Foreign Investors Shun South-South As Oil ‘Runs Dry’

Its rich oil and gas resources notwithstanding, foreign direct investment in the South-South has been at a low ebb, for reasons, which economic analysts said, were associated with insecurity, lack of good corporate governance and nonexistence of knowledge-driven economy.

Between 2013 and first quarter of 2020, the region which once got huge chunk of Nigeria’s FDI inflows in the 1970s, barely received $474,133,792 million out of the $92,284,945,105.59 inflow.

Development and financial experts told The Guardian that the decline in FDI was mainly because of militancy, sea piracy, kidnapping, community hostility, poor infrastructure and political instability, including failure to pass the Petroleum Industry Bill (PIB) that has continued to discourage multinational oil companies from making long-term investment commitments.

Analysts also blame overdependence on the 13 percent derivation from the federation account as another reason the South-South failed to secure good investments within the period, as states could not get FDI in huge mineral resources like silica, tar sand, clay, limestone, granite, quartz, marble and gold salt. Others are tin, basalt, quartzite, kaolin, sand and feldspar. There were also little or no investments in agribusiness, light manufacturing and tourism.

DATA on FDI from the National Bureau of Statistics (NBS) revealed that between 2013 and first quarter (Q1) of 2020, Akwa Ibom State received over 50 percent of the $474,133,792 million FDI inflow to the South-South. The state got $278,263,453 million, followed by Cross River State, which got $66,130,000 million. Delta State got $59,483,860 million, followed by Rivers State’s $49,212,960 million and Edo State’s $ 21,043,519 million. Bayelsa got zero investment within the period under review.

Despite efforts by some of the states to develop friendly policies and improve infrastructure to attract investors, activities of cult groups, kidnappers, militants continued to increase the risk perception of potential investors who are reluctant to make investments in the five littoral states of the region.

An expert in economic development, Professor Willy Okowa, said the steep decline of investments in the South-South was created by perceived difficult investment climate as a result of security concerns. He stressed that no investor would invest money in places where life would not be secure.

“Insecurity is a key factor. The South-South is largely the petroleum hub of the country. So, investment would have been done mostly on oil and its production, but because of insecurity, a lot of companies moved their headquarters to Lagos. To attract FDI, the first thing is to deal with the security issue (kidnapping). We need good governance too,” he said.

Okowa also cited lack of functional infrastructure like seaports, motorable highways and huge market for low investments. He said manufacturing was virtually non-existent in the region.

“If you want to produce in Port Harcourt and sell your commodity, Port Harcourt alone is not a good enough market; you need to sell to the Southeast. Take Calabar for instance, to go there is practically impossible. But when you produce in Lagos, you have enough market. If you manufacture in Rivers, it does not have enough market. And then you try to market in the South East and Calabar, road becomes a handicap.”

On his part, the Chairman, board of trustee of the South-South Chamber of Commerce, Mr Billy Harry, blamed lack of access to information and state governments’ indifference to encouraging proper spirit of enterprise.

“The governments in the South-South don’t interface with the organised private sector. They just feel that they are in government and forgetting that power will fizzle out in eight years. There is a need for governments of the South-South zone to interface aggressively with the private sector. We need to encourage proper growth of enterprise to take advantage of FDIs,” he said.

Former Director of University of Port Harcourt Business School and professor of Econometrics, Okey Onuchukwu, said decline of investments in the region had political undertones, as investors had continually been made to believe that the Niger Delta was very unstable. The frightened investors are, therefore, made to invest in Lagos.

“Recently, one of the biggest ships in the world berthed in Onne, Rivers State, and that is to tell you that the idea that our waterways are shallow is false. That is the kind of impression they give to people to ensure that foreigners don’t come here to invest. If Port Harcourt, Warri, Calabar ports are expanded in terms of activities, you will find that those businessmen will find it cheaper to import goods through Port Harcourt or through Calabar wharf,” he said.

Onuchukwu acknowledged that the South-South had been unstable, but noted that things were beginning to stabilise as every state government was formulating policies to checkmate activities of militants and other deviant groups that have tainted the image of the region.

“Now, we have succeeded in ensuring that there is peace in the region, we need to try and raise the confidence of these investors to come in by doing a proper advocacy,” he added.

Director-General of the South-South regional integration bloc of Bayelsa, Rivers, Akwa Ibom, Cross River, Edo and Delta States (BRACED Commission), Ambassador Joseph Keshi, said concerted efforts must be made to create conducive environment to attract investment into the respective states. According to him, “capital goes to a place that is safe and where people can recoup their investment.

“Dangote took his N600 billion oil facility to Lagos and he is going to pump the oil from Niger Delta. That, in itself, tells a complete story. It does show you a complete failure on many things. Now, if Dangote felt that the Niger Delta was safe, secure and that he would not get problem from people coming and saying, ‘‘this is our land, you must give us this before you build,’’ and if there was a strong government backing, that facility would have been in the Niger Delta and it would have provided tremendous amount of jobs, and not to talk of the multiplying effect of having such a huge facility in that region,” he said.

Keshi said if governments in the region were ready to help investors meet their expectations, there was so much in the South-South that could bring investment. According to him, between 2012 and 2015, the BRACED Commission was strong in advocating revitalised agribusiness and using agriculture as fulcrum for industrialising the region.

“We actually proposed that because, in the 1960s and 70s, the whole of the region survived on palm oil: Edo survived on rubber, and timber. And we said that, given the shortage in world market, they should go back and reinvest in oil palm. But here we are; nothing was done. Now, if the region had planted oil palm all over the place between 2012 and 2015, today, it will be exporting the produces and will be making money from it. As far as in the 1960s, it was identified that two local government areas in what is today’s Bayelsa could grow enough rice to feed West Africa, nobody is growing rice in Bayelsa today.”

Similarly, Vice President of the Trade Union Congress, Chika Onuegbu, said though decline in FDI could be easily attributed to insecurity, it was also pertinent to take into cognisance the non-passage of the PIB, which would have boosted investment in the oil sector, mainly domiciled in the South-South region.

“There has been studies that confirm that the motion without movement has denied the country over $300billion of investment, as investors continue to observe the situation. Nobody wants to invest in a place where he does not know the fiscal regime, the laws, taxation, and economic parameters that will enable him know whether his investment will be profitable or not. Government should encourage people to invest in refineries.

“And you can see the connection between the unemployment rate in Niger Delta and FDI. In places where there is FDI, unemployment rate is reduced; places where there is little or no FDI have high unemployment rate,” he added.

South-South coordinator, Institute of Chartered Economists of Nigeria, Mr. Friday Udoh, said the South-South needed to define its economic contents, including investment, to boost infrastructure, and redefining its tertiary education to support national competitiveness.

He insisted that the South-South states must examine, in broader perspective, the prevailing economic opportunities statewide and along the neighbourhood to achieve critical regional asset base. According to him, achieving a regional economic model would provide the South-South states an opportunity to maximize competence of individual units, be visibly present in the global market place, and have a shared prosperity through production, FDI and improved trade output.

– The Guardian.