Conducting Foreign Investment in Nigeria

2021-05-12 05:09:17
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Nigeria is a country located near the Gulf of Guinea well known for its rich natural landmarks and geographical features including wildlife reserves. It has a wide variety of safari and tourism destinations known globally such as the Yankari national parks, cross river National Park which are characterized by waterfalls, tropical rainforests, savanna and primate habitats (Garnier, 1958). A major recognizable site is the Zuma rock which stand tall at 725m High near the capital city, Abuja. It neighbors Benin to the west, Chad to the east, Niger to the North and Cameron on the south east of its territorial boundaries.

Nigeria boasts a population of173.6Million people as of 2013 conducted national census (Ohaegbulem, 2015). Nigeria covers a surface area of 923768 Square Kilometers with a population density of 193.3 per Square Kilometer. Its economic status is ranging from; Gross domestic product (GDP) 514965 million US dollars and GDP per Capita at $2966.1 in Us dollars. This economic statistic has been realized from its export activities which include Crude oil, Petroleum Gas, Refined petroleum, Cocoa beans and special purpose ships (Ayinde, Kuranga & Lukman, 2015). These economic statuses have been supplemented by the imports conducted by Nigeria these are; Refined petroleum, cars, wheat, rolled tobacco. To boost economic growth, the country trades exports with India, United States, Brazil, Spain and Netherlands whereas the imports are done with China, united states, Netherlands, India and Belgium.

The president of Nigeria is Muhammadu Buhari and the prime minister is Sir Abubakar Tafawa Balewa. They form the major political distribution of the country which is influenced by the Westminster system of leadership. The state is headed by the president and leader of a multi-party system that takes place in a federal, Presidential and representative model of governing. The current political party in power is the peoples democratic party of Nigeria.

Business Proposition

For a construction company moving to Nigeria in an effort to expand its territorial coverage and economic status would suffer a great deal if it expanded to Nigeria. This is because in the long run the company would suffer losses raised by the fact that Nigeria has not developed its economic status stability to enhance smooth foreign investment that caters for security, cash flow and basic government support (Akingunola, 2006).

Major Reasons

Because Nigeria is a third World country that is still emerging economically, there is stiff hindrances of foreign investments in the country. This is because the government itself has not yet established proper infrastructure, Configured security to cater for investors and most importantly poor government system that aid corruption and offers little support to investors

Some of the challenges that would hinder foreign investment in Nigeria for the construction company are:

Nigerias Insecurity

Nigerias lack of proper infrastructure

Nigerias Little or Lack of government support mainly due to corruption

Evidence of the Reasons

Nigerias insecurity

The social and political effects in Nigeria has been eroded by major insecurity problems over the last couple of years. This has been characterized by the failure of the Nigeria administration to address Challenges of poverty, Unemployment and equitable wealth distribution among ethnic races and nationalities. This issue led to anger frustration and agitation among nationals leading to development of groups and individuals that commit violent crimes across the country. These crimes include Militancy, Kidnappings, Bomb Explosions, Violent Robbery, Destruction of personal and corporate property among many others (Ahonsi-Yakubu, 2005).

These series of crimes mostly the violent ones have led to low income to the government which in turn has moderated The gross domestic product growth rate, low incorporation of local and foreign investors in economic developments sectors and mostly loss of lives and property all over the country. For instance; the country has suffered 153 Successful bombings between 2012 to date.

For a construction company which will have to incorporate machinery, rely on economic growth to push productivity and hire workers, insecurity issues will be a huge hindrance to penetrate the country and exploit its potential successfully. Bearing in mind that the inability of the security agencies attributed to Nigeria bid to address these issues has been deemed a huge challenge putting the country in a critical position on its preparedness to attain desired political, economic and social heights in the nearing future thus no light of hope can be see for the insecurity issue. This is because the company will be prone to loss of property, workers and insufficient development because security problems affects all aspects of national development, economic growth and stability (Idris, 2013).

Nigerias lack of proper Infrastructure

As seen in many other African countries, poor construction. Lack of maintenance and low investment by the government in infrastructure is evident in Nigeria. The economy of the country grows steadily at a rate of 6% annually for the last 5 years yet more than 50% of the country faces lack of infrastructure including electricity, water system and roads among other basic amenities structures. Weak infrastructure creates a huge burden on foreign and local business and investment options. This can be attributed to the fact that there exist a continuous problem accessing markets, extended cost on running diesel generators top drive the companys machinery this is due to the fact that electricity is not dully covered across the county and for a construction company which is mainly located in the outskirts will probably be in a location without electricity supply (Enimola, 2010).

