosting the competitiveness of local firms, and enabling their access to domestic and export markets.
He further suggested that as a developing Nation, that Nigeria should tailor its policies to over-come domestic imperfections that hinder the smooth integration of indigenous firms into global supply-chain networks. While calling for an improvement in the quality of Nigeria’s investment climate, as this will make a huge difference in the attraction of FDIs, he explained that the Federal Government should ensure an acceleration of the necessary reforms (fiscal, regulatory and institutional reforms) required to make Nigeria a much more attractive investment destination.
According to him, the Federal Government needs to accelerate the ongoing foreign exchange market reform, as the current volatility in the FX market is a huge show-stopper, which will inadvertently impede the attraction of FDIs into the country’s economy.
Dr Enang also recommended the following key fiscal reforms, which he assures will make the Nigerian investment environment more attractive: harmonization of taxes, and elimination of double taxation; reduction in the cost of business operations through the provision of basic infrastructure (road network and constant electricity supply); and issuance of government business loans at single-digit interest rates.
He harped on the need for the government to create new opportunities in the Public Private Partnership (PPP) space, especially in the aspect of infrastructure development. He also recommended the privatization of moribund enterprises which are not productive, yet are gulping a lot of operating costs on annual basis.
