Waiting For Foreign Direct Investments To Develop Nigeria: A Terrible Calculation

share on:
foreign direct investments

A Nigerian economist explained that his first action as Nigerian president will be to devalue the currency and privatize many national assets. This, he insists, will attract foreign investors to invest in Nigeria, since their foreign currency will yield more value for them. He further explained that he will create enabling environment for foreign investors to bring foreign currency to create jobs and development. Foreign direct investments (FDIs) will take care of electricity, agriculture, mining, building, manufacturing, transport, education, entertainment, telecommunications, distribution and all production sectors. While Nigerians organize themselves in groups for patronizing these selfless angels who have come to build our country for us.

 

An important nursery school rhyme insists that “as YOU make your bed, so you lie on it”. If you leave your bed dirty, people will step on it with dirty shoes or scatter it more. Neat people will not come into your dirty bed except to take away something they desire for themselves. Whenever their desired object finishes, they pack and leave your dirty and unsafe bed for you. Also, if they find their desired objects in a neater and safer bed, they will abandon you and your unsafe bed.

 

Foreign direct investment is a business establishment by a foreign company or individual in another country.[1] It involves launching business operations, acquiring existing businesses or controlling company interests in other countries. Foreign direct investments are commonly made in open economies with skilled workforce and growth prospects for constant returns.[2]


 

Societies are formed by members’ agreement to collaborate and utilize their resources for producing what they need. Sometimes societies are unable to produce all the commodities they desire, or they lack specific resources for some commodities. In this case, people from other societies fill the demand gap, and make profits for themselves. In cases where the main society does not produce majority of what they consume, even when they have the resources, they keep borrowing and selling off priced treasures. Smart merchants hope to buy priceless treasures like gold from desperate/unproductive people who auction them at giveaway prices.

 

Nigerians do not produce majority of what they use, instead Nigerian government auctions crude resources[3] for foreign exchange. The funds from sale of crude resources are distributed among government officials and parastatals for salaries, renovations and installations. Since the government does not invest in industrial research and production, the local production gap expands. Hence, local entrepreneurs liaise with foreign producers in supplying goods and services to tap most of the salaries and renovation funds. The service sector constitutes only little percentage of the Nigerian population, being people on government payroll. So when protests about unemployment and hunger rise high, Nigerian government starts begging for foreign direct investments in Nigeria.

 

However, the rising appeal for FDI springs from faulty planning and perception about business motifs. They are not coming to develop your country, they are looking for short and long-term profits in delivering  goods and services. Thinking that Nigeria desperately needs FDIs to develop presupposes a lack of faith in the present and future productive capacity of Nigerians. That is why many Nigerian politicians insist that Nigerian youths are unemployable[4][5], even after denying them access to mineral resources for production. The downsides of foreign direct investments abound:

  • “The more a country attracts foreign direct investments, the more dependent she is on the source(s) of the production and the more her deepening state of underdevelopment.”[6]
  • Developing countries’ local producers, who are not YET as advanced as the foreign producers, may not be able compete for a good market share with the foreign producers. Hence, the local producers go out of business, or produce inferior quality for the lowest class of the society.
  • After a short time, FDIs push back their starting capital to their home countries, and continue sucking the host country. “FDIs easily raise capital within an economy given the neo-colonial orientation of third world countries, only for them within a short period, to be declaring super profits and thus engaging in repatriation of capital which in turn worsens the balance of payment equilibrium that they were in the first instance expected to ameliorate.”[7] Many of these flight-at-night investors[8] or economic gamblers only tap resources without giving any real Nigerian-capacity development.
  • The employment opportunities they claim to create for Nigerians are positions of “glorified clerks or ceremonial directors or managers (who) do not possess the power to alter the production policy.”[9] The remaining employment are errand-boy positions, which do not provide serious technological knowledge or challenge.
  • In order to justify their jumbo pay, the indigenous staff are used to lobby for favourable policies, even against the developmental aspirations of the host countries. The staff’s high salaries are meant to distract them from realizing that they are assisting foreigners in exploiting their (local staff’s) own country.

 

Type of Foreign Direct Investment Nigeria needs

It will be false to assume that all foreign direct investments are unsupportive to the development of a nation. Some technological companies establish industries from which workers of host countries learn modern ways of production. In these type of manufacturing companies, local workers gain sufficient knowledge that could enable them develop their local industries. Lee Kwan Yew insisted that his country only needed foreign direct investments who can teach his people technology.[10] Nigeria equally needs foreign direct investments who are capable and ready to teach Nigerians technology. Apart from learning technology, after some level of industrialization, Nigerian industries need to be challenged in competition with formidable foreign companies, to avoid laxity.

 

Conditions for attracting the desired Foreign Direct Investment

  • Political stability: is a situation whereby political activities consistently follow the particular order that has been established for peace and collaboration in the society. It is characterized by rule of law, strong institutions rather than powerful individuals, low corruption and a business climate that is conducive to investment.[11]

 

Presently, Nigeria is politically unstable because there is no true agreement between the component ethnic communities in Nigeria. There has not been any accepted direction to which Nigeria is going, apart from the inter-regional struggle to get and hold power to share the resource-funds. The constant struggle for power between the different sections of the country makes it difficult to predict the political bearing for a long time. Hence, the desired companies are not sure of the longevity of any government policy upon which they are to make serious investment decisions.

 

  • Reliable infrastructure: good transportation network, power and communication reduce the cost of production for desired FDIs.

 

  • Skilled labour: technological FDIs require skilled people who can understand and properly carry out the complex processes of technical production

 

  • Stable indigenous businesses: FDIs will require support services in their production. Car manufacturers will prefer to establish their industry beside steel companies or other service sectors relevant to their production.

 

  • Security for their lives and property

 

Conclusion

Relying too much on foreign direct investments for creation of employment and development of Nigeria shows hesitancy for technological productivity. It shows that Nigerian government is not ready to fund research and development, or to allow ethnic communities collaborate in utilizing their resources for productivity. Yet, if Nigeria must welcome FDIs, they need to predict the after-effect on the productive capacity of their people. Creating favourable atmosphere for foreign direct investments that will not increase your people’s productivity may imply a waste of resources. It increases your people’s laziness and greed for patronizing foreigners at the expense of local producers and economy.


[1] Foreign Direct Investment (FDI) https://www.investopedia.com/terms/f/fdi.asp#ixzz56KCJbsD9

[2] Foreign Direct Investment (FDI) https://www.investopedia.com/terms/f/fdi.asp#ixzz56KCJbsD9

[3] Crude resources that have been confiscated from different ethnic communities using military force

[4] https://icirnigeria.org/why-nigerian-graduates-are-unemployable-dg-science-tech-agency/

[5] Femi Falana, The Right To Education And The Challenge Of Knowledge-Production In Nigeria, in a convocation lecture at Dominican University, Samonda, Ibadan, on 7th June, 2017

[6] Aluko O, quoted by Hassan A. Saliu, “The politics of foreign investment” In Issues in contemporary Political economy of Nigeria. edited by Hassan A. Saliu. (Ilorin: T.A. Olayeri press, 1999). 298

[7] Obasanjo O, quoted by Hassan A. Saliu, op. cit. 298

[8] Shonekan

[9] Hassan A. Saliu,

[10] Cf. Lee Kwan Yew, From third world to first (United States of America: Harper Collins, 2000)

[11] Cf. Ben Shepherd, Political Stability: Crucial for Growth?