Very few variables determine national economic competitive advantage. One of them is Foreign Direct Investment, FDI. In every continent, but Africa, the country with the largest population and one of the largest Gross Domestic Product, GDP, invariably enjoys the largest inflow of FDI; or at least the second or third inflow. In Asia, China is the undisputed leader, Germany in Europe, Brazil in Latin America and the USA in North America. The reason is simple. Those countries have such huge internal markets, offering great market potentials to investors as to make them automatic choices as investment destinations. Africa is the only exception; because Nigeria is the only giant on its continent which is not now among the ten investment destinations where it should be leading.
Until Dr (Mrs) Okonjo Iweala, the Federal Minister of Finance under President Jonathan persuaded the FG to re-base the Nigerian economy, it was generally assumed that South Africa had the largest GDP in Africa. Re-basement of our economy propelled Nigeria to the top. Ordinarily, such a development should have sent global investors scrambling to come here – especially when everybody says “Africa is the last great opportunity”. Extra-ordinarily, more than six years after re-basing, Nigeria is not only not benefiting from its status as the largest economy with the largest population as well, this country is actually losing ground to far smaller nations.
Being beaten by Egypt and South Africa might be somewhat understandable – given their long leads on industrialisation and diversification. But, the list of other countries now ahead of us as investment destinations in Africa should be highly embarrassing to Nigerians. The top ten countries, apart from Egypt and South Africa, include Morocco, Rwanda,Botswana, Ghana, Mauritius, Cote d’Ivoire, Kenya and Tanzania. Together, the population of all the ten countries might just about equal that of Nigeria. Yet, the world is ignoring us and trooping to Mauritius and Rwanda. The obvious question is why?
Intimidating business environment
“EASE of Doing Business Online: Nigeria ranks 35thglobally –NITDA.” News Report, December 8, 2021. For a big country aspiring to the leadership of its own continent, ranking 35th among nations in ease of doing business online is a danger sign. More and more transactions are moving online where the imperatives for success include integrity and regularity and reliability. This is the future of business and we can only be competitive by moving up in ranking. Unfortunately for us, our failure to establish strong institutions has ensured that nothing will be done until the next government takes office in May 2023.
The Buhari administration, with only 18 months left in office, is already a lame duck government. Most of the Ministers, Special Advisers and the members of the National Assembly, will return to Abuja in January to face politics squarely. They will have no time to consider new initiatives which will move Nigeria forward in the rankings.
Apart from online business, the Nigerian economic environment, which had hitherto been intimidating, is now also to some extent very deadly. Most of the great opportunities for diversification and industrialisation can be found in areas where nobody wants to go now. Agro-allied investment opportunities remain largely in the North and the dwindling chances in petroleum and gas occur in the Niger Delta. Anybody opening any of our national newspapers can easily understand why no foreign investors will come to Nigeria for years to come. We are already feeling the impact of their absence in the relentless decline of foreign investment in Nigeria. Here is why.
“Foreign direct investment in Africa falls 50% — EY report.”
Although the report referred to 2020 FDI, and some countries have bounced back a bit, the Nigerian story is different and more disturbing because the reasons adduced for the decline in FDI last year remain with us. According to the EY’s 11th Africa’s Attractiveness Report, “Investors are moving away from oil exploration and mining to ‘new age’ sectors including ICT, retail and business services. The trend is likely to accelerate as energy investors are increasingly compelled to meet stringent zero net carbon emission targets.” Nigeria’s over-dependence on investments in crude exploration and production place us at a severe competitive disadvantage in the short to medium terms. The Buhari administration has no strategy for development which will improve on our condition. Nigeria is like a crippled lion among several agile smaller animals.
The results are beginning to show the degree of our helplessness.
“Nigeria records N8.9tn trade deficit in nine months, expert blames insecurity.”
Extrapolating the trend to the full year, 2021, means that Nigeria’s trade deficit might hit N12tn by year end. That is about the same amount as the total budget for the year. If anybody is still wondering why the exchange rate is climbing relentlessly, they need not look further than this disparity between imports and exports. And, whereas we import thousands of different items from around the world, crude oil and gas still account for 67 per cent of Nigeria’s export – even
as investors are moving away from it. We stubbornly cling to a fading commodity.
Why the future is bleak
Investments made today determine the future of any economy. AS a corollary, it also means that investments not made today will limit the quantum of productivity we can expect in the future, the jobs that will be available to our rapidly increasing population and attempts on poverty alleviation. Certainly, our governments realise that we cannot perpetually pay for imports with crude oil exports. And we cannot continue to borrow from abroad to cover for the shortfall in domestic productivity. At one point, and that might be as early as 2025, our crude exports will be insufficient to pay for our imports. Then what?
Then this; severe scarcity of just about everything needed to support lives will occur; imports will decline and the giant of Africa will become more crippled.
LAST LINE: Have you noticed how even small island nations advertise on CNN to promote tourism; and large nations invite investors to come and take advantage of their economic potentials. The underlying message is frequently SECURITY. No nation can expect foreigners to leave their relatively peaceful countries and head for one in which bus-loads of people are kidnapped or burnt alive by their own fellow citizens. There are too many alternative investment opportunities elsewhere for anybody to take the risk. Capital is a coward!!!