The Acting Executive Secretary of the Nigerian Investment Promotion Commission, Emeka Offor, speaks with AMARACHI ORJIUDE on the challenges facing Nigeria’s business environment, the agency’s plans to create a conducive investment landscape, among other pertinent issues
As the Acting Executive Secretary of the Nigerian Investment Promotion Commission, what are the reforms you intend to implement to enable the commission to become more productive and achieve its goals of boosting investments?
Firstly, Nigeria needs all the investments it can attract to be able to meet her aspirations for economic development. Our focus at the NIPC as the national IPA (investment promotion agency) is to mobilise the government to be able to play its role, mobilise resources from the private sector to meet up the over 80 per cent required from the private sector as contained in the National Development Plan, build a good image for Nigeria so that investors feel good about investing in Nigeria, and host stakeholders’ engagements (government and private sector). We are also looking at building the capacity of the NIPC staff and the state IPA to understand the need to do something extraordinary. We are to encourage, promote and coordinate investments in Nigeria through proactive means -BIFs, investment facilitation, SWIP, Targeted Investment Promotion, and working with the relevant MDAs to support the investment aspirations of investors – both existing and prospective investors. There are existing initiatives which I am already part of e.g. the BIT Review, BoS, Compendium, iGuide; and efforts are in place to create more awareness on the services we render, for instance the SWIP that was recently launched -we want to bring prominence to that. Also, our overall strategy is to ensure an effective corporate governance that will directly affect the facilitation of information sharing and incentivise opportunities across sectors. This, we believe, will trigger confidence in investors’ consideration and positioning of the country.
Reports from your agency and the Central Bank of Nigeria show that foreign direct investments in the country have been declining. From your informed position, what would you say are some of the factors fuelling the decline?
Globally, capital flow has been under pressure in the last couple of years, from the height of $2.1tn in 2016 to $1.5tn in 2019. The decline has majorly been associated with the reforms implemented by major investment sources such as the United States of America which implemented tax reforms in 2018 forcing many United States multinational enterprises to repatriate capital. This predates COVID-19 though COVID-19 dealt a major blow on the decline. By 2020, largely due to the restrictions imposed by governments across the world as a response to checking the spread of the global COVID-19 pandemic, global investment capital flow continued the downward slope. The World Investment Report reported a contraction of 35 per cent of capital flow in 2020 against the 2019 flow. These restrictions resulted in the near-collapse of many global value chains and economies, especially those that are reliant on the export of raw materials. There has also been a slowdown on the implementation of existing investment projects as well as consideration of new projects led by MNEs, as many are reassessing their global strategy as an adaptation to the ‘new normal’ continues. However, it is expected that there would be some marginal upward flow in global FDI in 2021 which should be sustained in 2022. This is because there has been a considerable adaptation to the ‘new normal’ as economies continue to open more freely by relaxing restrictions but enforcing social distancing and intensifying campaigns for vaccination coverage as well as improving therapies to bring local transmission of COVID to tolerable levels across the world. Part of our strategy is to ensure that a true narrative or position of the economy is always projected based on facts that can persuade an investor to make the necessary considerations. It is all about changing perceptions and I can assure like I have said in many fora that opportunities in Nigeria still hold one of the best returns on investment.
Wouldn’t you say that the level of insecurity in the country is a militating factor against FDI?
So, every country has a security challenge. But the important thing to note is what the government is doing to tackle this problem. And then, is the security challenge prevalent in every country? The answer is neither here nor there. Yes, security can be a challenge, several investors have mentioned it as a challenge, but as I pointed out earlier, security is a challenge for every economy. In fact, when you look at the security index, you find out that Nigeria is not even listed among the leading countries that have security challenges. The important thing to know is that there is the need to resolve all forms of security challenges, so that it would be easier for investors to invest in our country.
There are concerns from various quarters about the rapid decline in FDI. What policy adjustment or economic reforms do you think are necessary to drive investment inflows to Nigeria?
Firstly, the move by the Federal government to redesign a new economic policy blueprint – the NDP-is deliberate. The plan will consolidate on the ERGP and still open new frontiers that will be tackled head on through emphasis. As stated earlier, global investment flow has been under pressure well before the restrictions imposed to check the spread of COVID-19. While Africa maintained its three per cent share of global flow in 2020, the volume however declined by 16 per cent as against 2019 flow. Nigeria remains one of the major destinations in Africa accounting for five per cent of the flow into the continent over the last five years. While in 2020 Nigeria was one of the countries with a positive change in flow as against 2019, the volume ($2.4bn) was, however, very marginal compared to the volume tracked by the NIPC as contained in our Report of Investment Announcement ($16.7bn). This indicates a considerable gap between the expressed intent by investors and the actual investments. To translate this huge potential into investments, there is a need for a coherent alignment of all government policies relating to the investment ecosystem. Governments across the tiers need to approach investment promotion as a serious socio-economic contract as expressed in the national development aspiration.
What are some of the NIPC’s contributions to the effort to raise the level of FDIs in Nigeria since you assumed office?
