Nigeria Opts for a Private Investment Strategy for Development
In conjunction with a pro-active engagement strategy with local and international investors, Nigeria plans to radically improve the attractiveness of its business and investment climate.
The first concrete steps are already well under way: The Minister of Trade and Investment of Nigeria, Mr. Olusegun Aganga, announced last week that the Federal government has secured N2.2 trillion ($6.4 billion) worth of investment from foreign and local investors to boost the non-oil sector.
The money will be invested within the next 12 months in the solid minerals sector or the manufacturing and agro-business industries. The majority of the pledged funds are from local investors looking to expand in the two latter categories. The foreign companies are principally concentrated in minerals. The talks were initiated, the minister explained, as part of a strategy to work with private companies in order to improve the business climate in the country.
During the first meetings with the investors, the ministry reportedly asked potential partners to fill in a survey form to indicate the sectors they wanted to invest in. Investor meetings have since taken place in Nigeria, the United Kingdom and in Australia. The government have in particular been keen to secure foreign investment in the mining sector, and indicated that several large projects are already in the process of negotiation.
Business & investment climate reform programme
At the same time, Aganga stated that the ministry had embarked on a business and investment climate reform programme aimed at increasing the flow of foreign direct investment. The programme will be pursued in partnership with the World Bank, the European Union, the United Nations Industrial Development Organisation, and the United Kingdom Department for International Development. The reform programme will review relevant laws, policies, incentives, the use of free trade and economic zones.
There are currently 24 free zones in Nigeria, either privately run or government owned. With the exception of the oil sector, it is now possible for businesses operating in the country to be 100% foreign owned. Nigerian laws apply equally to foreign as to domestic investors.
The strategy to become a prime investment target in Africa is part of the stated aim by the federal government, to create sustained double-digit economic growth. Talks will continue with potential partners, and the government plans to negotiate an inflow of N15 trillion in private investments in the course of the next four years. The target in terms of job creation is 3 million new jobs annually throughout that same 4 year period.
To further demonstrate the commitment to develop new markets, federal and state governments also expect to invest trillions in the domestic market in the coming years. The principal sectors to be targeted are in manufacturing, transport, tourism, real estate, agro-business and automotives. A key aspect in all these related efforts has been to move the national economy away from the current dependency on the oil sector.
Nigeria has been experiencing a relatively high growth rate in the course of the last decade and has become one of the most developed economies in Africa. Nonetheless, the petroleum industry still accounts for 95% of all foreign trade earnings and about 80% of budget revenues. Agriculture is the main source of income for the majority of the population. Local businesses point to energy shortages, poor infrastructure and lack of access to credit as primary constraints to business development.
Despite these disadvantages, Nigeria offers potentially the largest domestic market in sub-Saharan Africa. Labour costs are low and there is a wealth of natural resources. A number of reforms since 2003 have led to improvements in the business climate. Nigeria is currently the biggest recipient of foreign direct investment in Africa and the country has ambitious plans to become one of the top twenty economies in the world by the year 2020.
