As Foreign Investors Shop In Nigeria…

Experts Warn Against Unfair Agreements, Want Emphasis On Local Manufacturing

AFTER President Muhammadu Buhari won the 2015 presidential elections and jetted out for the G8 meeting in Germany with his wish-list, not many thought the trip was the right choice for a new leader, who had the herculean task of recalibrating Nigeria’s fortunes.

Even as some thought that international support was germane for impactful steering of the ship of state, others wanted a marshal plan, at least, before the last line of Buhari’s inaugural speech dries up.

Many expected that the president would, first, among other things, assemble a cabinet that embodied the change slogan and hit the ground running for an economy that was bearing the brunt of falling oil prices, a weak Naira, crumbling public infrastructure, corruption and a jobless youth population.

But Buhari had to wait for four months to announce his ministers, within the space of which he had traveled out of the country more than four times, leaving the economy to suffer under the weight of pseudo-fiscal and monetary policies formulated in the boardrooms of the Central Bank of Nigeria (CBN).

However, with the trickle of foreign investment missions into Nigeria in the last month, which comprise delegations from France, England, the United States, Germany and Poland, it appears the president’s trips might have, indeed, paid-off in turning the gaze of investments poachers to the country.

Though investment experts say there may be a link with the influx of foreign investment missions into the country with President Buhari’s international trips, they argue that the intentions of the visits could be either to secure old investments and/or initiate new ones, as “the carriage, integrity and sincerity exhibited during the trips abroad must have sold the country as attractive.”

They note, however, that Nigeria ought to be wary of the kind of agreements it enters with the missions, and that particular emphasis should be on protecting Small and Medium Enterprises (SMEs), as well as, attracting investments in the manufacturing sector as against mere trade agreements that would turn the country into a ‘dump yard’ for foreign products.

The Mayor of the City of London, Hon. Alan Yarrow, during his recent visit to Nigeria, assured government and people of Lagos State of the readiness of large number businesses in the United Kingdom to invest in the economy of the state, noting that there were huge potential for investments in the country.

Leading a trade delegation, Yarrow said the UK business group would come to the state to identify with the new administration and explore different areas of business collaboration and investment opportunities available.

He solicited appropriate policies and enabling laws to protect their investment, noting that investors are willing to collaborate in the areas of maritime, alternative and renewable energy, as well as, infrastructural development in the area of health and education.

Yarrow also visited Abuja to continue with the task of strengthening ties with Nigeria.

Not wanting to be left behind, members of the Movement of the Enterprises of France (MEDEF), a consortium of over 50 companies around the world, also came calling. Led by Chairman, Perre Gattaz, the group, on a courtesy to Lagos State Governor Akinwunmi Ambode, said there were several economic opportunities that could be mutually beneficial to both countries, adding that language and cultural differences must not be allowed to hamper the relationship.

Gattaz said he led the team to Lagos to discuss areas of business partnership in the country and especially Lagos State.
He noted aside visiting Abuja, the team has visited Eko Atlantic City in Lagos and many other trade zones to see how they can partner with Lagos, adding that it would be of great advantage if the governor can identify areas of possible collaboration.

He also expressed readiness to link with Nigeria and particularly Lagos on energy, agriculture, transportation, food production and economy.

But when MEDEF met with the Executive Secretary of the Nigerian Investment Promotion Commission (NIPC), Mrs. Uju Baba, they were told that government was interested in developing “enablers of rapid industrialisation through some sectors’’.

The priority areas, according to her, are agriculture, power, manufacturing, solid minerals, critical infrastructure, and waste management.

She explained that the One-Stop Investment Centre created in the country was the government’s strategy to streamline investment procedures, provide prompt, efficient and transparent services and coordinate investment-facilitating agencies.

The NIPC boss also said that the country had attractive incentives, including three to five years tax holiday for pioneer activities, for investors.

Also, a trade delegation of 16 U.S. companies, representing several sectors, visited Nigeria last month, as part of the largest overall U.S. Government-led trade mission to Africa in history. ‎

The Trade Winds-Africa spinoff trade mission to Lagos saw a day of meetings for U.S. business executives with government leaders and entrepreneurs, extending numerous U.S.-Nigerian business leads and deals.

