A declaration by the Federal Government, which suggested the other day that the Nigerian economy is resilient enough with self-sufficient parameters to attract Foreign Direct Investments (FDIs), deserves some examination.
Indeed, surviving battering bouts and body blows of sheer mismanagement is credence to the resilience of any economy. But to gloss over inherent tardiness and accept scary negative indicators as if they are virtues or necessary conditions for new investments, is like living in a bubble.
Doubtless, the times are hard. Efforts at keeping the economy afloat, whatever the worth, have been acknowledged. One of them is the Ease of Doing Business campaign and its Executive Orders. Another is the Economic Advisory Council (EAC). The Nigeria Economic Sustainability Plan entered the mix in the wake of the COVID-19 pandemic. However, to say that doing business now comes with ease and has doused perennial toxic environment or government policies are now consistent and focused on real development, are different narratives that evidence will not support. And that is where perception should not be confused with reality or fiction with the fact.
Apparently from a feel-good mode, the Minister of Finance, Budget and National Planning, Zainab Ahmed, recently took the path of economic appearance, not its reality, to market resilience to foreign investors. Ahmed urged foreign investors to take advantage of opportunities in the country’s fixed income market, saying the Nigerian economy remains resilient despite the external shocks it has experienced. Her words: “The Nigerian economy is resilient and the private sector has been cooperative with the government to ensure the stabilisation of the economy. We have a domestic market that is deep and we are inviting investors to consider investing in the Nigerian domestic market. We have at this time reasonable and adequate reserves to weather external shocks.”
The potential of the domestic market is not in doubt, but its main realities and facts again elicit some curiosities. The truth is that negative indicators are the reasons current investors are struggling to stay here and potential investors are looking elsewhere. With the clarity that attends all hindsight, the economy has been waning even in the good times that pre-dated COVID-19. The Q1 2020 ratings showed that the ability of Nigeria to attract sustainable FDIs remains weak. Portfolio investment, otherwise called hot money continues to outshine imported capital. Instability of the naira has consistently sent jitters down the spines of willing investors. In January, the exchange rate was N305 to $1. By July, naira worth had tumbled to settle for N380 to $1. Of the $5.85 billion received in the Q1, portfolio investment accounted for 73.61% ($4.31 billion) of the total capital importation recorded by the National Bureau of Statistics (NBS). That was in good times, compared to the devastating COVID-19 era that is holding businesses and economies by the scruff of the neck.
Besides the instability in a naira-to-dollar benchmark, a lot of business decisions are either cancelled or stalled by policy inconsistency and legislative dilly-dallying in deciding critical policy direction. For instance, a lot of oil and gas investors have not undertaken investment decisions because the Petroleum Industry Bill (PIB) has taken forever to become law. After years of pussyfooting, it was to have been passed before 2020. It is already mid-year and nothing has been said of the bill.
Again, irrespective of the merit that abounds in the need to reduce the cost of PayTV, forcing pay-per-view down the throat of the operators overnight is a legislative ambush, policy inconsistency, which underscores our inability to honour the existing agreement, all of which are injurious to investments. In the same vein, the international borders were closed to encourage local production of goods. Unfortunately, the directive is only implemented in the south, not in the north where foreign illicit goods are still making free entries to rival efforts of local manufacturers. Ideally, the rules should be sacrosanct and consistent.
What of the cost of operation? The macro-environment is toxic and unfriendly to ease of doing business. It is strange that even the Minister of Finance is unperturbed by these concerns. Insecurity alone has nearly restricted foreigners and investments to very few states in Nigeria. International Oil Companies (IOCs) are condemned to securing themselves deep offshores and at a heavy cost. Amid pipeline vandalism and sabotage, the same IOCs are transporting crude, ordinarily meant for pipelines, in more expensive barges. Electricity, gas, water and Internet supplies are commonplace in other FDI havens. Here, besides the high cost of utility, individuals just like organisations are still condemned to providing these basics. Today, electricity supplies alone account for 40 per cent of the cost of operation in any firm.
At the end, the landing costs of all products are expensive and passed to beleaguered consumers. Amid job losses, worsening poverty rate and a sharp decline in purchasing power in the COVID-19 era, there is no vibrancy in the market to sustain existing investments. That explains why a number of premium brands are pulling out of the market. It is not because Nigeria does not have the population or the domestic market as observed by the minister but for the indicators that are just not adding up to interest new investments.
With or without the knowledge of economics, commonsense dictates that ants colonise the most where the honey is sweetest. The economic think-tank of the Federal Government should see that wisdom and run with it. The flip side is that no amount of propaganda or feel-good perception will sway investors to where they stand a higher risk of losing money. They need not be wooed to where their investments are secure. They will rush to where their investments readily appreciate. They will be available where affordable rents and charges deliver good utility. Foreign and local investors would always sail to where the rule of law and sanctity of agreements prevail, where access to critical infrastructure and skilled manpower enables ease of operations. These business people come to where the schools meet the knowledge demands of the industry. Without these, Nigeria is not ready for serious investments or sustainable FDIs. Let us continue to enjoy the hot money while it lasts. But the point needs to be made to the authorities that foreign direct investors don’t know where they need to invest. They don’t need state actors to advertise that. Reason: it is now a small world, after all, as Rotarians would always tell us.
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