No other African country has the diverse potentials that Nigeria is endowed with, both human and materials resources. With a population of about 160 million, Nigeria is the 8th most populous nation and 32nd biggest economy in the world according to CIA World fact book, with the potentiality to surpass South Africa as the Africa biggest economy in not a distance future according to recent study by the investment giant Morgan Stanley. Notwithstanding these potentials, Nigeria rank among the poorest countries in the world with one of the lowest GDP per head around the world, ranked behind neighbors such as Ghana in attracting foreign direct investment (FDI), and ravaged by chronic poverty problem. In term of some of the indicators for attracting foreign investment Nigeria is also far behind some of its competitors, for example, measures such as World Bank ease of doing business ranking, electricity generation per person, state of infrastructures, legal and court reforms, corruption, just to mention a few.
It is in this atmosphere that Olusegun Aganga the minister of commerce and investment is expected to deliver on his promise of attracting the much needed investment required for rapid industrialization of the country. Some few days back the honorable minister in a chat with journalist in the nation commercial capital, Lagos, shed more light on the challenges ahead and what it will take to meet it up. According to him Jonathan administration has a target of N35 trillion investments in key growth areas in the next four years of the government. In order to realize this target the ministry will focus on Sovereign Wealth Fund, the pension fund, Nigerians living in the Diaspora, free trade zones as well as rejuvenation of small scale industries. Looking at the realities on the ground this is going to be a herculean task for Aganga. Recent data released by the central Bank shows that Foreign Direct Investment (FDI) inflow into the country in 2010 has declined substantially by 78.1% to $668m, the third consecutive year this is happening. Unlike portfolio investment FDI is the investment that is required for the creation of the most needed jobs in the real sector of the economy.
According to some estimate, Nigeria has 11th largest workforces in the world, with about 70% of them working in the agricultural sector, and still 70% of her citizens are living below poverty line. It shows a clear link between the poverty in the country and agricultural activities, a relationship that policy makers continue to ignore including in this Aganga’s road map. Interestingly, China which account for most of the investment in agriculture and mineral sectors in emerging countries has reduced her investment inflow into Nigeria. According to a release by the Central Bank, inflow from China reduces from $139 million in 2009 to $9.0 million in 2010. With over $1 trillion dollar in foreign reserve, China is the largest creditor country in the world, so I wonder how our policy makers would have missed that, thereby, allowing investment inflow from China to be declining. China did not even come sixth in the ranking of countries where the bulk of Nigeria’s investment is coming from. The bulk of our foreign investment last year is speculative investment that was targeted at our equity market coming from the UK, and US.
The most attractive destinations for FDI in the world did not achieve their positions just like that; they have some of the best infrastructures, and stable macro economic environment in the world. I always say it that foreign investors are not philanthropies; they are profit maximizing and risk minimizing capitalist looking for conducive environment for investment of their capital. Places like Dubai, Hong Kong, and Singapore that are darling of investors are known for their world class infrastructures. Talking of Nigeria’s infrastructures and administration, right from the point of entry into the country- our Airports- an investors will have a glimpse of what await him, Nigeria’s airports are ranked 86th in the world. Our telecommunication sector is no better, the telephone lines are dead, the only growth area is the GSM market. We are ranked a distance 163th in the world in term of internet hosts. The problem of insecurity is enough a challenge to send foreign investors away, and if you are thinking that foreign investors are not aware of all these you are wrong, because these investors pay world class consultancy firms fees to advice them on where they should put their money.
Another factor that will make Aganga’s job a bit tough is the global economic condition. Currently, the global economy is in a bad shape. Countries from Greece, Ireland, Spain, and Italy to the US are mired in debt problems. The global outlook for Oil, Nigeria’s main export is also not very promising. The uncertainties of the global economy will continue to push investors away from longer term engagements such as the one required by FDI into short term engagements – the equities and bonds – as we witnessed in the past one year. Despite these challenges mentioned above, Nigeria’s future potential is still bright if concerted effort can be put into putting the economy in order. For example, inflow into the manufacturing and production sectors last year increased by about 190% the highest into the sector in four years; imagine what would have happen in a different scenario where the power supply were better than what obtain then and now.