Investment is essentially a claim on scarce resources. It is thus an unending competition. Therefore one has to continuously prove their bonafides as a better source for returns or lose their claim.
Nigeria is the Giant of Africa but it seems to be losing its place on the continent. And at the rapid rate of development and adoption of technology, foreign and local companies are starting to invest in Africa.
In Nigeria, a series of interconnected factors are compounding to make segments of its economy less attractive to foreign investors.
Let’s not forget that a fifth of the Nigerian economy is driven by investment.
In this article, we help you think through how this affects the economy around you.
First of all, government policy can either bar or discourage them. Most recently, federal government banned Twitter operations in Nigeria, a move which has been criticised. Closer to home, the National Bureau of Statistics conducted a survey of small and medium businesses in Nigeria. Some key challenges were highlighted; one was an unstable policy environment and the other was excessive regulation.
You see, sometimes it is less about whether the policy action was the right call, and more about i) the unpredictability of government actions ii) the way they communicate (or don’t) and iii) the perception this creates. The more erratic and impulsive policy-makers seem, the fewer investors are attracted to a market.
Second, the issue of security. The certainty of a foreigner to walk the streets and be protected.
Nigeria is in big trouble. The government has failed to provide security to its citizens. Criminals, separatists, and Islamist insurgents increasingly threaten the government’s grip on power. So we need to take security very seriously.
Third, lack of good motorable roads, power supply, capital, among others, as factors responsible for the high cost of production in Nigeria. Companies in countries such as India and China, produce at low cost mostly because of the minimal cost of energy and labour, among others factors.
It is not like foreign investor interest in Nigeria has dropped to zero. Bilateral and multilateral loans into infrastructure, for example, are booming. But that is because the terms of agreements for those inflows are stringent, and the costs for default are high.
Nigeria needs to do far more work to make itself attractive to investors.