Foreign investors avoiding Nigeria’s oil region states as FDIs move south

Only 0.51% of Nigeria FDI 2013 – Q1 2020
Some states attracted only one FDI in 9 years
State govts don’t encourage spirit of enterprise

BEN EGUZOZIE

Foreign investors appear to be carefully avoiding Nigeria’s oil and gas rich states, also called the Niger Delta region, as data from the National Bureau of Statistics (NBS) on assessment of foreign direct inflows into the nation’s sub-nationals in Q2 of 2022 show that the region’s states were among 32 subnationals which attracted zero dollar foreign inflow since Q2 of 2015.

Additionally, the region, between 2015 and 2022, ranks among the least accessed in terms of foreign capital inflow (foreign direct investment (FDI). For example, another NBS data showed that the region received only 0.51% of the entire Nigeria FDI inflow between 2013 and Q1 of 2020. The region, which once held huge chunks of Nigeria’s FDI inflows in the 1970s and 1980s, barely received $474.13 million out of the $92.28 billion total inflow into Nigeria in the seven-year period.

The states in the oil region that, year-on-year, between Q2 of 2015 and Q2 of 2022, did not attract any foreign capital investment include Bayelsa, Cross River, and Imo.

Among the oil region’s states that did not attract any form of investment, depicting the deplorable state of FDI in the affected states, are: Abia, Akwa Ibom, Bayelsa, Cross River, Delta, Edo, Imo and Ondo. All these are contiguous oil producing states grouped under the Niger Delta region.

Some of the states that have received only one foreign capital inflow since Q2 of 2015, the NBS data proved, are among the states with the lowest foreign investment in the country. These are: Abia which received $1.27 million in Q2 of 2018; Delta in the same period received $1.12 million, while Edo could only attract $1.04 million in Q2 of 2019.

All the above are no where near Lagos’ huge FDI accretion. The Nigerian financial capital, with a red-hot GDP estimated to rise to $355 billion by 2025, received 69 percent or $1.05 billion of all Nigerian FDI inflow in Q2 2022. This is 35 percent higher than the $870 million it got in the same period in the previous year.

An NBS data on FDI inflow to the states in the oil region indicate that between 2013 and Q1 of 2020, Akwa Ibom received $278.26 million, representing 58.68 percent of the entire $474.13 million FDI inflow into the South-South. Cross River, its neighbouring state, got $66.13 million. Delta State got $59.48 million, followed by Rivers’ $49.21 million; and Edo’s $21.04 million. Bayelsa got zero investment within the period under review.

Development and financial experts feel concerned that the South-South, with a population of more than 25 million people, an aggregate GDP of N50.92 trillion or $126.12 billion (GDP official exchange) or $329.5 billion as of 2021, and with vast maritime potential, including oil & gas deposits, but with an FDI going south depicts serious socio-economic implications.

For sure, the area tops in Nigeria’s worst unemployment states. As of date, Rivers has 45.2 percent unemployment, while Akwa Ibom follows with 43.7 percent. Some development experts attribute the worsening situation to militancy, sea piracy, kidnapping, community hostility, poor infrastructure and political instability, including failure by the Nigerian government’s poor political will to encourage multinational oil companies from making long-term investment commitments.

Other analysts blame overdependence on the 13 percent oil derivation payout from the federation account as another reason for the South-South’s failure to secure good foreign investments. To date the states could not get FDIs in mineral resources like silica, tar, white sand, clay, limestone, granite, quartz, marble, gold and salt. There were also little or no investments in agribusiness, light manufacturing and tourism in the area.

Difficult investment climate

In a recent media interview, Willy Okowa, an expert in economic development, attributed the steep decline of investments in the oil producing South-South to have been created by an apparent difficult investment climate due to security concerns.

“No investor would invest money in places where life would not be secure. Insecurity is a key factor. The South-South is largely the petroleum hub of the country. So, investment would have been done mostly on oil and its production, but because of insecurity, a lot of companies moved their headquarters to Lagos,” Okowa said.

He advised on how to detour the direction. “To attract FDI, the first thing is to deal with the security issue (kidnapping). We need good governance too. There is also a lack of functional infrastructure like seaports, motorable highways and a huge market for low investments. Manufacturing is virtually non-existent in the region. If you want to produce in Port Harcourt and sell your commodity, Port Harcourt alone is not a good enough market; you need to sell to the South-East,” Okowa, a professor, said.

For Billy Harry, a former president of Port Harcourt Chamber of Commerce and Industry (PHCCIMA) and now chairman of board of trustees of the South-South Chamber of Commerce, there is lack of access to information and state governments’ indifference to encouraging proper spirit of enterprise.

Lack of spirit of enterprise

“The governments in the South-South don’t interface with the organised private sector (OPS). They just feel that they are in government, and forget that power will fizzle out in eight years. There is a need for governments of the South-South zone to interface aggressively with the private sector. We need to encourage proper growth of enterprises to take advantage of FDIs,” Harry said.