After gaining independence in 1960
Nigeria’s country and economy underwent high amounts of restructuring before
experiencing the oil boom of the 70s which led to large investments by international
corporations such Exxon mobile, Shell – BP, and Chevron[1]. Though despite reaching tremendous growth
rates of above 25% in the early 1970s, Nigeria has unfortunately been cursed extremely
with high levels of political instability and inadequate government and
leadership. These insecurities within Nigeria have resulted in extreme levels
of economic volatility which has led to low levels of foreign direct
investment.
For
the first time, through the course of the mid – 2000s, Nigeria experienced
various transformations relating to better political stability, successful
government reforms, and higher quality governance, which as represented in
figure A[2], led
to a large influx of foreign direct investment. In 1999, Nigeria ended sixteen
years of military leadership as civilian rule was finally restored.[3]
Nigeria went on to achieve its first ever peaceful transfer of civilian power
in its 2007 general elections, marking the significant reduction in military
intervention, which had plagued the country for 29 of its 40 years of
independence, during the 20th century.[4] Furthermore,
in August of 2006, the Nigerian government agreed to terms of sovereignty over Bakassi
Peninsula which had been disputed land with Cameroon for decades.[5]
All these events within Nigeria contributed significantly to global perception
of a politically stable nation which was one of the key factors leading to
increased foreign direct investment throughout the mid – 2000s. Throughout the
early – mid 2000s the Nigerian government also began to invest highly in the
country’s infrastructure. Projects such as the Lagos Rail transit, which has
had immense impacts on economic growth and development, had its official
announcement of construction in December of 2003 and groundbreaking in 2008.[6] In
addition to a new rail system, former president Olusegun Obasanjo created the
national Integrated Power Project plan in 2004 which was designed as a solution
to Nigeria’s long history of power challenges.[7]
Despite certain delays in construction and high costs these infrastructure
projects have shed a positive lights on the Nigerian government’s efforts and
ability to improve infrastructure and therefore contributed to the influx of
foreign direct investment.
Throughout
the early – mid 2000s, the Nigerian government also began to take more
intensive anti – corruption measures. In September of 2000, The Independent
Corrupt Practice Commission (ICPC) was established in aim of preventing and
investigating corruption, educating the public on corruption and enforcing
prosecution against offenders.[8] In
addition, two years later in December of 2002 Nigeria launched, in further
commitment to fight corruption, the Economic and Financial Crimes Commission
(EFCC), whose duty was to investigate and examine all financial crimes and
corrupt practices.[9] These agencies developed
by the Nigerian government allowed for better monitoring and prevention of
corruption, leading to lower investment risk and increasing foreign direct
investment.
Finally, various government reforms
concerning privatization, removal of subsidies, and deregulation allowed
Nigeria to pursue more market orientated policies encouraging foreign direct
investment. In 2005, the Nigerian government enacted the Electric Power Sector
Reform Act (EPSR Act) which revolutionized the industry by ending the monopoly
formerly controlled by government run Nigeria Electricity Power Authority
(NEPA).[10]
This reform highly increased market competition within the power sector,
lowering the prices and further encouraging foreign direct investment. Furthermore,
other reforms include the commencement of deregulation of the downstream sector
of the Nigerian oil industry in 2002 in which various taxes and import duties
were removed. Regulatory agencies such as the Petroleum Products Pricing
Regulatory Agency (PPPRA) were also established in aim of achieving complete
liberalization of the industry by 2003, which was later achieved. This resulted
in the sectional growth of the oil industry through the optimal development of
resource allocation and application, which reflected further positive signs for
foreign investors.[11] Thus, the various reforms and government
actions have led to the highest and most successful inflow of foreign direct
investment in Nigeria’s history.
Despite the acceleration of FDI
throughout the mid – 2000s, over the past five years terrorism has become a new
threat to Nigeria and incoming foreign direct investment. In May of 2013,
President Goodluck Jonathan declared a state of emergency in three states in
the northeastern part of Nigeria, due to the rise of attacks carried out by the
terrorist group called Boko Haram. Boko Haram attacks within Nigeria peaked
between the years of 2012 and 2015 in which it carried out 746 attacks with a high
of 270 in 2015, killing an approximate total of about 11,500 people.[12] This has resulted in
significant negative consequences on Nigerian foreign direct investment. According
to a study done by the World Investment Report 2013, Nigeria experienced a fall
of 21.3% in foreign direct investment between 2011 and 2012.[13] Fortunately, most of Boko
Haram’s attacks have been highly concentrated in the northern part of Nigeria, away from the financial center and
capital of Nigeria, Lagos. Despite this the negative impact on the south
remains high. Mass migrations of refugees from the north into the southern part
of Nigeria has led to large increases in financial and psychological pressures
for thousands, while also severely halting business operations throughout the
country.[14]
Over the past year, Nigeria has seen change, as combined efforts between the
Nigerian army and international forces under the initiative of Nigeria’s most
recent president Muhannadu Buhari, have yielded positive results in the war
against Boko Haram. Fighters have retreated into the Sambisa Forest and in late
2016 reports claim that the last strongholds of the terrorist group were
captured along with the rescue of 1,800 hostages.[15] There was also a
presentation given by Nigeria’s new foreign minister of industry, trade and investment,
Okechukwu Enelamah, in which he mentioned
the issue of peace and security in Nigeria. Mr. Enelamah stated that, “Even
though Boko Haram still is a threat in terms of individual sporadic attacks…they
no longer occupy territory, or…[act]… like an alternative government or alternative
group that has its own territory that it controls.” He continued, saying, “the
country and we believe that it is a war that will be won and a war that we are
winning.”[16]
I believe that this information provides evidence that the control impact of
the Boko Haram terrorist group has been significantly reduced over the past
year. Despite this, the group still has not been fully eradicated and levels of
political instability remain throughout the nation. Thus, foreign investors
should on account of recent success of military coalition and government, once
again raise investment interest in the Nigerian economy, but continue to
proceed with certain levels of caution.
The political instability, poor governance,
corruption, the damage done by terrorism and the fight against Boko Haram, have
seen significant progress throughout the mid – 2000s and over the past year.
Thus, Nigeria has become highly desired amongst international investors on the
global market and if to continue on this path will see a bright road ahead for
foreign direct investment in the future.
Sources
1.
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