Nigeria was once the first destination in Africa for Foreign Direct Investment, FDI. But now, according to a study, the country ranks nineteenth. Recently, the National Bureau of Statistics, NBS, reported that FDI flow plummeted from $9.64 bn in 2015 to $5.12 bn in 2016, a whopping 46 per cent drop.
That drop only tells part of the story and does not reveal the challenges facing the nation which badly need a lot of FDI. Nigeria was the favourite destination for FDI when crude oil was the world’s most valued commodity. Today, crude oil is in rapid decline as a commodity for a lot of reasons, and FDI inflow for exploration has reduced to a trickle. Furthermore, crude prices, which were stable at $100-110 per barrel in 2010 to 2013, had slumped to $28-55 per barrel in the past two years. Oil is no longer as profitable as it once was, and the Age of Oil is gradually coming to an end.
One reason is the global focus on climate change and environmental degradation – processes in which fossil fuel, mainly oil and gas, play a major role. The world is rapidly moving away from oil as an energy source to other more sustainable and environmentally-friendly sources. With very little FDI coming in for oil, Nigeria has not been able to find an alternative investment possibility which would attract FDI as oil and telecommunications did. The other reason for the low FDI inflow can be found in the way Nigeria has treated investors who brought in funds in the past. Our record is, to say the least, unenviable in this regard. Few foreign investors in Nigeria have a pleasant tale to tell about their experiences. MTN, GLO, Etisalat, Shoprite, Bi-Courtney, Dangote, BAU and many others have been so badly treated that their experiences cannot encourage others to come in. Agreements reached with one government are unilaterally and illegally terminated without compensations by another government. Because most FDI, except portfolio investment, involve long term projects – roads, refineries, airports, sea ports, railways – global investors, which constitute a small club, are wary of investing in countries whose records of keeping long-term agreements are shabby. That, unfortunately, is our situation in Nigeria. We have a poor reputation for upholding agreements and for obedience to the rule of law. Lawlessness by our government is the prime cause of low FDI. This must change. If we hope to overcome our infrastructure deficits, which also dampens on the FDI drive, we must reform our attitude towards agreements and terms of doing business together. We can never overcome the heavy burden of youth unemployment which is a major factor behind our runaway crime rate, unless we can convince both local and foreign investors to put their money in our economy.