Moghalu Urges FG to Target FDIs that Impact Human, Infrastructure Devt

Dike Onwuamaeze

Former Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu has advised the federal government to evolve a well-defined strategy to attract foreign direct investments (FDIs) that would help solve the challenges of human capital and infrastructure development.

He made the recommendations when he delivered a keynote address titled, “Back to Basics: How to Make Foreign Investment Work for Nigeria,” which he delivered at the United States-Nigeria Investment Summit held in New York City, at the weekend.

Moghalu, who is also the President and CEO of Sogato Strategies LLC explained: “Nigeria should now require, as a matter of strategic national interest, that any investment in natural resources and solid mineral include a beneficiary on plan to add value to them before export, as opposed to extraction and exports of crude oil and other natural resources.”

He noted that Nigeria is a country of significant potential for FDIs, “but for several reasons including a weak macroeconomic environment, policy inconsistency and the absence of a well-defined strategy for FDI as a component of economic growth strategy, FDI into Nigeria has declined markedly in the past several years.”

Moghalu, who was a former presidential candidate in the 2019 general election, also noted that FDI would play an important role in Nigeria’s development if certain conditions exist or would be met because such investments do not automatically trigger productivity.

“It can complement, but not substitute local factors that are essential for development,” he said.
These conditions, according to him, include the understanding that the impact of FDI on developing countries depended very much on the host country’s level of development.

He added: “The assumed benefit of technology transfer from FDI only happens when the investment is made in economies which themselves are actively engaged in research and development (R&D).

“Foreign investment can help lift a country from poverty if it is targeted at the real economy, for instance electricity, manufacturing, service industries, and export oriented industries, and uses local suppliers, as opposed to a lopsided focus on extraction industries.

“The most important requirements for FDI to successfully contribute to real development in a country like Nigeria (depends on) the presence of a well-educated workforce, and infrastructure. It is this question of the absorptive capacity of an economy, which is determined by how well educated and skilled a workforce is to take advantage of the possible technology and employment generated by FDI that determines whether or not FDI contributes to real economic growth.”

Moghalu also stated that Nigeria’s quest for FDIs should begin with clearly defined priority sectors that should be woven into a single thread that becomes the basis for execution, communication and engagement with potential investors.

He also advised the government to develop factor endowment that would have skilled human capital as a priority need.
“The presence or absence of productive knowledge in a society is the most important foundation for economic transformation, which remains necessary for a country such as ours with an economy still in need of diversification,” he said.

He also enjoined the government to evolve an FDI paradigm shift away from extractive industries to value-added derivatives of such industries.

Moghalu also said Nigeria should evolve a legal regime that would offer strong investor protections in order to facilitate increased flows of high quality investment.
“Beyond this, Nigerian authorities – and foreign investors- should incorporate political risk guarantees into major FDI agreements.

“This includes making use of guarantees offered by the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) for losses relating to currency inconvertibility and transfer restrictions, expropriation, terrorism, war and civil disturbances, breaches of contract, and failure to honor sovereign financial obligations.
“Improve the quality of governance and institutions: assessments of governance and institutional capacity to create a sustainable investment environment play an important role in attracting quality investment,” he said.