Foreign direct investments into Nigeria low – Soludo

The Governor of Anambra State, Charles Soludo, has raised concerns over the low level of foreign direct investments (FDIs) flowing into Nigeria, citing a range of structural and policy challenges that continue to deter global investors. Speaking at a recent economic forum, Soludo, who is also a former Governor of the Central Bank of Nigeria (CBN), outlined the critical factors undermining Nigeria’s ability to attract significant FDI, despite the country’s enormous market potential and natural resources.

Soludo pointed out that, while other African nations have managed to increase their foreign direct investments, Nigeria has lagged behind, facing obstacles such as poor infrastructure, inconsistent government policies, security challenges, and an unpredictable business environment. These issues, he said, are impeding Nigeria’s ability to capitalize on its strategic position as Africa’s largest economy by gross domestic product (GDP).

### Nigeria’s Investment Potential

Nigeria, with a population of over 200 million people, is considered one of the most promising markets for investment in Africa due to its size, youthful population, and abundant natural resources, including oil, gas, and solid minerals. In addition, the country is experiencing rapid urbanization and has a growing consumer market that offers vast opportunities in sectors such as agriculture, telecommunications, and manufacturing.

However, despite these advantages, Soludo highlighted that the country has struggled to attract FDI at the level expected for an economy of its scale. He emphasized that for Nigeria to fully realize its potential as a destination for global capital, it needs to address the structural and policy deficiencies that have historically hindered foreign investment.

### Barriers to Foreign Direct Investment

Soludo identified several key barriers that have caused Nigeria’s FDI inflows to remain low compared to other African markets:

1. **Inconsistent Policies and Regulatory Environment**: Investors typically seek stability and predictability when making long-term investment decisions. However, Soludo noted that Nigeria’s policy landscape has often been volatile, with sudden changes in tax laws, trade policies, and regulations creating uncertainty for foreign businesses. This unpredictability discourages investors from committing capital to Nigeria.

2. **Infrastructure Deficits**: Nigeria’s lack of adequate infrastructure—such as reliable electricity, transportation networks, and telecommunications—makes it difficult for businesses to operate efficiently. The high cost of doing business due to poor infrastructure not only affects local firms but also deters foreign companies from investing in Nigeria’s economy.

3. **Security Concerns**: Security remains a critical issue in Nigeria, with various regions facing challenges such as insurgency, banditry, and kidnapping. Investors are often wary of committing resources to environments where security risks are high, leading them to look for safer alternatives in other African countries.

4. **Uncertain Foreign Exchange Regime**: Soludo also emphasized the problems associated with Nigeria’s foreign exchange regime, which has been marked by liquidity constraints and multiple exchange rates in the past. This creates difficulties for foreign investors who need to repatriate profits or conduct transactions in hard currency, reducing Nigeria’s attractiveness as an investment destination.

5. **Bureaucratic Hurdles and Corruption**: The former CBN Governor pointed out that bureaucratic inefficiencies and corruption continue to plague Nigeria’s business environment. Investors often face delays in obtaining permits, navigating regulatory frameworks, and securing necessary approvals. These administrative challenges, coupled with pervasive corruption, deter foreign companies from entering the Nigerian market.

### Comparative FDI Performance in Africa

Soludo noted that while Nigeria has struggled to attract significant FDI, other African countries such as Egypt, Kenya, South Africa, and Morocco have seen stronger inflows in recent years. These countries have made concerted efforts to improve their business environments, offering more stable policies, better infrastructure, and fewer regulatory hurdles for investors.

For instance, Egypt has become a leading destination for FDI in Africa due to its aggressive economic reforms, which have included cutting red tape, improving infrastructure, and creating special economic zones with investor-friendly regulations. Similarly, Morocco has positioned itself as a hub for foreign companies looking to enter Africa, offering political stability, reliable infrastructure, and free trade agreements that make it easier for investors to operate across the continent.

In contrast, Soludo observed that Nigeria’s FDI inflows have not kept pace, with most of the investment in the country concentrated in the oil and gas sector. Non-oil sectors, which are crucial for diversifying Nigeria’s economy, have seen relatively little foreign investment due to the aforementioned challenges.

### The Way Forward: Attracting FDI to Nigeria

Soludo proposed several strategies that the Nigerian government could adopt to boost FDI inflows and create a more conducive environment for foreign investors. He stressed the importance of implementing structural reforms that address the root causes of Nigeria’s underperformance in attracting foreign capital.

1. **Policy Stability and Reforms**: Soludo called for a more consistent policy framework that encourages long-term investment. By creating clear, predictable policies—particularly around taxation, trade, and foreign exchange—the Nigerian government can send a strong signal to the international community that Nigeria is a stable and reliable place to do business.

2. **Infrastructure Investment**: Nigeria must prioritize improving its infrastructure if it hopes to attract and retain foreign investment. Soludo advocated for greater investment in power, transport, and telecommunications networks, arguing that these improvements would reduce the cost of doing business and make Nigeria a more competitive destination for global capital.

3. **Security and Governance**: Improving the security situation in Nigeria is paramount to attracting FDI, according to Soludo. He recommended that the government strengthen its efforts to tackle insecurity across the country, while also improving governance and addressing corruption within public institutions. Ensuring the safety of investments and reducing bureaucratic inefficiencies will help create a more welcoming environment for foreign companies.

4. **Improving the Ease of Doing Business**: Soludo stressed the need for Nigeria to streamline its regulatory processes and eliminate the red tape that slows down business operations. Simplifying business registration procedures, providing one-stop services for investors, and reducing the number of approvals required to set up operations would significantly enhance Nigeria’s attractiveness to foreign investors.

5. **Diversification of Investment Sectors**: While the oil and gas sector continues to be the primary attraction for FDI in Nigeria, Soludo emphasized the need for the country to diversify its economy by attracting investment in sectors such as agriculture, manufacturing, technology, and renewable energy. These sectors, he said, offer tremendous growth potential and are key to achieving sustainable economic development.

### Conclusion

Soludo’s comments underscore the critical need for Nigeria to take bold steps in reforming its investment climate if it is to compete with other African nations for foreign direct investment. With its large market, natural resources, and strategic location, Nigeria has the potential to be a top destination for global investors, but only if it addresses the underlying challenges that have historically held it back.

By implementing the necessary reforms to improve infrastructure, stabilize policies, and enhance security, Nigeria can unlock the full potential of foreign direct investment and accelerate its economic growth. Soludo’s call to action highlights the urgency of these reforms in positioning Nigeria as a more attractive and competitive player on the global investment stage.