We believe many countries would be manufacturing a number of those things. If they cannot do it themselves, they would try to domesticate a part of the value chain, so that they are placed in a situation where they would not be left exposed.
PT: In one of your recent briefings this year, you said the quantum of investment flows reduced by over 204 percent in 2019 than was recorded in 2018. But, curiously, there was no COVID-19 in the two years. What can we blame for such significant drop in investments during the period in reference?Investment inflow to Nigeria has been under pressure for a few years, even prior to COVID-19.
A lot of the sale of the power assets to DISCOs and GENCOs were funded largely by Nigerian principals who borrowed from the domestic market with minimal foreign participation. Those transactions did not really give FDIs the opportunity to come into the country. FDI is almost the most reliable source of investment in most countries.
An important factor investors point to is the stability of government policies, not only when they change with some frequency, but the application of those polices is almost immediate in most instances. Meaning that they don’t have the capacity to react to them. PT: What would you say are NIPC’s contributions to the effort to raise the level of FDIs in Nigeria since you assumed office?Investment generation is not a sprint. It’s a marathon. In my previous life in investment banking, it could take 10 years to get a right mandate. After a two years period, you will only have evidence of an engagement with the person on a regular basis, not a mandate yet. But, you know that the mandate is coming. So, that sort of strategic planning is considered important.
So, a lot of work I have done since I joined the NIPC have been focused on building the foundation for investment. Like I said, the bulk of investments that many countries chase are foreign investments. That means building a certain kind of relationship with foreign investors that these would come from.
The first thing one needs is what they call in banking a hook. Then you cast that hook in to engage an investor. We identified 20 countries. We tried to do a deep dive to understand their trade and investment relationships with Nigeria and the kind of things they invest in across the world, so that we know, when we are engaging with them, what hook to use in those engagements.
So, we combined and pulled the incentives together and put them in a compendium and make available to prospective investors. We also publish a variety of reports now that we never did before. Since 2018, we started publishing the report of investment announcements in Nigeria. We have so far published in 2018, 2019 and the first half of 2020. That report gives us an indication of investors’ interest in Nigeria.
A certain quantum of financial capacity is needed to meet the nameplate capacity and expand it. That would have meant that we may have had to do the reforms differently from the way it was done. But, it is the follow on actions; the things they needed to do to expand the capacity of the sector that probably did not follow the time they should have.It is a chapter in Nigeria investment promotion Bible . But, talking seriously, I told you earlier about building blocks and the need for building the foundation of a building. The “Book of States” will feed into a digital database the NIPC is doing.
But, once you reduce what you know about the states to a document like the “Book of States”, and feed it into a database, if an investor says he is interested in a certain commodity, when the name of the commodity is entered in the database, it will tell you the states that have the strongest prospects for that commodity.
It tells you how land, labour, taxes, and the cost of certain items in Nigeria impact on investment. It is useful for domestic investors as well, because not all investors understand how those matters work, especially if one is not an active practitioner. The fact that Nigeria is ranked 131 does not change that it is out of 190. There is still a long way to go. The target for Nigeria was to be within the top 70, originally top 100. So, we recognise there is still work to be done.
But, as you have rightly acknowledged, even though there have been improvements, there is still a lot of work to do. And if we disaggregate those rankings, in relation to a lot of things investors still have issues with, like trading across borders, even though Nigeria is ranked 131 out of 190 on an aggregated basis, Nigeria ranked 179 out of 190. This is where the rubber hits the road for many investors because we are dependent on imports. Everybody feels bringing in or taking out goods.
CAC has just introduced technology that allows investors to check for company names and register them within 48 hours. That works. Every now and again, there may be glitches in the system. But, it does not require a one-stop investment centre. PT: At times investors are weary about coming to Nigeria because of publications in the media about widespread corruption. They want to be sure who they are dealing with. But, here in Nigeria, company registries are not open, beyond checking for company names. You cannot see officially who are the owners, or even beneficial owners of these companies, even where you are interested in investing in these companies.
A deal has never been stopped by people not being able to do due diligence. What prevents investors more are government policies. That is what investors complain about more, not the ability to get due diligence. In Nigeria, there are a number of economic zones that were created for just that objective. There is an agency, the Nigeria Export Processing Zones Authority , that is specifically focused on special economic zones and managing investments there.
So, it is not a waiver. It is an incentive. NIPC processes pioneer status applications based on the delegated authority of the Minister in full recognition of the responsibility placed on it. When the child was sent to school, somebody could have asked the parents why they were wasting money on sending the child to school, and not start working immediately. It was because it was recognized that at that time that investment would yield more than having the child start working immediately.
So, it is not that the federal government grants pioneer status. But, the power to determine a beneficiary lies in the President. What NIPC does is based on a delegated authority. So, if NIPC processes applications for pioneer status based on the guidelines provided in law, it is covered in law. If the President exercises the powers vested in him by law, it is also covered in law.
In the NIPC website, the quality of the reports there, like the Pioneer Status Report published on a quarterly basis, Investment Announcements published since 2017, and the work we are doing articulating the cost of pioneer status, the “Book of States”, Compendium of Incentives, review of Nigeria’s bilateral investment agreements, and the amendments as well as the renegotiation of the agreements with many countries, are important elements of those legacies.
You don’t have that quality interaction at an investor engagement. If you are lucky, they will give you one hour to speak. If you are not lucky, they will give you five minutes. How can you convince somebody in five minutes to put their hands in the pocket and make a multi-million dollar investment? It is unlikely that you will be taken seriously.
PT: But, recently NIPC was returning some billions you generated to the government. If there is so much to do, why are you not ploughing back that money to the work?In NIPC, there is a lot of incredible discipline around government expenditure. When we prepare a budget, we generate a certain amount of revenue and spend a certain amount. If you generate excess, there is a process for getting permission to spend the surplus. Otherwise, there will be complete indiscipline.
In 2020, our full year’s budget was N1.5billion. By the end of September, we generated N2.9billion, a lot more than was budgeted. We have an approved budget expenditure of N1.1 billion. We cannot spend more than that. PT: NIPC workers protested recently against your management. Could it be that they were aware you were busy returning excess revenues to the government while their welfare issues were unresolved?No! There were some allowances approved by the NIPC Council in 2018. When those allowances were approved, they were approved in line with the provisions in the NIPC Act, and implemented immediately.
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