ICAN Tasks FG on Challenges Constraining Businesses in Nigeria

•Says Nigeria is a high-risk environment for sustainable business operations

Dike Onwuamaeze

Concerned by the steep decline in foreign investment inflows into Nigeria and the surge in the number of multinationals closing their operations in the country, the Institute of Chartered Accountants of Nigeria (ICAN) has called on the federal government to address challenges constraining businesses in order to create an environment that would attract and retain Foreign Direct Investments (FDIs). 

ICAN noted that it had become a matter of concern that despite the launch of the Presidential Enabling Business Environment Council (PEBEC) in 2016 and numerous presidential globetrotting in the name of searching for FDIs, Nigeria still recorded steep declines in FDIs inflow of 69 per cent and 44 per cent in the first and third quarters of 2023 respectively.

The 59th President of ICAN, Dr. Innocent Iweka Okwuosa, in a recent publication titled “ICAN Position Paper: Attracting Foreign Direct Investment,” pointed out that data from the Nigerian Bureau of Statistics (NBS) showed that, “on a year-on-year comparison, there was a substantial 69 per cent decrease, as FDI fell from $155 million in Q1 2022 to a paltry $48 million in Q1 2023. In Q3, 2023, it was US$654.65 million, compared to US$1,159.67 million recorded in Q3, 2022, indicating a decline of about 44 per cent.

“The downward trend in FDI inflows highlighted above reflects the reality of the challenges that businesses face, which we suggest should be addressed by the present government if it will attract FDIs. To this end we are of the view that these foreign trips will yield fruit if these challenges which are discussed below are first addressed.”

Okwuosa further stated that the spate of exits in the country’s industrial sector that was becoming a trend since August 2023, when GSK announced its departure, the cessation of daily trip to Nigeria by some notable airlines and disinvestments by Truworths, Etisalat, ExxonMobil, Tiger Brands, HSBC, Woolworths, Shoprite, InterCon¬tinental Hotel Group, and many more companies were clear indications, “that initiatives  (like) PEBEC may not have created the ease of doing business that can attract and retain FDI, after all.”

He pointed out that the challenges in Nigeria’s business environment were multifaceted and included security concerns, infrastructural decay, regulatory constraints and policy inconsistency.

These factors amongst others, according to him, have created a high-risk environment for sustainable business operations in Nigeria. A notable gap in infrastructure, particularly in critical areas such as power, transportation, human capital including technical human resources, and technology amplify operational challenges for businesses. 

He noted that, “the lack of reliable power is a significant constraint for citizens and businesses, resulting on annual economic losses estimated at $26.2 billion (N10.1 trillion).

“According to the 2020 World Bank Doing Business report, Nigeria ranks 171 out of 190 countries in getting electricity and electricity access is seen as one of the major constraints for the private sector, it is doubtful that FDI will be attractive under this situation. This is despite the introduction of PEBEC in 2016.

“Additionally, the specter of corruption and transparency issues looms large, potentially eroding investor confidence, especially if a foreign investor will have to pay his way through in order to be granted access to do business in the country.

“Foreign exchange volatility, marked by fluctuations in the value of the naira, introduces financial uncertainty, while limited access to finance, especially for Small and Medium Enterprises, restricts economic growth,” he said.

The institute also made some recommendations that would woo the foreign investors into the country.

It stated that government should be more proactive in addressing the security challenges facing the country, including identifying and visiting the full weight of the law on individuals and institutions involved in and sponsoring oil theft, illegal mining and insurgency in order to “create an atmosphere of peace and order that will attract both local and foreign investors.”

It also recommended that government should create an enabling environment that could attract private sector investment in infrastructural development. Therefore, “the Infrastructure Concession Regulatory Commission (ICRC), Nigeria’s main Public Private Partnership (PPP) unit with a key objective of fostering investment in the country’s national infrastructure through private sector funding should be made more active. While we welcome the Road Infrastructure Tax Credit Scheme, which is a form of PPP, we call for better accountability and transparency in project execution. This is where the skills of chartered accountants are required.” 

Other policy initiatives that were recommended by ICAN included legal, regulatory, tax and port reforms, transparency in foreign exchange market management, zero tolerance for bribery and corruption, the establishment of anti-corruption courts in all states of the federation to expeditiously try cases of bribery and corruption, the re-organisation of the major anticorruption institutions such as the Independent Corrupt Practices and Other Related Offences Commission (ICPC), the Economic and Financial Crimes Commission-(EFCC), the Code of Conduct Bureau (CCB) and the Bureau of Public Procurement (BPP) to make them more relevant in modern Nigerian business environment.

“An investment-friendly environment leads to increased FDI, bringing capital, technology, and expertise that spur economic development. It fosters job creation by expanding businesses and reducing unemployment,” Okwuosa said.