[OPINION] Removing landmines and pitfalls blocking foreign investments in Nigeria
Citing the statistics by the United Nations, Worldometer had estimated Nigeria’s population at over 207 million.
With such a huge population and Nigeria’s strategic location in the Gulf of Guinea, the country represents an attractive market.
However, the dearth of foreign investments, poor state of infrastructure, and the absence of competitiveness in the business environment have continued to undermine the economic potentials of the country. The country’s massive population and poor infrastructure have made the inflow of foreign investments imperative.
Also with the outbreak of COVID-19 pandemic which slashed 65 per cent of the government’s revenues, according to the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, Nigeria is in dire need of foreign investments now more than ever before.
Apart from the negative impact of COVID-19, it is trite that Nigeria as a developing nation needs foreign investments for development especially, the creation of employment opportunities, improving living conditions and generation of wealth.
Foreign investment will catalyse economic growth through improving industrial capacity and human capital development via training of employees.
But for foreign investments to flow into Nigeria, the Nigerian government must create an enabling environment to attract investors.
Beyond returns (profitability), the security of investment is important to attract foreign investors.
Over time, Nigeria has developed a reasonably adequate legal and institutional framework for investment generally and foreign investments. The framework derives from the Foreign Exchange Monitoring and Miscellaneous Provisions Act; the Nigerian Investment Promotion Commission Act and the Nigerian Export Processing Zones Act.
There are various levels of legal protection for foreign investors. Nigerian law provides for compensation in the event of expropriation.
Therefore, no movable property or interest in any immovable property may be compulsorily acquired, except in accordance with the law which, among other things, requires prompt payment of compensation and gives to any person claiming such compensation, the right of access to a court of law or tribunal having jurisdiction, in order to obtain a determination of the right and the amount of compensation payable.
Foreign investors are usually concerned about the capacity of a legal system to enforce the rights and obligations created under such legal system.
The attractiveness of a nation for investment starts with the level of legal protection for investors and their investments.
A major achievement of President Muhammadu Buhari’s administration is its sustained efforts to encourage local and foreign investments in the country since 2015.
President Buhari has not only mounted an international campaign for the inflow of foreign investments into the country but has also taken deliberate steps to improve the ease of doing business in Nigeria.
Following the measures put in place by President Buhari’s administration, the ease of doing business in Nigeria improved considerably barely two years after he took over power.
For instance, in 2017, in the World Bank Doing Business Ranking, Nigeria moved up 24 places and was also listed among the top 10 reforming economies in the world.
Nigeria moved up by 24 points from 169th position on the 2017 ranking and also 170th position on the 2016 ranking to 145 in the World Bank’s 2018 report. Under the administration of President Buhari, the World Bank named Nigeria one of the top-20 improvers in doing business out of 190 countries.
Among the notable results of the Buhari’s reforms, besides the better ranking by the World Bank Doing Business report, include the launching by the Federal Inland Revenue Service (FIRS) of a centralised e-payment channel contributing to a 20 per cent reduction in time businesses spent on documentation and payment of taxes; the launching by the Nigerian Immigration Service (NIS) of a fully digitised e-visa process guaranteeing visa approvals in 48 hours; the re-engineering of the registration processes and reduced processing time from 12 to less than three months by the National Agency for Food and Drug Administration and Control (NAFDAC); and the improvement of user experience at airports by eliminating passenger service charge stickers and manual check-in bag searches by the Federal Airports Authority of Nigeria (FAAN).
The Corporate Affairs Commission (CAC)’s simplification of company registration processes, resulting in 50 per cent reduction in processing time and the passage by the National Assembly of the Credit Reporting Act 2017, among others, were also some of the achievements recorded.
With these successes recorded, the Buhari’s government was able to attract more investors into the country, and at the same time restore the faith of existing investors in the country.
For instance, the Korean giant, Samsung Heavy Industries Nigeria (SHIN) which had already invested over $270 million in Nigeria’s oil and gas sector, further positioned itself to make more investments, given the attractive policies of the present administration.
It was understood from my research and observation that SHIN, having successfully integrated the Egina Floating Production Storage Offloading (FPSO) in Nigeria, has transformed Nigeria into the FPSO integration and fabrication hub in Africa.
In the course of executing the Egina project which contributed over 10 per cent of Nigeria’s daily crude oil production, SHIN was reported in the media to have invested 560,000 manhours to train over 600 Nigerians who had no prior knowledge of the oil and gas business to receive international certifications in welding.
According to statistics by the Nigerian Content Development and Monitoring Board (NCDMB), SHIN also engaged over 3,000 Nigerians at the peak of Egina project.