It is estimated that the Trade Winds-Africa trade mission in 2015 has brought more than 100 U.S. companies to the continent.

“Nigeria is the largest economy in Africa with countless business opportunities, and it can be a great launching point into other African markets,” said U.S. Acting Consul General in Lagos, when the Trade Winds-Africa mission visited the state. “Nigeria’s burgeoning market means untold possibilities for U.S. companies, which can provide quality goods, services, and solutions in a broad array of sectors,” said U.S. Senior Commercial Officer Brian McCleary, who is based in Lagos.

Commenting on the newfound interest in the country by foreign trade missions, the Director General (DG) of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said that despite its numerous challenges, Nigeria is still a juicy investment destination.

He said, “The truth is that despite the challenges inherent in doing business in Nigeria, there are still considerable attractions for foreign investors.  This economy remains the largest economy and the largest market on the African continent. The returns on investment are acknowledged as being much better than in many parts of the world.  The risks are high, but the returns on investment are commensurate to the risk.”

He also stressed that the influence of positive outcome of the last general elections may have spiked the interest, adding, “The fact that Nigerian is one of the most stable democracies in Africa is also a positive.  The outcome of the last elections, especially the rather seamless transition, earned the economy and the country tremendous goodwill.  But generally, this is an economy for investors with high appetite for risk.

For Associate Professor of Economics and an expert in Public Policy at the Department of Economics at the University of Lagos (UNILAG), Prof. Femi Saibu, the carriage, integrity and perceived sincerity of the president during his visits overseas may be credited for renewed inquest.

According to him, the international community has seen that the Nigerian government is now “more sincere and ready to play by the rules. For instance, we can see that the government is ready to establish framework for a good macroeconomic environment.”

He said it is a bit surprising that while some people are shouting that macroeconomic parameters are on the downturn, investors are “seeing the future, not the present,” adding that none of the investors want to be left out when the economy starts booming.

He said, “I think this is an opportunity for them to come in when things are down, so that when things change, they would reap of the benefits. The cost of doing business in Nigeria would soon drop. Before, they needed a lot of money to settle different people in order to get into the system. But now, they realise that they can directly relate to whoever is in charge, know whether they can get things done or not without necessarily engaging in PR. It is about cost and interest. They know things would now be done on merit.”

However, he noted that government ought to be wary of new found interest more than ever, because some of the trade missions are not necessarily coming in to set up new businesses, but to protect interests secured in the past, saying, “if they come in legally now, they can use that as a means to cover up interest they might have illegally acquired in the past.”

“We should be wary of the kind of agreement we go into. Any agreement that would jeopardize local production should be avoided. Government should be careful with anything that would negatively affect agriculture and the likes. They should rather come and establish their industries here and produce within Nigeria.”

A major factor in the movement of capital around the world for production is labour cost, as businesses seek opportunities that would reduce their spending on manpower, a factor, that has, over time, driven manufacturing activities to China and its Asian neigbours, where booming population provides cheap labour.

Suaibu believes cheap labour might also be the reason investors find Nigeria attractive, especially those willing to tap into the African market.

According to him, “In terms of labour cost, Nigerian is still cheaper than any European country. I think government should have an upper hand in the negotiations. It shouldn’t think that these countries are doing us a favour by coming down here. It should make sure that agreements should prioritize direct production in the country. This would help us engage the youths that are presently restive. Anything that would turn the country into a dumping ground and aggravate the unemployment situation is not a solution to Nigeria’s problem.

“Nigerian-made goods should be cheaper than foreign goods. The cost of producing in Nigeria, in actual fact, is low, despite the energy cost. If we can guarantee a conducive environment by granting them some concession in electricity and gas that can boost their production to mitigate the energy cost, they should produce in Nigeria, even if they want to sell in other countries.

“We have a lot of export processing zones in Nigeria that are just on paper. This is an opportunity where they can be asked to come and exploit the opportunities in these zones. We have arable land, which is an opportunity for mechanized farming too.”