Question

Discuss the opportunities for foreign direct investment in Nigeria. What are the benefits of establishing operations in the country? Do you see any drawbacks?

Answer 1

Foreign Direct Investment (FDI) from developing countries has risen sharply over the past two decades. Nigeria is one of the economies with great demand for goods and services and has attracted some FDI over the years. The amount of FDI inflow into Nigeria has reached US$2.23 billion in 2003 this figure rose to 14.5 billion in 2017.

With a population of over 180 million people, Nigeria is the most populous country in Africa and therefore among its largest markets.

The country has abundant natural resources and an inexpensive workforce, and it is strategically located near many West African countries. The Nigerian Government tends to pursue a policy of economic liberalisation, promoting public-private partnerships (PPP) and strategic alliances with foreign firms. Apart from this the Nigerian Government has introduced many programmes to boost FDI, notably in agriculture, exploitation & mining, oil & gas extraction, as well as in the export sectors. Tax incentives are granted to industries deemed beneficial for the economic development of the country and employment of its workforce (such as clothing); allowances facilitating capital investments and the deduction of interest on loans for gas companies are also planned. Outside of the oil and gas sector where investment is limited to joint ventures or production-sharing agreements, foreign companies are allowed to own 100% of businesses.

Hence this has become an opportunity for many companies to put FDI in this country.

This will benefit the country as well by raising the standard of living, giving employment, making the domestic market competitive and use the advance technology.

Some drawbacks can be poorly developed transport and energy infrastructure, which result in high operating costs; government corruption; an inefficient judicial system and unreliable dispute settlement mechanisms and an increasing lack of security, especially in connection with the extremist group Boko Haram operating in the north-east of the country.