WAY OUT OF RECESSION: COURT INVESTMENT AS IF OUR LIVES DEPEND ON IT.
Last week, the cat was let out of the bag, the woman who had been hiding her pregnancy was delivered of a baby in a market square, leaving nothing to imagination. From a technical recession we emerged into a real, true and official recession. From a -0.36% contraction of GDP in Q1, we landed to a -2.06% contraction in Q2. Thank God for democratic governance and more for the integrity of President Muhammadu Buhari, and the professionalism of the NBS management,may be, the figures will have been dressed up, which was the fear of some people as it seemed to have taken the National Bureau for statistics( NBS), much longer time than usual to release the Q2 report. It was the 'jazzing' up of economic data that has led to the impeachment of the Brazilian President last week .
Last week, before the official confirmation of the recession, I had advised on this column that we needed a single minded focus on Agriculture and Manufacturing as a means of working ourselves out of the recession. My slant was essentially from the National economic policy perspective . But the other critical and related issue is investment. We need to attract investment and drive it into critical sectors of our economy. The expected intensive public sector spending as espoused in the 2016 Budget must be feverishly complemented by Private sector investment, both domestic and foreign.
Investment inflow into the Country has been declining since 2013 but assumed alarming proportions in the last two years. Nigeria recorded a total decline of $11.68 Billion in investment inflows in the last three years. From an inflow of $21.32 billion in 2013, capital importation declined to $20.72 billion in 2014, then nose-dived to $9.64 billion in 2015. Nigeria which was the highest recipient of Foreign Direct investment( FDI) in Africa went from a high of $2.27 Billion in 2014 to $1.44 billion in 2015 while Portfolio investment which reached a high of $17.37 billion in 2013 was only $6.01 billion in 2015.
If those figures are worrying, what is happening in 2016 has become distressing. In Q2, capital importation dropped from $710 million(Q1) to $647million representing an 8.95% decline. Thus total half year investment inflow comes to a paltry $1.36 billion. If we should extrapolate it to full year 2016 at current rate of accretion, then we could end with $2.72 billion which will be a colossal 72% decline over 2015. Against Q1, FDI declined by 23.9% and has reached a 37% decline year on year. Portfolio investment declined 9.49% in Q2 but has reached a frightening 88.76 % decline year on year.
I have gone through this detailed analysis to draw our attention to a frightening trend. Of course, the main cause of this disturbing trend is the very significant fall of the price of crude petroleum in the global oil market which has drastically reduced National income. In addition it has precipitated a scarcity of foreign exchange. But this can not in all honesty explain the whole problem. Our recent policy choices and speed of action have also contributed. Certainly this is not the first time, Nigeria is passing through this turbulent patch in its life of mono cultural economic dependancy, but we have never come this low in about 27 years.
Usually, we have tried to cushion the drop in revenue with investment inflow- Foreign direct, portfolio, home remittances and others including loans and Bonds. The price of crude oil is not expected to improve very significantly in the short run, though some stabilization is projected for next year. This is why I think we should court investment as if our lives depend on it. And it might well be! Because investments create enterprises and projects which in turn create jobs and create wealth. The question is how?
MAKE OUR ENVIRONMENT MOST INVESTMENT-FRIENDLY
With or without oil revenue, we can make Nigeria an investment friendly country- a preferred investment destination. This I believe is in our hands and is doable if we are minded to do so, if we are truly convinced and accept that we can bridge the impact of the revenue fall by attracting investment. The various foreign trips of our President, Ministers and Governors seem to suggest our desires. But we must match intentions with actions.
Enthrone Law and order
Let us make law and order to reign supreme. Government and its agencies must obey the law and all court pronouncements. Due process must become our first nature and every law in our statute must be rigorously enforced with out fear or favour. Regulatory agencies must follow the law and be facilitative to business and not clogs. Our judiciary must urgently reform to win investor confidence. The sanctity of contracts must be assured. My heart was palpitating when I read an open letter to the President by a Chinese investor who is experiencing hell with the Ogun State government bothering on the unilateral repudiation of contract by the government. This is anathema to attracting investments.
. Create well-thought through and stable Policy environment .
We must have a stable, business promotive policy environment. No dilly daling, no prevarications, no policy flip flop.The impact of every policy on business must be evaluated before policy announcement. Implementation must be on a level playing ground. Privatization and Public-Private Partnerships to be given impetus.
. Secure Lives and Property
The security of lives and property is a sine qua non for the attraction of any sort of investment. We must reinvent our police. We must take arms away from non-state actors and ensure that all security breaches are quickly punished. Our Nation must show in words and actions that we value human lives and that it is the governments primary responsibility. If Nigerian Nationals are killed everyday and foreigners are regularly kidnapped for ransom, we can not seriously be courting investments.
. Sustain the War against Corruption
Nigeria must intensify the good fight against all forms of corruption- political, electoral, financial, administrative, security and regulatory in a holistic manner. The world must continue to see and feel our revulsion to all forms of corrupt practices at all levels of the society-public & private, governmental and non-governmental.Witch hunting or political vendetta will undermine the war.
. Maintain Macroeconomic stability
Sensible policies must be taken both by fiscal and monetary authorities to return the nation to a state of macroeconomic stability. Exchange rate, interest rate and inflation rate can all be moderated by sensible and co-ordinated policies. Investment flows preferentially to macroeconomic stable environments that actually seek, welcome and reward investors. Let us welcome more Mark Zuckerbergs please!
. Create irresistible Incentives
To compensate for our current infrastructural deficit, our poor score in the global ease of doing business index etc, we need to introduce mouth-watering and irresistible incentives- tax holidays,lower corporate tax, lower cost of transferring & registering property, elimination of double & multiple taxation, sustenance of the export expansion grant( EEG),establishment of many industrial estates, parks and Free trade zones, tax-deductible energy costs,etc
Urgent action is mandated. It won't be easy but we must give it our all.To spend and invest our way out of this recession is a task that must be done!
Mazi Sam Ohuabunwa OFR