Infrastructure hinders industrialization and manufacturing processes. This is because infrastructure problems hinder job creation facilities. For instance; lack of schools leads to huge illiteracy that lack of proper manpower which is vital for construction companies, poor country input hinders development thus lowering productivity and income for the company.

Although the government is in a bid to improve infrastructure across the nation, fixing it to the required standard is a monumental task that will take a great deal of time and income, thus expanding the construction company to Nigeria will put it in a financial strain due to huge taxes imposed by the government bearing in mind that the company will not perform well in the country. Thus expanding to Nigeria is a bad idea.

Nigerias little or Lack of government support mainly due to Corruption

Like many other African countries, corruption is a huge problem for Nigeria. Corruption in Nigeria plays a major role in making lives of its population harder. Corruption roots exploit all parts of the economic throughput making Nigeria a bad idea for local and foreign business, investment and expansion. This is because the government still uses the old way where unrecorded payments are the order of the day which leads to lots of lost income, tenders and at the same time enhancing malicious activities (Fenning, 2016).

This state of Nigeria and corruption leaves the above mentioned challenges at a higher risk of becoming uncontrollable. This is because it is easy to launder money for insecure militia groups, funds for infrastructure development are embezzled and thus the overall productivity, economic power, money circulation is drifted apart due to the fact that wealth distribution is not even and equal. Expanding the construction company to Nigeria can daunt challenging as even application for tenders will be rigorous for a foreign company that is not aware of how the system works.

Conclusion

As discussed above Conducting foreign investment in Nigeria is a huge challenge that cannot be averted easily. With the government not being in a position to avert the challenges in administration curb corruption and bolster proper economic growth through infrastructure development makes it hard to invest in the country not only for the construction company but any other form of business. Equally important, a lot of times, effort and dedication is needed by Nigeria to assume all these hindrances and the results is extended to individuals and companies who will face imposed taxes and revenues by the government in a bid to raise funds for the development of the country and putting it back on track economically and materially.

References

Ahonsi-Yakubu, A. (2005). Political Transitions, Crime and Insecurity in Nigeria. Afr. Dev., 26(1). http://dx.doi.org/10.4314/ad.v26i1.22133

Akingunola, R. (2006). Economic reforms and industrial performance in Nigeria. Nigeria Journal of Business Administration, 6(1). http://dx.doi.org/10.4314/njbm.v6i1.38570

Ayinde, K., Kuranga, J., & Lukman, A. (2015). Modeling Nigerian Government Expenditure, Revenue and Economic Growth: Co-Integration, Error Correction Mechanism and Combined Estimators Analysis Approach. Asian Economic and Financial Review, 5(6), 858-867. http://dx.doi.org/10.18488/journal.aefr/2015.5.6/102.6.858.867

Enimola, S. (2010). Infrastructure and Economic Growth: The Nigeria Experience, 1980-2006. Journal of Infrastructure Development, 2(2), 121-133. http://dx.doi.org/10.1177/097493061100200203

Fenning, R. (2016). Nigeria and corruption - a country working to change. Controlrisks.com. Retrieved 30 March 2016, from https://www.controlrisks.com/en/our-thinking/analysis/nigeria-and-corruption

Garnier, B. (1958). A GEOGRAPHY OF NIGERIA: LAND AND PEOPLE IN NIGERIA: THE HUMAN GEOGRAPHY OF NIGERIA AND ITS ENVIRONMENTAL BACKGROUND. New Zealand Geographer, 14(1), 97-98. http://dx.doi.org/10.1111/j.1745-7939.1958.tb01440.x

Idris, M. (2013). Corruption and Insecurity in Nigeria. PAR, 2(1). http://dx.doi.org/10.5539/par.v2n1p59

Ohaegbulem, E. (2015). A reliability assessment of the age-sex data from 1991 and 2006 Nigeria population censuses. IJASP, 3(2), 132. http://dx.doi.org/10.14419/ijasp.v3i2.4651

 

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