Nigeria, once investors’ beautiful bride, losing global attraction

By Charles Abuede

• Amazon, Hyundai, Kia, look to SA, Ghana, after Twitter move
• Oil majors also plan exit due to stringent operating environment

It is now becoming more alarming, just as the past few weeks in Nigeria have looked like a mirage to many concerned Nigerians, how the ‘giant of Africa’, a once beautiful bride for investors, has again been left in the lurch as more multinationals look away from Nigeria to countries with good ease of doing business rankings and less government interference, in a somewhat capitalist economic setting.

This was demonstrated recently following an announcement by the American micro-blogging and social media platform, Twitter, after Jack Dorsey, its CEO announced the siting of its African headquarters in Ghana with reactions trailing the decision. Barely 10 days after the announcement, Amazon, a global retail giant, announced setting its African headquarters in South Africa.

More of such investment apathy by global giants are expected to follow after Alan Kyerematen, Ghana’s minister for trade and industry, made the revelations that plans are already underway by automobile giants, Hyundai and Kia motors, to establish assembly plants in Ghana by 2022 and joining the long list of other auto-makers who have a presence in the West African country. Other automakers that have made investment decisions include Toyota-Suzuki, Nissan, Kantanka, Volkswagen, and Sinotruck.

Toyota also chose to look away from Nigeria, choosing instead to establish its assembly plant in Ghana and Ivory Coast despite President Buhari’s plea to consider Nigeria.

The trend is a no brainer, say analysts looking at the situation, especially with regards to the steps the Nigerian government has taken to ameliorate these slaps on the face with policies that can be geared towards the attraction of foreign direct investment into the economy and thereby increasing Nigeria’s reserves.

Available on the media space are reports that several multinationals are now seeking the exit door out of Nigeria as most foreign investors no longer find Nigeria an attractive destination for business investment in recent times.

There could be several reasons for the exit decisions of these multinational companies and high-tech driven businesses creeping around the continent in search of a suitable investment destination with high return potential as part of their growth and expansion strategy on the continent.

A reason is not far-fetched as can be seen after a 2020 World Bank report on ease of doing business ranked Nigeria 131st out of 180 countries in the world. According to the report, Nigeria, which is classified as a lower-middle-income group, has ease of doing business (DB) score of 56.9, approximately 57, out of 190 indices that were ranked.

The country occupies position 105th in starting a business, 169th and 183rd in the area of getting access to electricity and registering a property for the use of business, among other issues.

The last 10 years has seen Nigeria welcome international investors into its oil and gas industry as players in the buzzing market and as financiers. But things are moving on the contrary with a growing trend that these foreign-owned businesses and investments are now taking to their heels out of the country.

Little accounts can be given on the timeline when Nigeria’s e-commerce giant, Jumia Technologies’ parent company, exited the company owing to lack of profitability. Also, Kenyan marketplace platform, OLX, exited Nigeria after it cited the high cost of doing business as a major reason.

This is not to mention telecoms giant, Econet Wireless, then a major competitor to MTN Nigeria, exited Nigeria that was its largest market in Africa owing to unfavourable policies and the political games involved in doing business in Nigeria.

Fast forward to the recent announcement by South African retail and grocery giant, ShopRite on its plans to sell-off its assets to an indigenous buyer while it exits Nigeria.

Recent checks have also revealed that some oil majors such as ExxonMobil, Royal Dutch Shell, Total and Eni, domiciled in Nigeria, are taking the steps to cut costs, saving billions and shifting attention to renewable fuels and cost-effective markets following the hits on their profits in recent months in the face of the coronavirus pandemic and the present socio-economic realities that have made the current operating environment bad for their business.

According to a publication by TheStreetjournal, out of the $70 billion committed into new projects in Africa between 2015 and 2019, it has been unravelled that Nigeria was able to attract only $3 to $4 billion, meaning that this development spells doom for an economy that solely relies on oil to thrive.

This development calls for concern from policymakers as it would appear that Nigeria’s touted economic status as the giant of Africa has not helped in recent times. However, the exit of these companies will lead to an increase in the number of unemployed Nigerians, which currently, the National Bureau of Statistics (NBS) Nigeria reported to be above 33 per cent and can be argued is the highest rate in the world.

It also could mean that the country is no longer an investment destination as there will be a significant decline in the rate of foreign direct investment (FDI) inflow, which will have an attendant effect on the gross external reserves.

Factors shaping incessant avoidance of Nigeria as investment and business destination

The myriad of events that has ensued within the past few weeks up to a decade ago could be sending signals to policies and the nation at large on the need to seek ways to salvage the situation and place Nigeria on the forefront as an investment destination in Africa, while her economic status could be regained by all claims on the foreign investment inflows and the increased rate of industrialization, so as to create more job opportunities for the unemployed. These multinationals and international businesses may be fleeing Nigeria owing to the following:

Regrettably, the insecurity challenge posed by bandits, kidnappers and herdsmen activities, causing panic in some regions with potential investment destinations, is worsened by the unstable power (electricity) supply conundrum; it has made many factories to rely on petrol and diesel to power their types of machinery with the resultant pressure on cost, which is then passed on the consumers through higher prices of their products. This is coupled with the triple rise in electricity charges by the power distribution companies (DisCos).

Furthermore, the incessant and unnecessary interference by the national government into the capitalist affairs of investors without permitting the values of a capitalist democratic setting which is sacrosanct to economic and development to thrive or permeate the economy presents another sad story.

The high cost and ease of doing business is another issue which needs to be tackled. There have been postulations or propositions of favourable policies that can allow these international businesses thrive in Nigeria, pay reasonable tax and help support effort at building Nigeria’s external reserves buffers, while giving them the opportunity for the transfer of technology, knowledge and skills and expertise to the teeming Nigerian youthful population.

Conclusively, government and policymakers need to improve on policies and laws to promote private sector- focused involvement for the economic growth of the country, particularly in the areas of MSMEs, startups, financial technology (Fintech), software and telecoms companies, because they are essential in today’s business world.