A recent report released by Fitch Solutions disclosed that Ghana, South Africa and some other smaller countries in Africa are ahead of Nigeria in terms of favourable destinations for Foreign Direct Investment (FDI).
According to the report titled, ’43 NEW Africa Country Risk Reports’, these countries enjoy more stable environments for investment compared to Nigeria which faces heightened security costs, an uncertain regulatory environment, limited labour and capital mobility and uncompetitive import conditions.[READ MORE: World Bank ranks Nigeria among World’s most improved countries in “Doing Business”]
Reasons explained: The report details some factors responsible for the ranking of Nigeria and the likely reasons why it is unfavourable for foreign investors. It hinted on the criminal activities surrounding the oil sector as well as smuggling across the borders of the country.
“Rampant criminal activity and recurrent militant attacks on critical infrastructure – particularly in the Niger Delta – threaten the safety of foreign workers, business operations and the wider economy, given the economy’s fundamental reliance on oil revenues.
“Meanwhile, smuggling across the country’s porous borders and pervasive corruption further obfuscates already convoluted bureaucratic procedures, thereby raising legal costs and deterring investment. Over the longer term, contingent on successful completion of planned energy and transport infrastructure development projects, we expect a modest uptick in economic activity, however slow reform momentum will mitigate rapid improvements in secondary and tertiary sector development over 2019-2023,” the report said.
What you should know: President Muhammadu Buhari’s administration has been formulating various policies to make the country attractive to investors. The country is, however, still far behind, according to the report.
Despite putting various policies in place, dearth of infrastructure, corruption in the legal system and other traits of maleficence in the system have continued to deter genuine investors from investing in the country.[READ ALSO: Nigeria concludes plan with Russia to modernize railway infrastructure]
As Nairametrics reported, the latest capital importation data released by the National Bureau of Statistics (NBS), disclosed that there was a sharp decline in foreign investments into the country, as the FDI in the second quarter of 2019 dropped to $5.82 billion compared to $8.48 billion recorded in the first quarter.
The report suggests that investors are losing confidence in the country’s economy which is not good as it could lead to economic downturn.