Why Investors Are Running Away From Nigeria – Cowry Asset MD

Economic experts have identified weakened fiscal policies, insecurity, among others as major reasons why Nigeria is not attracting foreign investments in recent times.

The total value of investment inflow, according to the National Bureau of Statistics, dropped from $23.99bn in 2019 to $9.68bn in 2020, representing a 59.65 per cent decrease.

Even though the decrease may be partly due to the COVID-19 pandemic, experts have said that it is a product of weak fiscal policies which must be addressed urgently.

The Chief Executive Officer, Cowry Asset Management, Johnson Chukwu who was featured on Arise TV Morning show on Tuesday, said there is need for policy reviews, and stakeholders’ deliberations on why Nigeria has not been a preferred destination to foreign direct investors in recent years.

He explained that apart from Lagos, Rivers and the Federal Capital Territory, other states in Nigeria lacked the adequate structure to attract investment and private capital.

He added that most states cannot be sustained without the monthly federal allocation by the Federal Government.

According to him, Lagos state has remained the main recipient of investment inflows as it accounts for more than 80 per cent of the total capital imported into the country.

He said, “Most of the states do not have policies that attract private capital into the State, many of them are running to the federation account to collect allocation and they are not building infrastructure that would support private sector investments into the states.

“If you look at the trend in the last couple of years, you will observe that Lagos accounts for more than 80 per cent of the capital importation into the country, with either FCT or Rivers coming second and sometimes Kaduna state.

“Other states have no pattern, and it has to do with the fiscal structure in the states. Lagos is actually the only State that can survive on its internally generated revenue, the other states are living on hand-outs from the federation account, and debt is not what will attract portfolio investment, because that is what matters most.”

According to him the $9.68bn recorded in 2020 is only a drop in the ocean, being that Nigeria’s economy is the largest economy in Africa and among the first 25 economies in the world.

“Principally, we have not looked at ourselves to know why Nigeria is not a preferred destination to foreign direct investors. Something is certainly wrong with our policy and fiscal environment and that is what we should have on the table.

“We need to start asking ourselves, why are we not attracting investment? Until we begin to ask these questions, we may not be able to work on our ease of doing business and global competition index, and those are the factors that are keeping investors away.”

Speaking further, Chukwu said the delays in passing the Petroleum industry bill is making Nigeria to lose huge investments.

He said the delay is heightening the level of uncertainty in the commercial framework that governs the oil and gas industry.

According to him, security is also a major setback to attracting investment in Nigeria, as the State distribution of capital importation shows that none of the states in the north east has attracted any form of capital importation in recent years.

He said, “There are millions of things we can do to attract investment, let’s look at the issue of security. Statistics show that investors are shying away from States that have heightened levels of insecurity.

“So one of the areas we need to address is the issue of insecurity, I do not know how many people will go to Syria or Lebanon to invest, people go to places where their safety is guaranteed.

“Other things to look out for are basic infrastructure like power, transport, education system. These are critical to reduce the cost of doing business and improve on the ease of doing business, we need to address them urgently.

“So the key thing is to take a holistic look at our strategy to attract investors.”