CLOSING CASE Foreign Direct Investment in Nigeria years the economy of Nigeria,
ID: 410903 • Letter: C
Question
CLOSING CASE Foreign Direct Investment in Nigeria years the economy of Nigeria, Africa's most populace democratic form of government. In 2007, for the firs litical instability, poor gov in the history of the country, f irst time following general election nation, was held back by pol ernment policies, a lack of infrastructure, and endemic there was a peaceful transfer of civilian power. Since corruption. This started to change in the 2000s. In halt then, the government has pursued market-orientated te- ing steps, Nigeria has moved toward a more stable forms, including the removal of subsidies, privatizationExplanation / Answer
1. The primary factors that had held back the flow of FDI into Nigeria for most part of its history is – political instability, lack of improper government policies, lack of proper infrastructure facilities, as well as the presence of rampant corruption. Another key issue that led to low FDI inflows within Nigeria was the low and declining disposable income of its citizens.
2. During the mid-2000s the country and its government started taking positive strides to make the political climate and the economic climate of the country more progressive and more conducive to trade and commerce. Political instability made way for a stable democratic government in 2007. Policy and regulatory reforms were introduced by the newly elected government to make Nigeria’s economy more open, and move it on the track of economic growth. Conducive reforms like removal and lowering of subsidies, lowering barriers of trade, closing and/or privatizing los making public enterprises etc. were introduced. All this attracted fresh flow of FDI in the country.
3. FDI will significantly benefit the Nigerian economy as it will lead to establishment of new industries, creation of new jobs, transfer of technology, human capital development, capital formation and growth of gross domestic product (GDP) of Nigeria.
The potential downside to Nigeria from more FDI is that in the short term in can lead to speculative considerations that will be based on exchange rate differentials and expectations and also on interest rate differentials.
4. As majority of FDI in Nigeria is in the energy sector any decline in global oil prices will dim the outlook and future prospects for the country. Quantum of fresh FDI flow will decline with declining oil prices and the country will have to make new sectors and industries attractive for investors to negate the volatility in FDI due to change in oil prices.
5. Yes, the insurgency mounted by Boko Haram should be of concern to foreign investors even though they invest in southern regions. This is because the insurgency can have widespread socio-economic implications in the future and if the insurgency spreads in other regions of Nigeria then the property and investments of foreign companies and investors will be at risk.
6. Pros – Nigeria has a population that is dynamic as well as growing. Its current population stands at around 21 million and with economic growth and development the disposal income of its citizens is increasing. This makes Nigeria a highly lucrative market for a consumer products company. In terms of cons Nigeria is not very attractive due to its high import tariffs and nagging problems related to its infrastructure. I would recommend investing if taxes and tariffs are lower further and the infrastructure is improved.
References:
a. Financial Nigeria – Development and Finance. Retrieved from http://www.financialnigeria.com/why-nigeria-no-longer-attracts-foreign-direct-investment-blog-194.html
b. The Socio Economic Implications of Boko Haram Insurgency. Retrieved from https://www.researchgate.net/publication/271852689_The_Socio-Economic_Implications_of_Boko_Haram_Insurgency_in_the_North-East_of_Nigeria
c. Foreign direct investment – How ready is Nigeria. Retrieved from https://www.vanguardngr.com/2011/09/foreign-direct-investment-how-ready-is-nigeria/