Why is South-South not investors’ destination?
A recent report on dearth of investment in the South-South oil-producing region is a matter of concern that deserves proactive policy thrust to develop a strategic master plan for an area, which serves as the economic backbone of Nigeria.
It is amazing that a region that once got a huge chunk of Nigeria’s Foreign Direct Investment (FDI) in the 1970s and 80s is gradually turning to a shadow of itself owing to a number of preventable man-made factors.
Despite its huge oil and gas resources, foreign direct investment in the South-South has dwindled to low ebb, for reasons, which economic analysts said, were associated with insecurity, lack of good corporate governance and nonexistence of knowledge-driven economy.
For instance, between 2013 and first quarter of 2020, the region that once led in Nigeria’s FDI inflows in the past, barely received $474,133,792 million out of the $92,284,945,105.59 inflow.
Development and financial experts have observed that the decline in FDI is a direct consequence of militancy, sea piracy, kidnapping, community hostility, poor infrastructure and political instability, including failure to pass the Petroleum Industry Bill (PIB) that has continued to discourage multinational oil companies from making long-term investment commitments.
Analysts have also blamed overdependence on the 13 per cent derivation from the federation account as another reason the South-South failed to secure good investments within the period, as states could not get FDI in huge mineral resources like silica, tar sand, clay, limestone, granite, quartz, marble and gold salt. Others are tin, basalt, quartzite, kaolin, sand and feldspar. There were also little or no investments in agribusiness, light manufacturing and tourism.
According to data on FDI from the National Bureau of Statistics (NBS), between 2013 and first quarter (Q1) of 2020, Akwa Ibom State received over 50 per cent of the $474,133,792 million FDI inflow to the South-South. The state got $278,263,453 million, followed by Cross River State, which got $66,130,000 million. Delta State got $59,483,860 million, followed by Rivers State’s $49,212,960 million and Edo State’s $ 21,043,519 million. Bayelsa got zero investment within the period under review, which is shocking.
Indications are that despite efforts by some of the states to develop friendly policies and improve infrastructure to attract investors, activities of cult groups, kidnappers, militants continued to increase the risk perception of potential investors who are reluctant to make investments in the five littoral states of the region.
In the same vein some experts in economic development are saying steep decline of investments in the South-South has been created by perceived difficult investment climate as a result of security concerns. They are on point: 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 in oil and its production but because of insecurity, a lot of companies moved their headquarters to Lagos long ago. To attract FDI, the first thing is to deal with the security issue.
Furthermore, investors rush in where they can find critical infrastructure in place. So, lack of functional infrastructure like seaports, motorable highways and electricity can be a wet blanket for investors. That is why manufacturing is virtually non-existent in the region.
Besides, the governments in the South-South don’t interface with the organised private sector beyond their lacklustre economic summits they hardly take serious after the events. They just feel that they are in government and forgetting 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. They need to encourage proper growth of enterprise to take advantage of FDIs, which won’t flow in miraculously.
Therefore, concerted efforts must be made to create conducive environment to attract investment into the respective states in the Niger Delta. Capital goes to a place that is safe and where people can recoup their investment.
One thing is clear from the foregoing. Both foreign and local investors are shunning the South-South region owing to perceived insecurity and other challenges. For instance, Dangote took his N600 billion worth of oil and petrochemical facility (refinery) to Lagos but the company will still rely on raw material such as crude from the Niger Delta. That development tells a complete story. It does show us a curious failure that keeps failing on many fronts. If Dangote felt that the Niger Delta was safe, secure and that he would not get problem from people coming and saying, ‘‘this is our land, you must give us this before you build and if there was a strong government backing, that facility would have been located in the Niger Delta and it would have provided tremendous amount of jobs and not to talk of the multiplier effect of having such a huge facility in that region.
Between 2012 and 2015, the BRACED Commission was strong in advocating revitalised agribusiness and using agriculture as fulcrum for industrialising the region. What happened to this initiative? The South-South state and non-state actors must examine in broader perspective the prevailing economic opportunities state-wide and along the neighbourhood to achieve critical regional asset base. Achieving a regional economic model would provide the South-South states an opportunity to maximise competence of individual units, be visibly present in the global market place and have a shared prosperity through production, FDI and improved trade output.
In the main, the state actors, especially the governors should note that the internally generated revenue (IGR) strategy they celebrate may have become toxic too. They should make taxation more flexible enough to attract genuine FDIs, which will make the real difference as they have in Lagos and Ogun states, in this regard.
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