Instability As Bane of Investment
By Enitar Ugwu
A madman can be cured through a miracle, orthodox or unorthodox means, but one can hardly cure him of his murmuring tendencies.
This aptly captures the country, Nigeria and its investment climate. Yes, democracy helps to attract investment. But any democratic set-up that is devoid of security is not likely to encourage investments, especially foreign ones.
In the present dispensation, if it is not strike, it is religious upheaval that leaves property and lives in absolute destruction. Certainly, not the best way to attract and retain foreign investment.
This dilemma was adequately underlined by Mr. Fred Oroke during the recent Delta State Economic and Investment Forum last week.
According to him, an economy that lacks structure and the implementation elements of law is mainly perceived as a threat by corporations not used to operating in organised environments.
He noted that in the absence of standards, rules and regulations, a system cannot be consistent and inconsistency ensures inefficiency.
Apart from that, he argues that inefficiency creates room for non-accountability and non-accountability paves way for irresponsibility, stressing that irresponsibility in itself is corrupt, poor, contrary to the concepts of civilisation and hinders progress and development.
Taking a look at the entire argument, one can only agree. This is because given our situation as a country especially with the Jos crisis still fresh in mind, a lot need to be done.
For instance, an Igbo businessman, who had been in Jos for the past 20 years and only last month relocated to Lagos bared his mind on this issue.
His name is Mr. Joe Uzor. Hear him; "Asking a business man to invest in some parts of this country is a waste of time because, it is not worth the trouble.
"What kind of investment can one really make in this country and have a rest of mind"?
He explained that as days pass by, more flash points emerge in the country, adding that this is not good either for local or foreign investors.
He also argued that even these constant strike actions, even though justified and in tune with democracy, sends negative signals to investors.
So based on the foregoing, it is safe to say that in as much as encouraging investment friendly legislations is desirable, security is the aspect that must not be taken for granted.
For instance, according to Professor Mike Obadan, the Nigerian investment environment used to be characterised by intense exchange controls and lack of internationalisation of capital markets.
He noted that in this direction, the deregulation of the capital market commenced in 1993 while the Exchange Control Act of 1962 was repeated along with the Nigerian Enterprises Promotion Decree Act of 1962.
The reform step, he said, was taken a step further by the federal government with the enactment of the Nigerian Investment Promotion Commission Decree No.16 of 1995 and the Foreign Exchange (Monitoring and Miscelleneous Provisions) Decree 17 of 1995.
Based on this, he said that with the repeal of the two laws and their replacement with two new ones, the capital market became internationalised as it became possible for foreigners to participate in the market both as operators and investors with no limits to the percentage of foreign holding in any company registered in the country.
However, consequent upon the measures taken, was the listing in 1999 of the M-net (Supersport linked) shares, which are listed on the Johannesburg Stock Exchange, he recalled, adding that, because of external problems, the shares have ceased to be listed.
Also between 1995 and 1999, the foreign portfolio investments in US dollars made in the Nigerian capital market through the NSE were as follows: $1.137 milllion in1995; $32.99 million in 1996; $9.4 million in 1997; $50.5 million in 1998 and $26.5 million in 1999.
He pointed out that from 1999 to 2002, net portfolio investment has been positive, possibly reflecting not just the internationalisation of the market, but also the increased efforts of the government at investment promotion.
Such efforts also appeared to have yielded some dividends in the area of foreign direct investment inflow such as the US$278.05 million was recorded in 2001 as a result of investment by GSM companies.
A breakdown shows that in 1999, 38 companies invested N4.3 million, while in 2000, 55 comapnies invested N28.8 million. In year 2001, 34 companies invested N21.3 million and in 2002, 71 companies invested a total of N14.09 million. Year 2003, 50 comapnies invested the sum of N18.7 million.
Obadan posited that even at that, much still needs to be done especially in the improvement of the investment climate.
He noted that an investment climate that is alluring to foreign investors should have the following features, among others'
_ macro-economic stability and consistent policies;
o transparent rules and regulations;
_ political instability;
_ a good investor orientation;
_ adequate infrastructure;
_ improved education and
_ effective implementation of the privatisation programme.
Meanwhile, specifically as regards the recent strike embarked upon by the Nigerian Labour Congress (NLC) to protest the increase of fuel price, it is yet to be known the exact figure it cost the nation in investment.
But a glance at the happenings shows that the worst hit this time around is the formal sector or the economy.
This is because in most cases, such outfits like government ministries, banks, sea and airports, were all shut down or in some cases offering skeletal services, all leading to a loss of sizeable revenue.
A classic example is the Dutch Auction Sysytem (DAS) trading of Thursday last week that witnessed a significant drop in the amount of foreign exchange sold by the Central Bank of Nigeria (CBN) and also the number of banks that took part in the business.
During the trade under review, the CBN sold a total of $69.32 million to 31 banks, which is a far cry from the $171 million purchased by 65 banks Tuesday, last week, an i ndication that the strike certainly took a toll on the forex deals.
However, in the informal sector, the effect was not that much as traders carried on with their businesses but it told on the patronage level as most of their customers stayed away.
However, all hope is not lost as Oroke concluded, "the imperfections in our systems and our quest to realise a developed state, region, country and continental means there is plenty of work to be done".
Plenty of work, he said, means lots of opportunities ahead, opportunities for every one, local and international, corporations and individuals, to contribute and participate in that which will likely evolve into the greatest revolutionary development manifestations to be witnessed by the people of our generation".
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