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Looking for a new theme for Nigeria investment 08 Jul 2024

This past 29th of May marked the 25th anniversary of Nigeria’s return to democracy. President Bola Tinubu marked this milestone with an elaborate ceremony two weeks later on the 12th of June, the country’s Democracy Day. The pomp and circumstance of the event was unfortunately marred when the President tripped and dangerously fell while climbing the stairs to the vehicle for his open-air parade at Eagle Square in Abuja. Thankfully, he was not apparently hurt as he continued to participate in the events for the day.

Nigeria returned to democratic government in 1999 after 16 straight years of autocratic regimes and, cumulatively, 29 years of military rule since the country attained independence in 1960. The return to democracy yielded immediate diplomatic dividend for the country through rapprochement between Nigeria and the international community, which had treated her as a pariah state in the previous four years, following the extra-judicial killing of the Nigerian writer and environmental activist Ken Saro-Wiwa in 1995. Democracy became an investment theme as the government started to implement economic reform, beginning with the establishment of the Debt Management Office to usher in public debt transparency and sustainability.

The critical acclaim of the transparent bidding for mobile telecommunication licences in 2001 showed the country was open for business. African investors lashed on the opportunity for foreign direct investment in the Nigerian economy. In their tradition of risk management, Western investors engaged the emerging opportunities more indirectly by providing financing to the African institutions and Nigerians who made direct forays into the sector and others. Foreign portfolio investment opportunities further opened up as the banking sector recapitalisation of that mid-decade was enacted as part of broader market reform.

Another dominant theme from this period was the rising prices of commodities, especially crude oil, in the international market, driven by China’s astonishing economic growth. Nigeria arguably managed the financial windfall quite well by paying off its foreign debt to the Paris Club and the London Club, and by establishing a quasi-savings fund: the Excess Crude Account, which grew its cash holding to over $22 billion. With the improvements in fiscal management, oil revenue fuelling economic growth, and dramatic increase in the capitalisation of the banks, Nigeria started to turn into a recognised, large consumer market. The country’s large, growing, and youthful population became an investment theme. In response, African, European, and US consumer brands entered the market or increased their presence.

Democracy. Fiscal reform. Market reform. Rising crude oil prices. Demographic advantage. All these themes that drove domestic and foreign investment in Nigeria in the 2000s have all but lost their allure now. The democratic charm was quick to lose the interest of Nigerians as evident in the drop in voter turnout in the 2003 presidential election and the subsequent ones. Also, the people would rather vote for their incompetent tribesmen and co-religionists than competent persons of a different ethnicity and religion.

So, the democracy tripped not long after it was launched. Rather than making a recovery, the country is now only a democracy by statute and not by deeds. From being a disorganised autocracy in the 1990s, Nigeria is now a dysfunctional democracy that tends to supress investment appetite.

Fiscal and market reforms have also lost their offer of investment comfort. The rapidity of their introduction conduces more to policy somersaults than improvement in the business environment. They have since the last decade functioned to manage the growing poverty trend, rather than fostering a shared economic progress.

As for the oil economy, it has declined. Oil prices are now more susceptible to downward pressure and less responsive to the traditional upward pressure caused by geopolitical tensions such as the ongoing Russia-Ukraine war and Israeli military campaign against Palestinians in Gaza. Nevertheless, the Nigerian oil economy has been suffering more from domestic issues, including a national oil company that is investing in the distribution of imported refined petroleum products more than in domestic oil exploration and production, and industrial-scale theft of crude oil.

The recent gale of divestments in the consumer products and retail segment shows the Nigerian demographic play is no longer attractive. A high national poverty rate projected to reach 38.8 percent in 2024 by PwC, high youth unemployment rate of 8.6 percent according to the National Bureau of Statistics, and growing emigration trends indicate a long-term horizon of falling demand.

These leave the country in need of new themes to attract investment capital and drive economic growth. But the enormity of this challenge appears not to have dawned on the government and policymakers. They are patching a ragged outfit with paper, by still mouthing democracy and ‘reforms’ that are exposing businesses to unbearable operating costs, fostering monetary and financial instability, and stifling consumption.

But all hope is not lost. Nigeria’s governance and market reforms since 1999 have neglected the most potent theme for driving national economic progress: national unity. This is evident in the sharp differences in human development indicators between the northern and southern parts of the country and the absence of elite consensus for shared progress. National unity – of good purpose – is the only force that is capable of pulling Nigeria from its worsening leadership, economic, security, and humanitarian crises now. If we come together, recognising our common destiny, despite our ethnic and religious differences, we would do the other things that also matter and see the country beginning to thrive again.

Jide Akintunde is Managing Editor, Financial Nigeria publications, and Director, Nigeria Development and Finance Forum.