International Trade: Investors Bemoan Nigeria’s Unfriendly Business Climate

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Investors have bemoaned the harsh business climate in Nigeria occasioned by security challenges noting that insecurity is increasingly affecting investors’ appetite in the country.

They also lamented inconsistencies in government policies demanding that the Federal Government be sensitive to the operating environment and refrain from making policies that could undermine investments.

They stated this in a press statement where they said an operating environment characterised by policy inconsistences, political interference and policy somersault like in Nigeria remains harmful to international trade. Kayode John, who signed the statement said insecurity and excessive bureaucratic bottleneck created by some government agencies and the activities of selfish local businesses have all resulted to lack of significant improvement in Nigeria’s foreign trade.

He said in the oil and gas business for instance, both local and international operators had come to the conclusion that Nigeria’s operating environment is the most difficult among the oil-producing countries.

“The difficult operating environment has led to a slump in the country’s foreign trade, according to government’s own statistics.For instance, Nigeria recorded a 10.3 per cent decline in foreign trade in 2020, according to the National Bureau of Statistics (NBS),” he said.

According to the NBS report, the value of total imports in 2020 stood at N19.898 trillion or 17.3 per cent higher than the N16.96 trillion recorded in the previous year.

Total exports, according to the report, also dropped by 34.8 per cent from N19.19 trillion in 2019 to N12.522 trillion in 2020.

Within 2020, Nigeria’s total foreign trade also dropped by 27.46 per cent year-on-year in second quarter of 2020, when compared to N8.61 trillion recorded in the corresponding quarter (Q2) of 2019.

According to the report, Nigeria’s total export during the quarter of 2020 nosedived by 51.7 per cent to stand at N2.22 trillion, representing a significant fall when compared to N4.59 trillion recorded in second quarter of 2019 and N4.08 trillion recorded in the second quarter of 2018.

The report also showed that Nigeria’s total foreign trade recorded a decrease of 27.3 per cent when compared to N8.59 trillion recorded in previous quarter (Q1 2020).

In September 2020, Nigeria recorded its lowest foreign trade with the United States since 2015, slumping to N1.5 trillion as of September 2020 compared to N2.1 trillion recorded in September 2019.

John said the challenges of the operating environment were said to have been aggravated by the disruptions caused by the COVID-19 pandemic.

He said: “Nigeria’s dwindling international trade and the recent alarm raised by the Nigeria’s Minister of Industry, Trade and Investment, Otunba Niyi Adebayo, that the volume of trade between Nigeria and South Korea plunged by 74 per cent within a two-year period, should be an eye opener to the Nigerian government and its agencies.

“In a statement issued in Abuja, the minister specifically stated that the volume of trade between both countries dropped from $5million in 2018 to $1.3million in 2019. The minister said Nigeria and South Korea shared strong economic and investment ties with over 20 Korean companies presently operating in Nigeria. Adebayo named some of the companies to include: Samsung Heavy Industries (SHI) and Hyundai Heavy Industries (HHI). He also called on foreign investors to take advantage of the Nigeria’s involvement in the African Continental Free Trade Zone (AfCFTZ) to invest in Nigeria so that they would have access to the large market on the African continent. Adebayo told his visitors to encourage foreign investors to invest in the new special economic zones established by the ministry in each of the six geographical zones across the country.”

Otunba Adebayo is one of the few ministers in the administration of President Muhammadu Buhari who have exhibited unbridled passion to woo foreign investors in line with President Muhammadu Buhari’s agenda.

But while Adebayo and his likes are making strenuous efforts to attract foreign direct investments (FDIs), some other officials of government and their collaborators among local investors have embarked on deliberate efforts to scare foreign investors in a bid to wade off competition. Foreign investors are not insulated from the adverse effects of the activities of these predators, who use their local political contacts and connections to engender unfriendly government policies that do not only destroy existing investments but chase away potential investors.

While other countries like Senegal and Cameroon, which have opened their doors foreign investments and skill transfer to create quality jobs in their countries, some foreign firms in Nigeria are being strangulated to death without any soothing words.

South Korea, for instance is well-positioned to help Nigeria build capacity but unfortunately, the enabling environment has not been created.

The minister cited Samsung Heavy Industries (SHI) as one of the South Korea giants operating in Nigeria.

