Needs to halt exit of foreign investors from Nigeria

By Bassey Ekong (culled from thenationonlineng.net)

Despite Nigeria’s vast business opportunities for foreign investors, many foreign investors have exited Nigeria due to their inability to deliver favourable returns to shareholders.

Nigeria is endowed with significant natural and human resources, but the failure of the country’s leadership to get it right over the years has continued to set the country backwards.

General economic meltdown, policy somersaults, failure to protect foreign investors investments and lack of deliberate efforts to separate business from politics have sent many foreign investors back home.

In the last one-and-a-half decade, many foreign investors have exited Nigeria on account of the high cost of production, inefficient government policies, insecurity, decaying infrastructure and economic recession.

The most recent victim of Nigeria’s harsh operating environment was Africa’s biggest grocery retailer and the South Africa-owned chain of stores, Shoprite, which last week announced its exit from Nigeria after 15 years of operation.

Though the company claimed the decision was reached after it re-evaluated its operating model not just in Nigeria, but across Africa, it should be pointed out that Nigeria’s harsh operating environment forced the company of the country.

Apart from facing the challenges of inadequate power supply, corrupt government agencies also collude with local companies scared of competition to drive foreign companies out of the country.

In the telecommunications sector, Abu Dhabi’s Etisalat had in 2017 terminated its management agreement with its Nigerian arm.

All UAE shareholders of the company exited and left the board and management of the Nigerian brand. The decision was made by the telecommunications networks after it’s $1.7billion loan talks collapsed.

All UAE shareholders of the company exited and left the board and management of the Nigerian brand.

In the financial sector, the Central Bank of Nigeria (CBN) had in late 2018 announced that British multinational banking, HSBC, and Swiss multinational investment bank, UBS were closing their representative offices in Nigeria.

The apex bank gave no official reasons for their exit.

Barely three years after it had bought 63 per cent shares in Lagos Flour Mills from Dangote Group in 2012, Tiger Brands and its executives realized the complications of the Nigerian market and sold back the investment to Dangote in 2015.

Following the rising costs imposed by the federal government, which made it too difficult for the South African retailer, Truworths, to operate in Africa’s biggest economy, the fashion retail company in 2016 closed its Nigerian stores and left the country

Chief Executive Officer of the company, Mr. Michael Mark stated that “The regulations were making it extraordinarily difficult to get stock into the stores,” Mark said. “We can’t get money out, so there was no point any longer.”

In the oil and gas sector, multinational oil and gas companies have been gradually selling their onshore assets since 2010.

Faced with destructive attacks, oil theft, pollution and community issues, Royal Dutch Shell Plc last week acknowledged that its spill-prone operations in Nigeria were no longer compatible with plans to go green.

“The balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions,” Shell’s Chief Executive Officer, Ben van Beurden told investors at Shell’s Annual General Meeting last week.

“We cannot solve community problems in the Niger Delta,” Beurden reportedly added.

The company has started discussions with the Nigerian government on how to move forward.

Indeed, after half a century of pumping oil out of Nigerian swamps, the company sought to put aside chronic problems such as pollution caused by ruptured pipelines and the resulting legal battles with local communities.

Concerns have been raised that some of these multinational oil companies were planning to exit Nigeria considering their refusal to sanction new projects.

Indeed, Nigeria’s operating environment has become increasingly challenging to investors.

While the Nigerian government has continued to make efforts to attract foreign investors, no deliberate efforts are being made to protect their investments.

The government’s failure to protect foreign investors has exposed their investments to threats by government agencies and local investors.

These local investors take advantage of their familiarity with the political environment to undermine their foreign partners and in some cases take over their investments.

Apart from retail traders, and oil companies, other categories of investors are also facing challenges.

For instance, the SHI-MCI yard built by Samsung Heavy Industries Nigeria (SHIN) Limited at the LADOL free zone in Lagos is under threat due to the failure of the Government to put an end to the dispute with its then landlord and service supplier Ladol.

SHI-MCI is the only fabrication and integration yard for Floating Production Storage Offloading (FPSO) vessel in Africa was built for the fabrication of the Egina FPSO, Total’s largest FPSO globally. This is the biggest milestone for any contractor in Nigeria and perhaps the biggest driver of local content in the country.

However, after its record-breaking milestones in the Egina project, the yard has become virtually idle due to the tactics of its Landlord LADOL.

NCDMB can mostly only laud local content achievements through the Breakthrough EGINA and yet seem to not be able to actively intervene, by supporting the yard which made this possible through jobs and protecting the facility from possible closure.

SHI-MCI set a new record in the Nigerian Content Development in the Egina project and if it is shut down, no other investor can break the record.

Egina deepwater project is the largest deepwater project executed in Nigeria and will possibly forever remain the largest if the yard is shut down.

This shut down will be the biggest loss for local content fabrication and integration in Nigeria and likely to affect future deep offshore projects. Additionally, it will make the NCDMB mandate for in-country fabrication and integration impossible because of the lack of any quayside able to berth FPSO vessels with the only one at SHI-MCI.

Apart from the lack of intervention to utilize the local manpower trained by SHIN in the course of executing the Egina project, SHI-MCI and other investments at LADOL are also facing other multiple challenges.

An American company forced out of the free zone had sought the intervention of President Muhammadu Buhari and the US Embassy in Nigeria.

When Africoat, a Nigerian-registered pipe-coating company came into Nigeria, it purchased complete corrosion and concrete weight coating plants from Korindo in Indonesia in 2012, packaged for freight and shipped to Nigeria by charter vessel directly to the Lagos Deep Offshore Logistics (LADOL) base in Lagos where it established a world-class pipe-coating facility.

However, the vision and mission of this United States’ pipe-coating giant to build local capacity and create employment opportunities were said to have been truncated by a dishonest caretaker of the free zone, which allegedly deployed all arsenals at its disposal to strangle and seize Africoat’s assets by creating a toxic working environment.

This created the impression that LADOL was above the law.

Stakeholders emphasized that NEPZA as an authority in charge has the power and ability to intervene and protect investors when such situations occur.

There is an urgent need to halt the further exit of foreign investors as this will truncate Nigeria’s dream of creating job opportunities and growing its economy.

LADOL’s disputes with Samsung Heavy Industries Nigeria are also subject of litigations in Nigerian courts, while arbitration is also ongoing in the UK.

LADOL’s high handedness fueled by its claim of having powerful contacts at the highest level of Nigeria’s political leadership has made a peaceful settlement of these disputes a herculean task.

Multiple litigations and arbitrations are disincentives to investments.

It is strange that the federal government would attract foreign investors and a Nigerian company chases the investors away without any consequences.

While LADOL was allegedly killing investments, many government agencies, appeared to be watching helplessly.

There is a need for the Nigerian government to rescue foreign investments from the clutches of the harsh operating environment.

Ekong, a public policy analyst, writes from Port Harcourt