Insecurity: Foreign investment drops by $2.4bn –NESG

The Nigerian Economic Summit Group, NESG, has identified the increasingly worrisome insecurity challenges in the country as one of the major constraints to foreign direct investment inflows. Speaking at the opening session of the 18th National Economic Summit in Abuja, NESG Director- General, Mr. Frank Nweke Jnr, yesterday said an analysis conducted by the group had shown that the size and direction of foreign investment flows into the country in the 12 months to June 2012 fell by 19.14 per cent to $10.4bn down from the $12.8bn a year ago due to insecurity challenges.

Nweke, who took participants through a critical analysis of the performance of the economy, particularly the 2012 scorecard, said that the share of foreign direct investments (that is, investments in brick-and-mortar businesses) shrank to 43 per cent in 2012 from 62 per cent recorded in the preceding year.

“These results collectively echo investor perception about the extremist insurgence in the northern parts of the country and gradually renewing militancy in the Niger Delta and the resultant negative impact on investments into the country,” he said. He, however, noted that the decline in FDI inflow had given way to more foreign portfolio investments in the capital market, which were also beneficial to the economy but were more susceptible to liquidity shocks in the event of heightened global uncertainties.

Despite the security and militating challenges, including credit crunch which constituted a drawback to the country’s economic progress, the NESG’s DG noted that the country improved on its overall economic performance, scoring 4.18 points on a 10-point scale this year compared to the 3.93 per cent scored the previous year. He said: “Our analysis of Nigeria’s overall economic performance in the last 12 months to June 2012 shows that the economy scored 4.18 points on a 10-point scale.

“We can interpret this to mean that a distance of 41.8 per cent has been covered in terms of attaining all of the domestic policy targets and global developmental benchmarks observed within the review period. “And this leaves a distance of 58.2 per cent yet to be covered. Overall, this present score of 4.18 is an improvement from the 3.93 scored in the same period a year ago.”

Specifically, he explained that the country had made progress in performance in eight out of 12 domains of the economy, which include financial capital, macroeconomic environment, science, technology and information communication technology (ICT), public sector governance, human capital development, infrastructure, corporate governance as well as institutional effectiveness.

“Our analysis reveals that eight out of 12 domains made progress in terms of performance and scored higher in our analysis of the last 12 months to June 2012 compared to the same period a year ago.

“The domain of macroeconomic environment also made progress with a 23 per cent improvement in scores. In the last 12 months, the Federal Government has covered a 64.55 per cent distance towards attaining specific targets of economic growth, exchange rate and external reserves. “These targets were contained mostly in the NV20:2020 Implementation Plan and the Transformation Agenda,” he added.

A further breakdown of the positive performance at sub-domain level showed that the highest improvement in scores came from the capital budget utilisation in science and technology (+ICT) sector, which was largely attributed to low score in 2011 and improvement in the budget utilization, warranting a higher score in 2012.

“The amount of documents required for export which improved as a result of Nigeria’s higher score in the 2013 Doing Business Report versus the 2012 report; albeit this was still a very low score i.e., 2.13 points out of 10. “Private sector investments and the achievement of sectoral targets also witnessed significant, aboveaverage improvements in scores. The time required to get a building permit was the area of least progress. “According to the Doing Business Report 2013, this takes about 85 days in Nigeria compared to global average of 26 days,” he said.

Comparatively, the five domains that scored below the aggregate included infrastructure and political governance, among others, adding that the first was that the domain of corporate governance scored the highest points of 5.64 per cent followed by the domain of political governance scored the lowest points of 3.12 per cent.

He explained that corporate governance made the score as a result of significant improvements in corporate ethics and disclosures as well as auditing and reporting standards especially in the financial services industry, as an aftermath of the local banking crisis, while political governance’s low score was due to the frequent impasses between the legislature and executive over budgetary matters, which causes delays in budget passage.

He said the low score was also a result of the unending probes into untraceable public funds which have created a high level of public distrust for politicians, adding that “for instance out of 144 countries, the Global Competitiveness Report ranks Nigeria as: 102nd in terms of ‘public trust for politicians’; 122nd in terms of ‘favouritism in decision making’; and 135th in terms of ‘diversion of public funds’.

The group, therefore, called on government to step up measures that would create enabling environment for businesses to thrive. Nweke commended the government for sundry initiatives targeted at achieving improved performance of the economy under the ongoing transformation agenda. Meanwhile, President Goodluck Jonathan yesterday restated his administration’s commitment to instilling discipline in public sector by tackling headlong the problem of corruption and arrest the general feeling amongst the populace in order to enlist all stakeholders’ support for the ongoing transformation agenda.

The President, who declared the summit open, said everything would be done by his administration to promote transparency and accountability in governance as a strategic step towards creating enduring platforms for promoting the development of the country on a sustainable basis. Represented by Vice- President Namadi Sambo, the President noted that lack of trust in the public sector was an inherited burden which his administration will reverse in order to make people believe in government policies and programmes and support such initiatives in the long-term interest of the country. “Let me assure you all that as far as this administration is concerned, it is no longer business as usual. We are strongly committed to rebuilding the hopes of Nigerians in the future of our country.

I take seriously the trust and confidence reposed in me by Nigerians. I will discharge this sacred trust to the best of my ability, to the benefits of all people,” he said. He also stated that as a means of entrenching probity and transparency in government, his administration had instituted the policy of performance contract, as well as empowering the Economic and Financial Crimes Commission, EFCC, to prosecute those that undermine the system, no matter how highly placed. The President said: “The task of national building requires that both the leadership and the governed to demonstrate integrity and accountability in the conduct and management of national affairs.

This is the guiding principles behind the determination of our administration to hold people accountable and to ensure that business in both public and private sectors are carried out responsibly in compliance with the global best practice.

“To accomplish this objective, we started reforming various sectors of the economy notably oil and gas, agriculture, solid minerals, works, housing and power immediately after coming into office. We are also placing emphasis on transparency and accountability in oil and gas industry. “The newly introduced process of payment oil subsidy on the importation of refined petroleum products to marketers as well as the empowerment of the EFCC to prosecute those that are undermining the system no matter how highly placed clearly underlined our determination.

“To make top government officials, including ministers, permanent secretaries, directors and chief executive officers of public agencies are accountable, we have introduced the Performance Management System.

With the signing of Performance Contract with ministers, the first step towards achieving has been implemented. I trust that these initiatives will facilitate improvements in economic governance in our country,” the President added. While pointing out that the nation is faced with internal and external challenges, President Jonathan said Nigeria cannot isolate herself from the ugly developments in the global environment, adding that “we can only shield our economy from these crises through sustained implementation of reform measures we have initiated.”

According to him, his administration is not only determined to set the right priorities, goals and targets it is also determined to create the enabling environment for the private sector to thrive by involving all stakeholders, including civil society organisations, in the drive for change and transformation of our great country.

National Mirror