Profiling Nigeria’s economy recently has brought, into the forefront, discourse of indices which are assessed to give expression to the prevailing status of the underlining factors which have been the basis for what has been observed as strings responsible for a wobbling economy. Such assessments by data and statistics remain much important as they constitute the formulating ground upon which investors structure their decision making patameters to determine where to establish new ventures, or better still, to expand their threshold, maintain status quo, or where possible, wind up to look else where.
Following recent drop of Nigeria’s ranking in investment destinations in Africa, business, finance and economic stakeholders have continued to express concerns over the worsening situations. This in view have found expression in Nigeria’s drop from Africa’s top 10 investment destinations ranking to 14th in a report released by RMB, a division of FirstRand Bank Limited. While Nigeria was ranked 14th, in the RMB’s report titled, “Where to Invest in Africa 2021,” Egypt tops the list. According to RMB, the ranking was based on the operating environments of the Countries on the continent. RMB Africa Economist, Daniel Kavishe, had said the pandemic ushered a new world and a new approach to this year’s list. Kavishe had said, “We created a new set of rankings that incorporated some of the unavoidable COVID-19-induced challenges, of which the operating environment score was one. The inclusion of a fiscal score in our rankings aimed to score governments’ fiscal positions and provided a basis from which investors can understand specific jurisdictions. Although the pandemic brought devastation, it also enabled opportunities for reimagining policies and trade relationships. Increasingly clear now is that home-grown strategies to tackle poverty, inequality and unemployment across Africa must be implemented. If not, all of Africa suffers.”
As noted by the report, the top 10 African countries to invest in, according to him, were Egypt, Morocco, South Africa, Rwanda; Botswana, Ghana, Mauritius, Côte d’Ivoire, Kenya and Tanzania. The company had said, “The sheer size of Nigeria’s economy and large population base has undoubtedly aided the country’s economic environment and has led to an increase in investments in the economy over the past 10 years. The country boasts significant hydrocarbon resources and considerable agricultural and mining potential. With fiscal support expected to increase and continue over the next few years, given both the coronavirus shock and oil price collapse, the economy is expected to grow but at a slow and steady pace. One of the key tenets for its development will be the efforts that have been made to support small and medium enterprises through monetary policy reform. This should support the country’s efforts as it continues its expansion into sectors such as information technology. Nigeria’s heavy reliance on oil means that the drop in oil prices and production generated by the OPEC+ agreement is strongly impacting the economy. COVID-19 came at a time when the economy was still rebalancing from the drop in oil prices during the 2014 to 2016 period.
“Therefore, a lower drop in reserves, tight liquidity and a weak currency can still be expected. The government, which has been criticised for its slow pace of reform, still faces a myriad of security challenges that destabilise the country, such as the activity of the Islamist terrorist group Boko Haram in the northeast, forcing many people to flee.”
Meanwhile, in 2018 and 2019, Nigeria was ranked in the top 10 (eighth in both years). Nigeria was also ranked six and 13 in 2016 and 2017 respectively. In 2014, Nigeria ranked as number two and dropped to number five in 2015. Experts have largely linked the rationale informing the fall to inflation, currency devaluation, insecurity, and COVID-19, among others.
While reacting to the development in an interview with Nigerian NewDirect on Sunday, the CEO, Centre for Promotion of Private Enterprise (CPPE) and former Director General, Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf had said Nigeria’s progress on investment promotion has been slow, stating that the Federal Government should fix all structural and regulatory bottlenecks and provide improved enabling investment environment to attract foreign investors.
He said, “Issues raised in RMB report are not new. They are issues that investors operating in the economy had been complaining about. These include macroeconomic challenges manifesting in high inflationary pressures; the exchange rate depreciation; the liquidity challenges in the foreign exchange market; and the mounting pressure of debt service on the finances of government. It is also true that the heavy dependence of Nigeria on crude oil for foreign exchange earnings aggravates the vulnerability of the economy. The economy is diversified in structure, but not in earnings. Progress in the promotion of economic reforms has also been slow. There are reform imperatives in the foreign exchange policy, oil and gas sector, investment policy. Fixing the structural and regulatory issues in the investment environment are also important in making Nigeria a leading investment destination. But the fact remains that the large Nigeria market offers opportunities which most Countries in Africa do not have.”
In his own view, past President of the Chartered Institute of Bankers of Nigeria (CIBN) Prof. Segun Ajibola, had said, “Generally, we all know that the global environment has been quite troubled, and Nigeria is not an exception. We have the pandemic, and don’t forget that we just came out of economic recession. We are still struggling with the issue of inflation and the value of our currency. We also have the issue of insecurity. So, all of these put together will have affected our rating as a Country among the international investors. These are some of the general factors one could point out in reacting to such a report for now.”
On his part, the Executive Director, Nigerian Workforce and Enlightenment Centre (NIWOSEC), Dr. David Kayode Ehindero believes “the president Buhari’s administration hasn’t provided a smooth atmospheric conditions for business activities to strive. A situation where Government tiers and agencies charges multiple taxation thereby forcing foreign companies and local ones to shutdown. Some of them have relocated to Countries like Ghana, Rwanda, Eyght and South Africa where they can survive. The ranking of Nigerian not being among the 1-10th is not surprising to us as we saw it coming. There are no financial experts in the Government to navigate policies towards expanding the Economy coped with the COVID-19 challenges. In his recommendations on moving out of the prevailing economic hostilities, he had said, “I will suggest that the government should Constitute an Economic Think-tank comprises of the public and private sectors to outline policies and Programmes to regain our credibility. Contrary to President Buhari claim that Nigeria is the investment destination in Africa. I will say I will rather concur with the findings that Nigeria drops as an investment destination. While I will appreciate President Buhari for doing his duties of advertising his counter, yet the reality is that due to the security challenges bedeviling the nation of Nigeria, potential investors could be discouraged. Apart from the huge domestic market present in Nigeria, other factors are grossly unappealing to have attracted investors.”
It is glaring recently that indices of economic assessment have begun to reveal that against strengthening confidence of investors, the clusters of defining factors of the economy are scaring investors away. The profiling of Nigeria’s business environment recently is incontrovertibly being clustered with discomfitting strings making the subject of ease of doing business delving towards the corridor of deficiencies unappealing to attracting investments in the Country.
It is noteworthy that investors would only commit their investments where the depth of risks does not overshadow the chances of success. It is hence, important that the Federal Government and all coordinating Subnational governments put into consideration the firm necessity to address the strains pushing the business environment to the edge of disturbances that are hostile for operation.
The inimical impacts of shrinking investments and lowering profile of Foreign Direct Investment which the prevailing situation pose, is by all means unhealthy for an economy which has suffered recession from the monocultural oil dependent status. Opening up channels of firm responses to addresses the prevailing strains is non-negotiable for a change in narratives.