ALSO READ: FG has abandoned Benue, Ayu laments
With this massive impact to transform the Nigerian economy with the Egina project, it is believed that if a company like SHIN is given another opportunity in future projects, both the Nigerian economy and the Nigerian people will feel greater impact in the area of training of more Nigerians, earning revenues for the government and contribution to the country’s GDP.
Apart from SHIN, another foreign company, Africoat, an American company also built a pipe coating mill in Nigeria.
However, some of these companies are being frustrated not by the deliberate policy of the government but by selfish and monopolistic tendencies of local operators who frustrate the efforts of Buhari’s administration by chasing away foreign investors because of fear of healthy competition.
For instance, there were media reports that the LADOL Free zone, which hosts both SHIN and Africoat, has reportedly chased away Africoat from Nigeria, while SHIN has been facing difficult times due to monopolistic tendencies, unfair business practices and excessive charges, which erode returns on investments and unfriendly operating environment.
The Federal Government should not allow companies with questionable ownership structure to masquerade under the cover of indigenous ownership to frustrate the much-needed foreign investments.
Indeed, it was a public knowledge that Africoat suffered loss of many business opportunities and was forced to leave Nigeria because of LADOL’s monopolistic tendencies which have suffocated foreign investors in the zone and denied Nigeria foreign investments.
It was reported in the media that the NPA, which is the landlord of the zone, intervened in the dispute and granted SHIN a fresh lease to protect the company’s investments in the zone but the caretaker (LADOL) flouted the decision of the landlord.
Apart from creating monopoly and chasing away other local and foreign investors in the free zone, LADOL was accused by the NPA of shortchanging the Federal Government.
Specifically, LADOL allegedly shortchanged the Federal Government by subleasing some hectares of land at an outrageous amount of money.
NPA revealed that LADOL collected an outrageous amount from a third party for some hectares of land for which it paid only a paltry amount to NPA. LADOL was also accused of monopolistic tendencies and chasing away foreign investors from the free zone.
NPA’s move to sanction LADOL for violating the terms of the land lease was justified, and since the action, foreign investors had hailed NPA for ending the regime of monopoly and opening up the Lagos Free Zone for more investments.
To reassure foreign investors that their investments are safe, it is needful for the Federal Government to demonstrate that LADOL’s crude ways of extorting investors is not a policy of the government or approved action of its functionaries.
It is not enough for the Federal Government to attract investments; deliberate policies should also be put in place to save foreign investors from the likes of LADOL.
The purpose of setting up the free zones (FZs) by the Federal Government was to attract foreign direct investment (FDI), generate employment, encourage transfer of technical skills to Nigerians and boost the country’s economy.
Also, the idea of exempting businesses at the free zones from the normal tax regime, particularly with regard to customs duty and tax, is a deliberate attempt by the Federal Government to encourage investors to boost exports, create jobs and help in diversifying the Nigerian economy by bringing investments.
But LADOL’S continued stranglehold on several hectares of land at Tarkwa Bay in Lagos has hampered the Federal Government’s efforts to attract investors to the Lagos Free Zone.
For over 20 years that LADOL has been managing the zone, a large chunk of the 121 hectares of land has remained undeveloped because of the operator’s lack of capacity to form alliances with local and foreign investors to boost developments at the FZ.
The zone operator has developed monopolistic tendencies, transforming itself from zone manager/agent of regulator (NPA), to sub-lessor and exclusive service provider.
The overlapping and conflicting roles have resulted in exorbitant charges that scared away investors, thus defeating government’s objective of making the FZ an investment hub.
The Special Adviser to President Buhari on Ease of Doing Business, Jumoke Oduwole, had earlier this year, unveiled Nigeria’s new National Action Plan 5.0 aimed at accelerating the actualisation of the country’s ease of doing business target.
She revealed that before setting the new action plan 5.0, the Nigerian government had carried out a holistic assessment of Nigeria’s processes.
According to her, the intention was to ensure a more realistic approach is towards actualising the action plan.
She noted that during the assessment, the government took note of the complaints that were made by the private sector and intend to work together with Ministries, Departments, and Agencies (MDAs) towards solving addressing those.
She added that the Nigerian government also examined global best practices in the ease of doing business, with the intention of replicating the ones that are best fit for Nigeria.
Indeed, for the government to improve further on the ease of doing business ranking, there is a need for the government to listen to the complaints of foreign investors.
The Federal Government should adopt global best practices to protect vulnerable foreign investors because they need much more protection than foreign investors who understand the operating business and political environments.
Kwande, immediate past Chairman of Arewa Consultative Forum (ACF), writes from Abuja