INVESTORS are fleeing Africa’s largest economy due to a litany of problems, notably the Central Bank of Nigeria (CBN)’s mismanagement of foreign exchange market, skyrocketing inflation and insecurity.
Like Shoprite, many companies have exited Nigeria in the last five years. On February 19, 2016, South African retailer Truworths packed out of Nigeria, shutting down two remaining stores in Africa’s biggest market. The clothing retailer cited rising costs as a key reason for exiting the market. Canadian-based technology company Dynamics Intelligence announced plans to exit the country in 2019.
Twitter recently set up an office in Ghana, ignoring Nigeria, and Amazon is also establishing an office in South Africa -a big blow for Africa’s most populous country. These firms exited Nigeria for various reasons, but investors say mismanagement of the foreign exchange market, poor management of inflation and insecurity are key issues.
The CBN has maintained multiple exchange rate market, creating one window for investors and exporters, another window called NAFEX, and another window for religious travellers. Analysts and investors say this weakens investors’ confidence, creating uncertainty in the economy.
The LCCI is made up over 3,000 investors and businesses. The body said multiplicity of the exchange rate market was one big reason scaring investors.
“Lack of cohesion among policymakers sends a negative signal to the investment community, worsens uncertainty, and further dampens investor
confidence,” President of Lagos Chamber of Commerce and Industry (LCCI) President Toki Mabogunke said in an emailed press statement to The ICIR.
The chamber said it was critically important for policymakers to harmonise the multiple exchange rates into a single market-reflective rate, which was imperative in strengthening investor confidence and engendering macroeconomic stability.
“Unification of exchange rates would complement recent efforts by the CBN geared at enhancing liquidity at the supply segment of the foreign exchange market,” the LCCI noted, adding that ensuring clarity on the country’s foreign exchange policy direction among participants in the investment environment was even more imperative in attracting private investments into the economy.
Insecurity from terrorism to kidnapping is hurting the Nigerian economy, scaring investors away and leading those in the country to consider exiting for neighbouring countries like Ghana. Analysts say unless a decisive step is taken to quell the rising insecurity, the Nigerian may, at some point, be an orphan.
“There is a fundamental problem with the governance structure in the country. How come we have the governors as the chief security officers in their respective states, and we get the kind of news we get on daily basis in the country on insecurity. They collect security votes in the country, but look at the current situation in the country. Do you expect any investor to come into our country, giving the terrible issues of terrorism in the country?” President of Association of Public Policy Analysts Pricewill Okorie told the ICIR.
Experts have stressed that Nigeria, with about $400 economy and nearly 210 million population, should be the most obvious investment destination in Africa. But bandits are overrunning Nigeria, kidnapping school students and officials in Nigeria’s North. The infrastructures of telecoms such as Airtel, MTN and Globacom have been severally destroyed in the North-East, scaring other investors’ interest. Investors prefer peaceful destinations where their investments are protected, but this has not been the case in Nigeria.
A business expert and associate consultant to the British Department for International Development Celestine Okeke told The ICIR that the government was de-marketing itself with the way it was handling the security situation in the country.
“Bandits are overrunning the country because they think there is no authority to confront them. No business person, both local and foreign, would come into an environment like this,” he noted.
Rising inflation is eroding incomes of consumers, raising cost of living and hurting investors’ profitability. Inflation hit 18.17 per cent in April 2021 – highest in four years. The country has failed to enforce monetary and fiscal policies to steer productivity o curb inflation, while the exchange rate policies have skyrocketed an already worse inflation situation. Investors can no longer find certainty in the Nigerian market, according to the LCCI, fuelling unemployment to 33.3 per cent in the fourth quarter of 2020.
The Manufacturers Association of Nigeria (MAN)’s Director-General Segun Ajayi-Kadir said the current inflationary condition in Nigeria was adversely affecting the profitability of the manufacturing sector and was partly responsible for its lack of competitiveness.
“The latter is a major contributor to the low-export penetration of goods manufactured in the country into the international market,” he said.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.