Within a year, President Goodluck Jonathan’s administration has ramped up the drive to attract foreign investments into the country, scoring crucial hits in the nation’s power sector
The import of foreign direct investments, FDIs, in the development of any nation seems not to be lost on the administration of President Goodluck Jonathan. His administration is apparently aware that countries such as China, South Korea, and Singapore have, through the instrumentality of FDI, transformed themselves from the unenviable club of Third World countries to emerging economies. In the case of China, funds from FDI helped develop its industries, turning it into the world’s workshop. It was therefore no surprise that China’s share in international trade rose from one per cent in 1980 to over 4.3 per cent in 2003. This is also the vision that President Goodluck Jonathan has for Nigeria.
The president resolutely believes that the country could be one of the world’s top economies. Since the commencement of his administration, President Jonathan has made the drive for foreign investments one of the key pillars of his transformation agenda. He cemented this drive last year, when he announced that the nation’s foreign policy would be tied to foreign direct investments, a move that was unprecedented in the annals of the country. Under the new policy thrust, all of the President’s overseas travels would be viewed from the standpoint of attracting foreign investments to the country as well as exposing Nigerian businesses to foreign opportunities. The policy thrust was lauded by experts as being well defined and clear-cut.
Barely a month after the initiation of the policy, the President demonstrated that he was serious about it during his visit to the United States. There, he met world leaders and business moguls, canvassing for FDI for the nation. He also attended the Nigerian Investment Summit and Exhibition in New York, which had former British Prime Minister, Tony Blair, and other world leaders in attendance. There, President Goodluck Jonathan became the canvasser-in-chief for Nigerian businesses, as he drummed up support for the country as an investment-destination haven. The President also unveiled a new visa regime, which has been streamlined to meet the needs of would-be investors.
This visa procedure, which would facilitate easy entry for investors, would also allow them to stay in the country ranging from between five years to 10 years as against the former maximum of two years. Many international investors who had problems with the old system were indeed pleased by the development. In the past, Nigerian embassies had been flooded with complaints by international investors that the nation’s visa process was very difficult and was limited to two years.
But it was not just the visa system that President Jonathan’s administration worked on. It also ensured that investors who wanted to register their businesses in the country did so with ease. In the past, the process was fraught with bottlenecks and could take as long as two months before a person or a foreign investor could register a business in the country. Realising the injury this was causing the nation’s attempt to attract foreign investments, the presidency, through the Ministry of Trade and Investment, designed a system that would reduce the number of days it took to register a business in the country. Today, it has been reduced from months to just three days.
But Olusegun Aganga, Minister of Trade and Investment, insists that the target of this administration is to reduce the time it takes to open a business to just 24 hours. “What we have done is to commence the investment-climate reform programme. We are working towards delivering a 24-hour service and for you to be able to register your company from wherever you are… We are installing the system to make us do that now, so that people will be able to register their businesses under 24 hours,” he said.
The President also seems to have realised that the nation needs a good tax system to attract international companies. It is well known that one of the incentives for foreign investors is a stable, efficient and well organised tax system. Countries such as Monaco, Liechtenstein and, to a large extent, Switzerland have used their tax system to attract investment into their nation, which they have used to build their economies. In the past, Nigerian tax system was confusing, which was a disincentive to some special kind of investments. But through a painstaking transformation process that was started under the administration of former president, Olusegun Obasanjo, and sustained by the administration of President Goodluck Jonathan, the Federal Inland Revenue Service, FIRS, was turned around to one of the best tax administrators in the world.
Today, the FIRS, through the design of the National Tax Policy, has created a conducive and friendly environment for international investment. “Any investor who reads the National Tax Policy document will now have some level of comfort. An investor does not want to get to your country and suddenly you are introducing some kind of taxes that were not put up to him upfront. That reduces trust and confidence in the system,” says Samuel Ogungbesan, Coordinating Director, Tax Operations Group, FIRS.
If President Jonathan’s administration scores high in using the tax system to attract investment, it has done the same in drawing the attention of foreign investors to the huge potential in the nation’s gas sector. Though the country is said to have more gas reserve than oil, the focus of previous administrations had always been centred on its oil production. This has often led to the nation’s gas being flared, an act that has been deemed as both wasteful and environmentally dangerous. As part of its transformation agenda, the President is determined to make the country one of the world’s top three liquefied natural gas, LNG, exporters by 2017, contributing about seven per cent of the global additional capacity of about 400 million.
