House Committee on capital market charges SEC on NSE status


Monday, February 01, 2010

• Arunma Oteh
•Photo: Sun News Publishing

Nigeria is a fast growing economy with great opportunities available in almost all sectors. This speaks volume why the economy needs foreign direct investment to shore its improvement models. The emerging economic nature of Nigerian economy is such that while proffering solutions, care will be taken not to inject characters capable of eroding the efforts to elevate it to international standards.

The international standards we envisage for the Nigerian economy exposed it to the vagaries of international debilitating effects of financial markets’ policies of developed economies. However, the Nigerian market is not yet deep enough to withstand the kind of global meltdown that enveloped recognized economies and markets in the world. It is observed that today, the global financial markets and economies still operate under challenging conditions resulting in the sub-prime crisis that began in 2007 leading to the collapse of Lehman Brothers.

Although many would have noticed the imbalances and strains that were beginning to appear in the global financial markets, stemming from the meltdown in the United States of America housing market, very few could have anticipated the extent and severity of the financial storm that subsequently enveloped markets and economies around the world. The era of the first debilitating impact that affected Nigeria stemmed from the US bubble burst in the real estate market, the events opening up in recent time indicate that a round tripping of the meltdown is lurking around the corner with the crash of Dubai real estate market.

In Nigerian parlance, efforts will be geared towards creating cushioning effects of the second round of downturn as Nigerian may not be able to absorb another meltdown witnessed within one decade. This again speaks volume why Nigeria must as a matter of fact create derivatives and windows that would act as solvent to the settling meltdown otherwise the effect will be tremendous and negatively impact on its economy.

To attract and track down direct investment in Nigeria for the purpose of improving the local economy, the business environment must be conducive such that investors will increase confidence of coming whenever they like to supervise and value the extent of turnover accruing from their investments. As long as there is such assurance devoid of unnecessary bottlenecks but with full transparency on the part of business partners, the flow of direct investment will be sustained. There will also be level playing ground for every player in the economy for partners sustain Uberime fidei (utmost good fate) otherwise the foreign partner will view such partnership as white elephant project.

Most countries with robust economies today have tracked and continued to attract foreign investments for their industry growth. Government policies and legislations from the country’s legislature do more in fertilizing the ground that would suit foreign investors. This is the stand point in the effort to track foreign investment especially in an emerging economy like Nigeria.

According to Vladimir L Kvint, a Professor of Management System and International Business, Fordham University Graduate School of Business, this is the approach used by Hungary government and legislature in securing the highest level of foreign direct investment (FDI) per capita among all emerging economies and markets. However, in absolute numbers, the largest FDI recipient in the emerging markets of Europe is Poland. This is because at the start of the 2002, Poland had attracted $60 billion in total FDI capital. This is according to Alan R. Ackerman in his ‘Investing Under Fire’. This however precludes China that has remained the leading recipient, globally, among all emerging market countries, overtaking United State as the ultimate FDI recipient world over.

But Nigeria may not get the tremendous level of FDI compared to its needs and position as a promising large emerging market. A lot of factors abide why some countries attract so much foreign direct investment than others. One would ask why would a country with such vast natural resources, highly educated, hardworking population, a tradition of great business men and women who are eager to engender innovation not able to track foreign investment from foreign investors.

In proffering answer to the question, one would recall that Russia in the past decade attracted less cumulative FDI than either Brazil or China attracted in only one year. One thing should come to mind in this aspect. It is not that Nigeria is more erratic or that the market is not large enough to accommodate what would come like the other market, the issue is that little disturbance in African country is viewed to mean horrendous crime that is unprecedented. This more reason why where black Africans succeed, no white man will fail.

The level of grants and facility given to Africans are prior to release written off as bad debt because the preponderance of checks and balance and scrutiny/investigation to ascertain the potentiality of a repeat gesture, would have taken off the shine needed for the grant. In majority situation, no white man or white association comes into the shores of black man for investment without having an agenda what he intends to gain in return.

The more reason why Nigeria fail to attract the required FDI to match the local needs is because for any investor or company executive to put together a strategy for entering an emerging market must weigh the problems and opportunities brought on by the various aforementioned recent influential global trends. But one must first be able to define what an emerging market it. The International Finance Corporation, a division of the World Bank Group, differentiates markets based on gross domestic product per capita (GDP/capita.
In many countries in the world emerging market, we have seen a paradoxical situation develop in which a government welcomes foreign investment but does not give investors leeway that they need to make their projects successful.

The Nigerian experience has been on the encouragement level because those who matter have not seen the wonder FDI could attract to the economy through private individual connection.
Experience in Nigeria is that those who are at the helms of affairs may at the initial stage support the gesture but when the support start to come in their numbers, they start to see it from the angle that they are not directly benefiting or are not receiving the credit.

This will force them to if not make draconian laws to attract some gains to themselves or to governments if channeling such to them will expose their evil intents. It is still vividly in our minds how government departments stopped states from borrowing money abroad. Although, some state governors borrow for their states for the purpose of seeing something to embezzle and not for projects as projected.

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