British MP’s warning against FDI in Nigeria
TRUE, not everybody would agree with her, but the scathing remark by a British Member of Parliament, Priti Patel, warning the international business community to keep away from Nigeria, is brutally frank. In a damning op-ed for City A.M. (a United Kingdom newspaper), the former Secretary of State for International Development cited the disobedience of court orders and non-adherence to rule of law at the highest level of government as the justification for castigating Nigeria openly. Although Patel’s message seems embarrassing, it should provoke sober reflection in government.
Just last month, the country dropped by one percentage point in the annual global Ease of Doing Business rating by the World Bank. From 145 in 2018, it fell to 146 in the 2019 rankings out of 190 national economies assessed. After advancing 24 places – from 169 in 2017 to 145 in 2018 – the latest ranking indicates that Africa’s largest economy is finding it difficult to sustain the momentum. Nigeria averaged 145.09 from 2008 until 2018, reaching an all time high of 170 in 2014 and a record low of 120 in 2008, the World Bank stated.
Despite avowals by the federal and state governments, Nigeria has yet to foster the enabling environment for business to grow. Patel’s complaints involve difficulties in enforcing contracts, trading across borders, registering property and resolving insolvency. In these sub-headings, Nigeria scored woeful marks. In the 2019 version, Nigeria ranked 92 in contract enforcement and 149 in resolving insolvency. There is more bad news.
The most worrying are in the areas of trading across borders (182) and registering property (184). It means only eight countries are worse than Nigeria in the first sub-heading; in the last category, Nigeria is just better than six economies, which might have done better if not that the likes of Somalia, South Sudan, Sudan, Syria, Yemen and Afghanistan, are facing war and insurgency.
This is why Patel’s assertion should be interrogated in government. Her grouse that the Nigerian government, which signed a contract with an Irish company in 2010 only to renege on it, deserves a second look to avoid costly litigation. The company – Process and Industrial Development – had signed a multibillion-dollar 20-year contract with the Federal Government. She alleged that the Muhammadu Buhari government terminated a compensation settlement upon taking office. The MP wrote, “The most recent court decision at a London tribunal confirmed that the Nigerian government owes P&ID almost $9 billion for the breach of contract, loss of income, additional costs, and interest accrued after five years of non-payment. Investors must consider this long-running scandal and weigh this obstinacy against Nigeria’s mishandled economic potential.”
It is a severe criticism in the international arena, where a country rises or falls by the impression it creates in the minds of investors; but, frankly, the business climate in Nigeria is overly corrupt, harsh and polluted. Nigeria hobbles its economy by refusing to implement and arbitrarily reversing policies. In registering businesses – done online in some African countries – Nigeria complicates things for investors. For years, the government has been mouthing reforms in this area, but nothing concrete has come out of it. The pseudo-federal structure, in which an omnibus Corporate Affairs Commission is the all-in-all in the registration of businesses, has to be dismantled.
The most notable areas of deficit are in infrastructure, electricity and security. A 2017 report by the Infrastructure Concession Regulatory Commission said Nigeria was losing two per cent of its GDP or about N2.03 trillion annually to decrepit infrastructure. The major highways that support business are shabby. The transport infrastructure in and around the seaports in Apapa that account for over 60 per cent of Nigeria’s maritime trade, is an eyesore. It has created perpetual gridlock that spans tens of kilometres in the Lagos metropolis. Port operations suffer due to obsolete equipment, making Nigeria unattractive to importers and exporters.
Although Nigeria posts a nominal GDP of $376.28 billion, it has neither the sufficient electricity backbone nor the ICT framework to expand its economy. For decades, electricity generation has not been expanded beyond 5,000 megawatts. In South Africa, electricity generation is about 42,000MW. Its success story in the telecoms subsector is tempered by declining investment. Telecoms companies are unable to expand because of many inhibiting policies, including the right of way charges, which investors describe as excessive. Security is dire; this scares away investors. Policing should be devolved to improve on the security quagmire.
How long will the country continue to flaunt its potential? It is critical for government to stop mouthing intentions to improve the business climate. The Federal Government should revisit the Presidential Executive Orders it issued in 2017, especially the ones concerning the airports and the seaports. The slew of corrupt public agencies at the seaports should be streamlined and technology introduced to reduce the interface between officials and importers to the barest minimum in port operations. The 48-hour target for cargo clearance should be achieved in the first quarter of 2019 and the transport network reconstructed.
Similarly, government should obey and enforce contracts and court judgements. It means the era of signing contracts without undertaking due diligence should be over. Cumbersome delays by state governors, who hold in abeyance the issuance of certificates of occupancy, should be consigned to history.
Laws that hinder foreign investment and privatisation of state-owned enterprises should be reviewed, multiple taxes abrogated and the capital expenditure budgets implemented to provide relief to investors.
(PUNCH)
