Despite the recent uptake in the gross domestic product (GDP) of Nigeria to 1.4 percent, experts say government should rather aim for a growth rate of 15 percent as soon as possible.
The new GDP milestone, which was the second consecutive growth, has drawn accolades for the President Muhammadu Buhari administration. However, Donald Duke, former governor of Cross River State, who spoke at the Nigerian-American Chamber of Commerce (NACC) breakfast meeting, Wednesday, said “as attractive as the development might seem it does not negate the fact that the country still faces many challenges.’
The NACC breakfast meeting had the theme ‘Foreign Direct Investment as a Catalyst for Development.’ Olabintan Famutimi, national president, NACC, explained that foreign direct investment (FDI) was more than mergers and acquisitions and new investments. FDIs also include reinvested earnings and loans and similar capital transfer between parent companies and their affiliates.
“FDI remains the most important element in the economic development programme of Nigeria. We have had a lot of it before. In 2012 to 2014 Nigeria received the highest share of FDI inflow in Africa. Perhaps, it was coincidence that the upsurge came immediately after the re-basing of our economy in 2013 when the country’s GDP was then said to have reached $501 billion.
“Until then, South Africa was regarded as the largest economy. Foreign investors came in droves to examine opportunities in every sector – mostly agriculture, power generation, housing and food processing,” he said.
While making his presentation, Duke said instability in currency rates, power generation and lopsided trade policies constitute some of the major problems the economy was facing.
To attract foreign investors, the government needs to come up with incentives that is not only attractive but also ensures that the economy benefits from it.
“Trade between Nigeria and another country should be qui pro quo. We buy from you but we must get something back,” he said.
Additionally, Nigeria should not trade with every country; rather, Duke recommended that before going into a trade agreement, Nigeria’s objectives must align with the partner.
“There must be some exchange when we trade. We don’t have to trade with every nation on earth. There is an advantage with trading with the United States of America, but we have to ensure that there is a commonality in the trade,” Duke said.
Some of the incentives the government can come up with include building a 5,000-kilometre of gas pipeline that it will offer subsidy to corporations. This according to Duke will boost job creation, get the attention of the investment community and attract foreign direct investment.
Wole Obayomi, partner and head of Tax, Regulatory and People Services at KPMG, said investors coming into Nigeria must bear in mind that it was not a “quick-dash” but a “marathon.”
He also stated that FDI contribution to the GDP was very insignificant. Hence the country should target a 15 percent growth rate.