Unlocking Nigeria’s Investment Potential for Sustainable Development

James Emejo writes on the need for a coordinated strategy to unlock the country’s untapped investment opportunities toward economic recovery and sustainability.

There are several reasons why Nigeria must move quickly to attract foreign capital especially Foreign Direct Investments (FDIs) into the country.

If anything, it has the potential to solve some of the macroeconomic challenges including the foreign exchange crisis, and provide job opportunities among others.

Foreign capital inflows can also help to solve Nigeria’s huge infrastructural gaps as the country recovers from the global economic downturn occasioned by the COVID-19 pandemic, and amid the disruption in the global supply chain, caused by the war between Russia and Ukraine.

Several analysts have also attested to the fact that foreign inflows could help strengthen the Naira and shore up the country’s external reserves.

Even the few investments that come into the country are mostly concentrated in a few states and regions, a situation, which had left most states without a single capital inflow over the years.

Yet, amid rising poverty, improved foreign capital inflows are bound to promote inclusive growth and prosperity.

Declining capital inflows

But, attracting FDIs has been a tall order in recent times.

The total value of capital importation into the country declined by 2.40 per cent to $1.54 billion in the second quarter of the year (Q2 2022) compared to $1.57 billion in the preceding quarter, according to the National Bureau of Statistics (NBS).

However, when compared to the corresponding quarter of 2021, when capital importation was recorded at $875.62 million, it represented an increase of 75.34 per cent.

According to the Nigerian Capital Importation Q2 2022, Lagos State topped the destination for foreign capital inflows with $1.05 billion, accounting for 68.66 per cent of total inflows into the country.

This was followed by investment into Abuja (FCT), valued at $453.95 million (29.57 per cent).

Anambra attracted $24.71 million, Kogi $2 million and Ekiti 40.50 million during the quarter.

However, portfolio investment accounted for 49.33 per cent ($757.32 million), representing the largest capital importation in the review period.

This was followed by Other investment category which was valued at $630.87 million or 41.09 per cent of total inflows while Foreign Direct Investment (FDI) accounted for $147.16 million or 9.58 per cent of total capital imported in Q2.

Disaggregated by sectors, capital importation into banking had the highest inflow of $646.36 million amounting to 42.10 per cent of total capital imported during the period.

This was followed by capital imported into the production sector, which stood at $233.99 million or 15.24 per cent.

Furthermore, the financing sector attracted $197.31 million or 12.85 per cent inflows.

Disparity in investment announcement

The Nigerian Investment Promotion Commission (NIPC) recently disclosed that it tracked $2.58 billion as investment announcements for the first quarter of the year (Q1 2022).

This represented a 69 per cent decline in the $8.41 billion tracked in Q1 2020.

However, the NIPC said the decrease in value was indicative of the concern occasioned by lingering travel restrictions associated with the global pandemic (COVID-19) and the war in Ukraine, which has destabilised the European countries, a major source of investments for the country.

The commission tracked a total of 33 projects across five states and the Federal Capital Territory (FCT) during the quarter. According to the report, 79 per cent of the projects were planned for Lagos State.

The top five states by value of investments, are Sokoto $1.5 billion), Lagos $881 million, FCT $58 million, Rivers State $50 million, and Delta $40 million.

Although, the investment announcement provides a sense of investors’ interest in the Nigerian economy, it does not portray real investments in the country.

Often times, investment announcements don’t translate to actual investments, thus the need for government agencies to recalibrate strategies towards ensuring that investors who indicate interest in the economy actually commit their capital.

Gaps in investment drive

If anything, the concerns raised by the newly appointed Executive Secretary/Chief Executive of NIPC, Mrs. Saratu Umar, that the country’s level of resource mobilistion was insufficient to deliver inclusive growth should not be taken lightly.

Umar, during a stakeholder engagement with Ministries, Departments, and Agencies of government (MDAs) stressed that Nigeria remained a resource-rich country with potential that is unrivaled by any other country in the world.

According to her, investment remained critical to promoting economic growth, creating jobs, generating wealth for Nigerians as well as facilitating development, adding that investment promotion remained key to attracting Foreign Direct Investment (FDI) and mobilising Local Direct Investment (LDI) in order to fully harness the potential of the Nigerian economy as well as set it on the path of sustainable progression towards becoming a prosperous nation.

The NIPC boss, however, pointed out that this potential had not been fully harnessed, “hence the situation we find ourselves today”.

She stressed that Nigeria’s investment promotion drive required more coordination and traction, adding that the absence of a well-coordinated ecosystem had not been without its share of challenges.

The NIPC boss further noted that it has become necessary for all stakeholders in the investment promotion ecosystem to work in synergy and complement their respective mandates and competencies to collectively drive a national investment promotion campaign.

According to her, the emergence of the AfCTA as well as shifts in the ECOWAS investment protocols and the emergence of the National Development Plan, the Nigerian Integrated Infrastructure Masterplan, and others required that the central and strategic role of the NIPC in the coordination of all investment promotion should be activated.

Umar said, “This is to ensure Nigeria’s investment promotion drive is given traction to onboard investments into the different sectors of the economy in a bid to facilitate economic growth and national development including job creation, import substitution, foreign exchange generation, and reduction of our reliance on debt amongst others.”

She stressed that if the country is to assert its position as a dominant African investment destination, “we must enhance our investment drive”.

She argued that the global FDI market had become competitive and versatile where the investment promotion thrust of successful jurisdictions that are attracting the largest global market share of FDI inflows are driven by effective, efficient, and performance-driven Investment Promotion Agencies (IPAs) over the last decade.

She said, “With over 170 IPAs worldwide competing to channel FDI to their different countries, a compelling imperative was established that NIPC as Nigeria’s IPA is positioned to ensure that Nigeria gets a fair share of the global market.

She said, “This is especially important with the onset of the Africa Continental Free Trade Area which is now in force with Nigeria having deposited its instrument of ratification since December 2020.”

The NIPC chief executive further pointed out that under the National Investment Coordination Framework being developed by the NIPC, the commission would provide a clear strategy for seamless collaboration and coordination of the investment ecosystem as well as usher in robust and effective stakeholder communication and engagement.

She said, “It is believed this will result in effective partnership with all concrete stakeholders including MDAs with sector-specific investment promotion mandates and regulators that are key actors in investment facilitation and investment climate improvement.

Investment promotion strategy

Umar also disclosed that the commission is currently developing the Investment Promotion Masterplan, which is aimed at having clear actions that key into the federal government’s sectoral masterplans and policies as well as commodity value-chain development.

According to her, “NIPC will “Orchestrate and execute targeted investment drives along investor-specific, sector-specific, industry-specific, country-specific, regional-specific and investment-type specific strategies to facilitate FDI and LDI that fit into Nigeria’s development and investment needs, in an inclusive, coordinated, tangible, measurable and effective manner.”

Umar, in an interview with THISDAY said, “You know Nigeria has a lot of potential and we need investments to actually harness that potential.

“It should come from loans but it should come from investors and a critical element of enhancing investment for example ministries, are the departments and agencies because we all have one role or the order to play in the investment lifecycle.

“And NIPC is mandated to coordinate all investments in the Nigerian economy and also all investment promotion activities in the Nigerian economy. So, we cannot do that without engaging stakeholders.”

She said the commission would also engage the diplomatic community and investment support groups including banks, and legal firms among others.

Umar pointed out that attracting FDIs could also help to strengthen the local currency.