The NIPC’s efforts are not just limited to my time that I am currently serving in acting capacity. Like I stated earlier, it is a process and the process is being sustained and on-going. This process targets laying the requisite foundations that will engender a strong investment culture for the country. I can assure you that already, we have been getting greater response and enquiries from potential investors, within the country and across the globe. We plan to hold more stakeholder engagements in 2022. There are plans to do the DISN which will be sector-focused and the NCI which will be held with the states. We are also mulling holding regional investment forums this year.
The former executive secretary of the NIPC advised the Federal Government to negotiate its bilateral agreements to enable Nigeria to her investments targets? Do you share this view?
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The bilateral investment agreements aim at ensuring a balance amongst the transacting nations and thus it is essential that it is reviewed to a position of win-win. The essence of the review of the bilateral investment agreements is to ensure that there is a balance. Some of the bilateral agreement tends to favour one side more than the other and it is our belief that if there is an understanding that sees the benefits accruable to both sides it works well for all. I’m sure that the tiny lines need to be read and reviewed for the benefit of the country. Work has already been done in reviewing existing agreements that may not be in the best interest of Nigeria to ensure that they comply with modern realities. For example, the new model BIT that was negotiated with Morocco was accepted as a model to be copied. In specific terms, reviewing the existing agreements would contribute immensely to providing the requisite legal framework for attracting RIBS investments of the quality needed to foster economic development.
The 2020 World Bank Ease of Doing Business ranking showed Nigeria moved from 145th position in 2019 to 131th. But, there are still so many things that suggest it is still difficult to do business in Nigeria. So, does this ranking truly reflect the reality?
The World Bank is a reputable organization. However the ranking is just indicative – governed by standards and variables set up by the WB itself and it is the improvement on these standards that affects the whole ranking; an improvement in ranking does not necessarily mean an improvement in each of these variables. The major usefulness of the EoDB ranking was to draw the attention of countries on the need to improve their DB environment. The bank has stopped the ranking because even World Bank itself felt that the methodology used to make this assessment was not a true reflection of the realities, asides from the irregularities of the process as admitted by the bank itself. However or without the EoDB ranking, Nigeria is focused to improve the DB environment which is why PEBEC was set up. Nigeria is also focused on subnational ease of doing business rankings whereby states are encouraged to do peer review to ensure that they match with the best. It is our hope that every state keys into the project which will ultimately improve Nigeria’s EoDB.
What would you say about the special economic zones as a strategy for investment promotion in the country?
The SEZs is a model that has seen many countries like China, Singapore, UAE and the TIGER economies navigate industrialisation with relative ease. The main purpose of setting up SEZs is to meet with the immediate operational needs required to grow the economy. This model became more important to nations that are experiencing developmental gaps like infrastructure, power need, export needs amongst others. So the SEZs targets investors who are willing to expand their operations but being hampered by other considerations which this carved out zones address head on. So, it is our belief that based on the comparative advantage of any particular geographical location that such zones be established to take advantage of such natural endowments like access to raw materials, seaports, natural resources. Through the SEZs, the country is now positioned to achieve its developmental and industrial goals at a faster or speedy rate.
In September, the NIPC established a partnership with Nigeria Exports Processing Zones Authority to facilitate investment in the three newly approved special economic zones in Lagos, Kwara, and Katsina. How has this partnership aided investments flows through this SEZ so far?
So, the engagement with NEPZA was specifically meant to attract traffic to the Special Economic or Export Processing Zones as an investment incentive tool for investors. The first thing we thought we should do was to put in place a document for the investing public on what it takes to invest in SEZs or EPZs. The document is titled “Doing Business in Nigeria’s Special Economic Zones”. We expect to finalise this document within this quarter and make it public. NIPC is also on the technical team planning the Katsina Investment and Economic Summit which hopefully will hold in Q12022, where His Excellency, President Muhammadu Buhari, is expected to do a ground-breaking of the Katsina Special Economic Zone. All these efforts at supporting stakeholders to ensure the NIPC continuously acts on its investment coordination mandate across the country
The issue of tax incentives to prospective investors is one area of concern for investment promotion. Some criticise the pioneer status initiative as a policy that saw the government lose more money through waivers and tax holidays than the benefits derived. What do you think?
First of all, there is a difference between waivers and PSI. For instance it is only 43 companies that enjoy PSI in Nigeria as at today. The NIPC does not grant waivers, we administer PSI. There are requirements for granting PSI and one of them is that the company will be in its first year of operations and what quantum of tax that a company that is just starting pay in its first year. The essence of the PSI is to muster enough resilience to be able to generate more revenue for themselves and then be able to pay better taxes. This is to ensure that in the initial year when they are going through teething problems, they will not die because of tax weight and other ease of doing business issues. At the level of Nigeria’s economic development, it is extremely important to support these companies and industries so that they can grow to be able to generate larger taxes. Even countries that are developed offer incentives, even better incentives. So the NIPC does not agree that government loses revenue. Instead, we look at how those companies will pay better revenues in the future. The PSI is not administered to every company. It is only given to companies that the Federal Government of Nigeria through the instrument of FEC has been identified to be operating in industries or activities that are crucial to the country’s economic development. Also, due to the level of infrastructural challenges we have in Nigeria, the PSI assists companies to cushion some of the shocks that they might face.