TRADE, INVESTMENT AND ECONOMIC DEVT IN NIGERIA

There is a need to build an economic and political climate that is investor friendly, writes Nwachukwu T. Obi

Modern trade and investment is one of the many advantages of globalisation. The legal regime for trade and investment in Nigeria has grown over the years into an intricate body of laws comprising of municipal and international laws, rules, treaties and case law. The object of this piece is to briefly analyse the complex, legal and policy concerns relating to doing business in Nigeria. This is with a view to understanding, and proffering practical recommendations that will vastly improve the economic, social and legal output of the Nigerian trade and investment sector.

The basis of Nigeria’s current investment and trade policy stems from her objective to improve her foreign reserves through increased foreign direct investment (FDI) and reduce the economy’s reliance on fossil fuels. The Nigerian Investment Promotion Commission Act, Cap. N 117 LFN 2004 (“NIPC Act”) is the primary investment and trade legislation in Nigeria. The NIPC is responsible for registering and regulating foreign investment in Nigeria. Professor Fabian Ajogwu SAN, in his book, “Trade and Investments in Nigeria: Legal and Regulatory Aspects” opines that the legal and regulatory framework on trade and investment law in Nigeria can be classified into two broad groups, the general framework and sector specific framework, citing examples of various forms of investment areas and the specific laws and regulatory provisions governing them. Professor Ajogwu and other experts are of the opinion that the laws and policies regulating FDI in Nigeria are due for a makeover.

Further to this, steps have been taken both locally and internationally to increase Nigeria’s trade and investment by reducing the rigours involved in operating and running businesses in Nigeria as well as advancing the accompanying legal framework. One of these initiatives was the establishment of the Presidential Enabling Business Environment Council (PEBEC) in July 2016. PEBEC was tasked directing action plans for achieving the goal of removing critical bottlenecks to doing business in Nigeria and improving Nigeria’s place in the World Bank Ease of Doing Business ranking. The priority areas PEBEC worked on include, starting a business, construction permits, registering property, getting credit, paying taxes, getting electricity, entry and exit of people and trading across borders. These reforms reaped dividends as evidenced by Nigeria moving up 24 places up the World Economic Forum ease of doing business index to 145th globally.

While these reforms are welcome, it remains to be seen whether these reforms will benefit most Nigerians and impact on the economy directly. WEF’s Global Competitive report for 2017-2018 has Nigeria ranked 125th out of 137 countries. According to WEF’s report, Nigeria is still facing deteriorating macroeconomic conditions (122nd down 14), fragile institutions (125th down seven), poor infrastructure (132nd) and inadequate higher education (116th), which have added uncertainty to the business environment and has reduced investment. Philanthropist, Bill Gates recently admonished the Nigerian government for not doing enough to eradicate poverty and implored the government to invest in the people. His statements while harsh ring true as only four per cent of Nigerians have access to credit facilities and the World Bank has judged Nigeria to be the poorest country in the world, with over 70 per cent of Nigerians living in abject poverty. This supports the theory of Dinuk Jayasuriya in his “Improvements in the World Bank’s Ease of Doing Business Rankings: Do They Translate into Greater Foreign Direct Investment Inflows?”, where he noted that the idea that merely improving the ease of doing business would automatically translate to increased foreign direct investment is at best a deception.

The truth is that the Nigerian terrain remains hostile to foreign investor’s, especially those that depend on the Nigerian capital market. The result of this is that while foreign investors may come in willingly, they usually close shop soon after, disgruntled and licking their wounds. This was precisely the case in the recent departures of Etisalat International from the telecommunications industry as well as international brands - Marriot and the Milan Group (which saw Renaissance Hotel Ikeja rebranded as a Radisson Blu and Intercontinental Hotel) from the hospitality industry; all the departures resulting from conflicts with Nigerian creditors. This is even more troubling because the hospitality and telecommunications industries are ordinarily two of the most profitable industries in Nigeria. The slump has also moved to the digital economy with the digital market OLX closing up and online juggernaut Jumia making losses for the second straight year.

The only probable rationale for the current trend is that while law and policy seem to be proactive, in reality, foreign investors are still bearish and apprehensive of investing in stocks, commodities or businesses in a country that has an unimpressive B+ investment rating by Fitch. Nigeria is also still recovering from an uncertain general election in 2015, a crash in oil prices, a crippling recession in 2015, as well as the devaluation of the naira and ensuing fiscal crisis. The recent extraordinary increase in the Land Use Charge of the commercial hub of Nigeria, Lagos State, as well as proposed tax hikes in hotels and restaurants are also bad optics to investors. The end result is a loss of foreign investment. Hence, there is need to adopt a trade and investment framework that will open the country up to credible well financed local and foreign investors.

In conclusion, one can posit that while law is an instrument for societal engineering and change; policy, political willpower and solid institutions go a longer way to properly transform society. It is on this note that I recommend a humane approach in growing the ease of doing business. Merely ticking boxes to obtain accolades makes no difference in a society where majority of the population lives far below the global poverty line. A humane approach would be concerned in addressing the institutional bottlenecks that hamper economic growth. For instance, in access to credit, the concern ought to be on how best to increase credit for micro, small and medium enterprises in order to help build a thriving middle class for foreign investors to cater to. Another thing that would excite potential investors would be the improvement of basic infrastructure all around Nigeria in other to reduce overhead costs for foreign investors and help maximise profit. While transforming the legal framework for investing is key to growing trade and investment, it is not the panacea to attracting skittish foreign investors. There is a need to build an economic and political climate that is truly investor friendly in order to fully attract and keep foreign investors in Nigeria.