Recently, stakeholders in the African real estate market put up the argument that only stronger regulations and a more consistent business policy will attract investments into the continent and insisted on a recourse that could cushion any adverse effect should the untoward occur. Narrowing the situation down to Nigeria, the stakeholders alluded to the fact that weak and inconsistent policies were detrimental to the investment climate in the country, and in fact, were unanimous that it was still highly risky to invest in institutional capital in Nigeria because property laws and regulatory frameworks in general were not strong enough yet.
To buttress the argument, Resilient REIT Managing Director, Des de Beer, said at a conference: “We have been unable to spend the money which we raised in Nigeria. The economic policies related to currency control are not conducive for investing for us. Nigeria is on ice in our portfolio for the time being. We are looking to move our efforts elsewhere”.
Aside the real estate, it seems obvious that investors have had strong reservations about their operations in Nigeria for several reasons including policy summersault and unhealthy political climate. While it is true that corruption had been rampant in Nigeria, persistently painting the country with its brush at every international forum as if corruption were exclusive to Nigeria does no little damage to the image of the nation and surely does not portray her in a favourable climate for investors to operate in.
It, therefore, makes empirical business sense for those in authority to focus on improving the business climate through policies and programmes that can inject moral vibrancy into the system and ensure abhorrence for unhealthy business practices, which are what actually scare away investors.
Besides weak policy, poor infrastructure in terms of epileptic electricity supply and the high cost of alternative source of power weaken investors’ resolve to invest and hope to break even in the country. Invariably, unless the electricity situation improves and there is commitment towards institutionalising good governance and enforcing internationally acceptable ethical business conduct through friendly policies, investors’ inclination towards relocating their businesses away from Nigeria will persist.
Not too long ago, the Board of Trustees, International Freight Forwarders Association, at its National Executive Committee meeting, adduced that most of the firms that used to bring their cargoes to Nigeria had diverted them to ports of neighbouring countries because of the poor infrastructure and high cost of clearing goods at the Nigerian ports.
While it will be wrong for the federal government to turn a blind eye to all manner of illicit and anti-economic activities at the ports, creating uncertainty through unfriendly taxation and approaches indubitably will be counterproductive, thus destroying the very essence of injecting discipline in business and other operations at the nation’s ports and indeed other avenues of conducting businesses in the country.
Unhealthy political climate is yet another factor that has militated against investors’ presence as was the case prior to the conduct of the last general elections when political unrest and uncertainty generated tension in the polity forcing investors to adopt more than a cautious stance on their investments without considering the genuinely huge and lucrative opportunities in the country.
As economists have suggested, elevated policy uncertainty has had adverse effects on macroeconomic performance. No doubt, when investors and businesses are uncertain about government and regulatory policies, they are wary and would rather maintain studied reservation until such periods of uncertainty are clarified before they venture into investment and expansion.
Therefore, lack of clarity, political squabbling and unwarranted policy shifts just because such policy was instituted by the previous government are what scare away rather than invite and embrace investors.
The level of policy uncertainty and its adverse impact on investor/business confidence in the country could be meaningfully reduced if the process of policy formation encompasses coordination, rationality, consultation, collaboration and constructive criticism.
While the responsibility for policymaking typically rests with the government, it is essential that policy documents are informed by the opinions of all relevant stakeholders.