Last November, Namadi Sambo, the vice president, led a high-powered delegation to Doha, the capital city of Qatar, for the first summit of the Heads of State and Government of the Gas-Exporting Countries’ Forum, GECF. There, the vice president enumerated the number of initiatives the country had embarked upon to turn it into a regional gas hub. The vice president told the gathering that President Jonathan had unfolded a series of policy initiatives aimed at an aggressive development of the nation’s natural gas reserves to create a highly competitive gas sector that would yield more jobs for Nigerians and become a growth-driver.
President Jonathan’s administration has equally demonstrated that the nation’s agricultural sector could be a growth-driver and a source of foreign direct investment. Though the sector is said to account for 70 per cent of employment and 40 per cent of the GDP, this has not translated into much revenue gain for the nation’s coffers and even for the farmers involved. But this situation has been changing since the inception of this administration. The presidency, through the Ministry of Agriculture, has had a paradigm shift in the sector. Hence, agriculture is now viewed as a real business as against a development project.
The government also invested huge sums of money in rice, cotton and cassava production in order to add value to their production and to encourage both foreign and local investments in the sector. So it is because of Mr. President’s determination to turn around the situation that he is putting a lot of focus on agriculture. “We have been treating agriculture from an investment perspective, which means that we want to attract investment into it in order to expand the comparative advantage,” says Akinwunmi Adesina, Honourable Minister of Agriculture and Rural Development.
While this administration has achieved success in the agriculture sector, it appears to have confronted mixed results in the area of security. In the past two years, the deadly group called Boko Haram has carried out a number of high-profile bombing campaigns, which have given the nation a bad image. However, President Jonathan’s administration has shown that it is up to the task of clipping the wings of the terrorist organisation. Already, the nation is working with its African neighbours, members of the European Union, and the United States of America towards developing a new security and counter-terrorism strategy.
The efforts at eradicating terrorism seem to have allayed the worries of foreign investors. It also explains why they have not stopped seeing Nigeria as a choice investment destination. Last year, for instance, Hyundai Heavy Industries of South Korea said it would establish a multi-billion-dollar shipyard in Brass, Bayelsa State, which it hopes to complete before 2013. At a meeting with Jai-Seong Lee, the President and Chief Executive Officer of the company at the State House, President Jonathan noted that his administration had realised the importance of foreign investment in generating more employment for its youth population. He added that the first phase of the project would provide at least 2,000 jobs for Nigerians.
The administration also recently reaped the reward of its hard drive to canvass for foreign investment when General Electric, GE, the American multi-national conglomerate, signed a Memorandum of Understanding, MoU, for $10 billion power projects with the federal government in March 2012. Under the MoU, the money would be invested in various power plants, which are expected to generate about 10,000 megawatts of electricity, while the company would take 15 per cent equity in each of the power plants constructed. During the signing ceremony at the Nigerian High Commission in London, Professor Barth Nnaji, Minister for Power, described GE’s willingness to work with the federal government as a show of confidence in the president’s vision in the power sector. He added that the government would not be involved in any of the projects, but would only provide guarantees for the private sector participants. He also noted that the projects would be heavy on local content, as the American company had been mandated to have local partners. “What we are doing today is the culmination of a series of work done; some behind the scenes, and some in the open. With the meeting between President Goodluck Jonathan and the Chairman of GE last month in Abuja, there was a narrowing of areas of focus for the country and GE to collaborate on specific areas of focus. Accordingly, GE developed MoUs specific to the various sectors, and today, the MoU we are signing relates to power alone,” Professor Barth Nnaji said.
Lazarus Angbazo, GE’s President and Chief Executive Officer, responsible for East, West and Central Africa, noted that the federal government was doing a good job in the reform of the power sector, which was attracting foreign investments to it. “That process has taken some time but I think it has made tremendous progress and it has taken the right level of steps. To support this process, GE is working with a number of Independent Power Producers, IPPs, that are interested in investing in the sector. We are also working with some interested investors, who are bidding for the distribution and generation assets that are being privatised. So, we see a good number of opportunities in those areas,” he said.
The administration also secured another foreign investment in the power sector to complement that of GE. The President, during his three-day working visit to Germany last month, sealed an MoU between Siemens and Nigeria. Under the agreement, the German company will build a workshop for producing small and medium-sized turbines, while also supporting the nation in its attempts to solve its energy problems. During the three-day working visit, the President also addressed some members of the German business community, urging them to invest in Nigeria. Similarly, the vice president, while addressing some foreign investors in South Africa, called on them not to miss the opportunities inherent in the nation’s economy for high-yielding investments. “Nigeria is a virgin land with huge opportunities for investment. The opportunity is there for huge growth and returns. The time is now for any investor that is willing to invest in Nigeria to come forward before others take your place,” he asserted. There is indeed no doubt that all the foreign investments would create several thousands of jobs for many young Nigerians and complement other programmes aimed at addressing the problem of poverty.