Indeed, since SHI came to Nigeria about a decade ago, it has demonstrated its capacity to transform the Nigerian economy by local manpower development, which could boost the country’s Gross Domestic Product (GDP).

SHI has proved its mettle and invested heavily to demonstrate that it is in Nigeria for a long-term.

But despite its record-breaking achievement in the development of Egina oil field, the uncertainty in Nigeria’s oil and gas industry has discouraged investors from launching more projects that could utilise the expertise of SHI.

Foreign investors operating in some of the country’s free zones are worst hit by the activities of these local operators who connive with some corrupt government agencies to seize investors.

Free trade zones are areas in which businesses are exempted from the normal tax regime applicable in Nigeria.

In return, the Federal Government expects such companies to boost national exports, create jobs and help in diversifying the country’s economy by bringing in new activities.

But companies operating at LADOL free zone in Lagos are being suffocated with excessive charges and other acts of hostility by the free zone managers For instance, an American pipe-coating company, Africacoat was forced to exit Nigeria by operators of LADOL.

While other free zones nationwide are championing the struggle to woo investors, LADOL has since the past seven years engaged its tenants in protracted litigations, leaving investments to suffer.

The operating environment at the zone is characterized by open hostility against investors.

This open hostility against Korean investors got to its peak in April 2019 when an officer of the Nigeria Security and Civil Defence Corps (NSCDC) guarding LADOL shot and killed a fellow officer and wounded a Korean staff, working at the fabrication and integration yard of SHIN located in the free zone.

The LADOL’s armed security guard was said to have gone berserk around the SHI-MCI yard, killing his colleague during an argument, and shooting a Korean SHI-MCI employee operating a crane within the yard at the time.

This kind of incident was capable of scaring away any actual or potential investor from any operating environment.

The incident, no doubt, must have dealt a great blow to trade between Nigeria and South Korea because no investor will like to invest in an unsafe environment.

It was not surprising that the slump in trade between South Korea and Nigeria occurred during 2018/2019, exactly around the time the ugly incident occurred.

The dwindling trade between Nigeria and South Korea also occurred during the period LADOL locked out one the major investors in the zone, denying it access to its investments in the zone.

It took the intervention of government agencies, and the courts for LADOL to lift the blockade and allow the investors access to their facilities in the zone.

In the present world of internet, other international businesses read all these negative reports about LADOL’s open display of brazen hostility against its partners, and this painted Nigeria in a bad light and made it a wrong destination for Korean businesses during the period. Apart from the unfriendly posture of the likes of LADOL, business activities at the Apapa ports in Lagos, which account for 70 per cent of international trade in that corridor, are also affected by gridlock.

This gridlock also hurt multilateral trade between Nigeria and other countries, including South Korea, adversely.

Insecurity is also increasingly affecting investors’ appetite in Nigeria’s operating environment.

Another issue of great concern to investors is government’s policies.

Government should be sensitive to the operating environment and refrain from making policies that could undermine investments.

All policies must be geared towards improving the country’s Ease of Doing Business.

An operating environment that is characterised by policy inconsistences, political interference and policy somersault is not a preferred destination for investments.

Investors in the Nigeria free trade zones (FTZs) recently threatened to divest from the zones over a proposed reform by the Federal Ministry of Industry, Trade and Investment (FMITI).

A recent statement signed by Director of the Snake Island Integrated Free Zone, Lagos, Yusufu Abdullahi, on behalf of the investors, alleged that the ministry had concluded plans to transfer the supervision of the free zones from the Nigerian Export Processing Zones Authority (NEPZA) and the Oil and Gas Free Zone Authority (OGFZA) located at Onne Port in Rivers state.

The investors are suspicious of government’s decision, describing the proposed reform as “a ploy to destroy multi-million naira private investment in the free zones”.

They alleged that FMITI had directed NEPZA to transfer five selected free zones (Dangote Industries Free Zone, LADOL Free Zone, Snake Island Integrated Free Zone, Tomato Industrial Park, and Olokola Oil and Gas Free Trade Zone) regulated by the authority to OGFZA.

It is not clear why investors made the threat but the onus is on the government to restore the confidence of these investors in its activities. Though NEPZA has not implemented this directive, it is imperative for the government to bring all the parties to a negotiating table for the sake of protecting investments.

– The Sun

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