Nigeria: Growing Concerns As Fluctuating Naira, Unstable Power Supply Scare Investors From Nigeria

15 April 2021

Lagos — More foreign investors may dump Nigeria for neighbouring countries in the next couple of months as the harsh operating environment occasioned by unstable power supply, policy inconsistency and insecurity, among others, continue to scare investors, LEADERSHIP learnt.

South African-owned Shoprite has disclosed it is relocating from Nigeria, while Twitter is setting up its African office in Ghana, in a move that may force other foreign investors to join the bandwagon.

Shoprite ranks as the biggest shopping mall in Nigeria with outlets in every major city across the country. Reuters reported yesterday that a Nigerian property company will be taking over Shoprite's local business in Nigeria. Shoprite, with more than 2,300 stores across Africa, is awaiting regulatory approval on the sale.

Experts said until the federal government and relevant stakeholders resolve some of the bottlenecks limiting business survival, more investors will leave the shores of the country to somewhere else where the business operating environment is favourable.

To head, Retail Investment at Chapel Hill Denham, Ayodeji Ebo, to win back the trust of investors and companies there is the need for government to create enabling environment.

"They need to tackle insecurity in the country and create an enabling environment that includes protecting companies, both foreign and local companies.

"There should be reduced policy inconsistencies and we also need to create incentive for companies to come in. Recent statistics have shown that long term investments have been dwindling and we need them to create employment in the country.

"Government is unable to fund initiatives that will help create employment, so they need to encourage the private sector. Also they need to deal with the multiple taxes across states and federal government

"There is also need to provide adequate infrastructure because the lack of infrastructure is affecting the cost of doing business when compared to neighbouring countries where cost is reduced. In Nigeria most companies have to provide all the infrastructure like roads, electricity, etc. and these impact the cost of production."

Similarly, the director-general of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, stated that "if the environment is not conducive, the investors will leave."

"When looking at Africa, for example, the investors will first do an analysis of the risks on investment in all the countries and locate the country where the risk is low with good returns; this is what happened in the case of Twitter," he said.

Yusuf added that "security risk has created a terrible image for us as a country and on top of that are policies issue. If the policies are not good or too tight, either foreign exchange policy or trade policy, if it is too difficult for investors to operate in, they will leave or exit the country

"We have investors here who have not been able to repatriate their dividend or profit to their parent companies.

"There is also the issue of depreciation of the currency. As a foreign investor, your principal outside the country will be looking for dollar equivalent of the investment or profit."

He explained further that if over the years the exchange rate had depreciated by almost 100 per cent, depreciation of profit value can also be a problem.

"Overall, they do a comparative analysis of the business environment and see whether a country is worth investing into or not.

"The way forward is by making the environment much more conducive; we need to fix security and other things," Yusuf concluded.

Also, a financial expert, Dr. Timi Olubiyi, lamented that Nigeria was losing its natural advantage to other countries in the sub region.

"When we consider that Nigeria currently has a population estimate of about 206 million and that Nigeria's population is equivalent to 50 percent of that of West Africa where the population stands at 394,314,367 according to United Nations (UN) data, then it is depressing that we lost to Ghana on the Twitter' decision to situate its Africa operations office in Ghana.

"Further recall that Nigeria also accounts for over 50 percent of the GDP of the West African sub-region. Furthermore, Nigerian Internet and mobile penetration continue to grow with high relevance, as at 2020. About 50 percent of Nigeria's population use the Internet and around 90 percent of the total population have mobile phones according to reliable data.

"According to a survey online, 39.6 million Nigerians have Twitter accounts, which is more than the entire 32 million population of Ghana. It is on record that Ghana has just about eight million social media users.

"All these data on Nigeria should offer tremendous opportunities for any investor, particularly in the technology space, but on the contrary, the choice of Ghana over Nigeria for the Africa's operation of Twitter Inc. might just be due to the perennial challenges that exist in the country, from incessant insecurity, inadequate infrastructure, the severe and irregular regulatory requirements, to high sense of entitlement, high cost of running business, corruption and the current macro-economic uncertainty among others," he said.

According Olubiyi, stability, security of life and assets come chiefly for any investment consideration before viability or returns. More so, it is not enough for Nigeria to just be a big market for desirability of investors; FDIs consider much more other factors.

"In my opinion, another reason for Twitter Inc.'s decision could be the power/electricity situation in the Nigeria which has remained unsolved and this usually increases the cost of doing business."

He stated further that "it is a big challenge to businesses and FDIs when competitiveness is considered across borders.

"Without adequate electricity supply, it is extremely difficult to operate businesses effectively because companies will usually end up committing revenue to generate alternative power supplies which include buying generators and fueling such generators daily; this can draw back investments.

"If the power concern is addressed in Nigeria, it will contribute significantly to business growth, increase in FDIs, which in turn will contribute to sustainable economic activities and job creation for the citizenry," he said.

Olubiyi said Nigeria needs to do more to attract investments into the country, because this is one of the ways to improve the economy, create more employment and engage some of the youth gainfully in the country.

A few days after South African retail giants Shoprite decided to pull its operations out of Nigeria, the country was further hit by Twitter's decision to site its African headquarters in Ghana.

In his reaction to the news, Chief Olumide Aderinokun expressed his concern and he has concluded that the business policies of the APC-led government are not favouring anyone - both the citizens and the foreigners.

Chief Aderinokun frowned at how the government's incompetence would make thousands of people jobless and also make tech-savvy youths miss working opportunities if Twitter - one of the most popular social networking sites in the world - had moved into the country.

"They lack direction and, at this point, I don't think the government knows what they are doing," Chief Aderinokun said. "If you see the policies drafted by the government, it scares investors."

The 49-year-old real estate mogul suggested that the government should be doing more for Nigerians with the resources in their hands.

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