A deep look at Nigeria’s current Trade and Investments status, By Teinye Akobo

By Teinye Akobo January 12, 2016 10:12

A deep look at Nigeria’s current Trade and Investments status, By Teinye Akobo

The World Bank index on the ease of doing business has become the gold standard when it comes to country guide for investors. It samples respondents from countries, and comes up with a breakdown of the various aspects of investment experience.

Nigeria features abysmally in the index for several years running, due largely to institutional and infrastructural bottlenecks. However, we have also seen an improvement in our index placement over the years albeit sluggish.

Lagos State with its revolutionary legal reforms has been a beacon of hope. But as a nation, we are still in the lower rungs when it comes to the ease of doing business in the world.

Many experts over the years have called on the Nigerian government to increase reforms in order to bolster investors’ interest in the Nigerian economy. The passage of the Nigerian Investment Promotion Commission Act 1995, and the Foreign Exchange (Monitoring and Miscellaneous Provision) Act 1995 signaled Nigeria’s willingness to liberalize the economy by allowing foreign ownership of enterprise.

Since then, other laws have been passed to make investment entry into the country more flexible and less onerous. These legislative efforts have been augmented by the many hours in foreign trips and supportive services here in Nigeria targeted at investors to ease the manner of conducting business in Nigeria.

As Nigeria went from investment starved to investment destination in Sub-Sahara Africa, it has put in place two major frameworks: entry/repatriation of profit and capital; and prohibition of expropriation. Investors’ confidence rebounded ever since these frameworks were enshrined into the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 2005.

Consequently, many businesses came to Nigeria assured that they could repatriate their investments and profits, and that government couldn’t possess their investments. Despite all these efforts, Nigeria still ranks 169 out of 189 countries in this year index, a modest leap from 170 out of 189 countries last year.

The array of areas covered by the index methodology is not generally accepted, neither is its choice of cities, some have argued. But for Nigeria, the index primarily samples experiences in Lagos and Kano. So its findings might be mild to the extent that it deals with investors’ overall experiences.

Although their burden is made lighter by the efforts of the Nigerian Investment Promotion Commission, NIPC, but foreign investors in Nigeria still face a litany of obstacles as they meander through institutional settings and infrastructural decay in the country. What is most troubling today about the experiences of investors in Nigeria is that of profit and capital repatriation.

Section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act lays out a framework for what should serve as guidance for investment capital and profit transferability.

Provided in section 15(1) is the opportunity of bringing in capital through any authorized dealer recognized by the Central Bank, while section 15(4) & (5) lays out the framework for repatriation. These provisions are meant to serve as a promissory note enshrined in law to investors as guarantee for the safety of their investments.

As at now, investors (from foreign airline operators to importers of equipment and goods) have been complaining about their inability to acquire forex. Although, government have found ways of providing forex to those engaged in sectors considered favored by the government, or those with close proximity to the trenches of government patronage, others have been left out.

For the airline operation, as much as $2 billion is trapped in our economy because of the unwillingness or sluggishness of the CBN to grant them forex or facilitate external transfers for onward remittance to their parent companies.

The Central Bank has explained the scarcity in forex on lowering oil prices on the global market thereby reducing the amount of forex earned by the country, leading to high demand and decreased supply domestically. As a way of meeting this unique situation, the foreign reserve is being depleted to defend the naira, as against further devaluation of the Naira, the CBN explained.

This sets a dangerous precedence, and could be discouraging for investors thinking of entering into the Nigerian market. From the look of things, the CBN is not giving any indication as to when it will relax its current monetary stranglehold to the dismay of many.

In his December 30th, 2015 presidential media chat, President Buhari while reacting to questions on business’ difficulty accessing forex in the country, said “foreign exchange will be made available to the productive sector of the economy and not for luxury items.”

The implication of this statement is still very unclear and further heightens the level of ambiguity that defines our monetary policy as a nation. If left unchecked, this could become deleterious to the efforts of government at attracting investors. Already, we are witnessing an unprecedented level of desperation on the part of foreign investors to repatriate profit and capital to further their businesses.

This might lead to an increased reliance on the parallel market for the acquisition of forex. To see Nigeria, descend to this level will be telling on our future as an investment destination. We will need to plough through many years to reassure investors, and in the process waste billions doing so.

Whatever the intention was of the Nigerian government to initiate these monetary policies, there is a need for revision. The government has said it is responding to a peculiar situation triggered by many years of bad management of fiscal and monetary policies.

But, as many experts have opined, we can’t continue to act in a reactionary manner especially when it has to do with setting a definite fiscal and monetary policy.

The president has put the blame on abuse of public trust, and the plundering of our commonwealth. Ironically, the clean up seems too imbalanced especially for a nation in desperate need of foreign investment for its economic growth and development.