Investors shun four South West states

Posted by News Express | 23 November 2020 | 955 times

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Except for Lagos and Ogun states, the downward trend of Foreign Direct Investments (FDIs) to South West states has exposed the inability of their governments to make their environments business-friendly.

Lagos and Ogun states had the lion’s share of Nigeria’s $93,284,945,10559b FDI between 2013 and first quarter of this year. With Southwest’s $81,808,183,342.05 (87.70%), Lagos and Ogun had almost 97 per cent of the region’s FDI.

An analysis of data from the National Bureau of Statistics (NBS) revealed that Oyo, Ondo, Ekiti and Osun states remain ‘poor cousins’ to Lagos and Ogun despite sharing many things in common.

Even though FDI inflows have continued to diminish in the light of global financial and health crisis, the manufacturing and services sectors remain dominant, offering many of the states an opportunity to take advantage of the congestion and saturation in Lagos to attract new investments.

However, experts blamed the four states for failing to explore their comparative advantage, especially in agriculture (a goldmine in the old Western region) to turn it into value. They also blamed poor quality of infrastructure, market and policies that attract investment.

In 2019, NBS figures reveal that Nigeria attracted $23.99b foreign investment out of which Lagos got $17,67b (73.6 per cent), Ogun $16.01m, while Oyo had $3.74m and Ondo attracted a paltry $30,000.

Statistics for the first quarter of 2020 did not show any improvement, even as Ekiti and Osun States were still not in the radar of states with higher attraction factor.

Cocoa remains a priority area for Nigeria as the country currently ranks the fifth largest cocoa producing country in the world. With a total output of approximately 300,000 tonnes, Nigeria is behind Ivory Coast (2million tonnes), Ghana (883,652 tonnes) and Indonesia (659,776tonnes). Production of cocoa was hitherto clustered in Southwest states such of Ondo, Osun and Oyo.

With dairy development programmes gaining ground in Oyo and Ekiti States, operators are equally optimistic that new investments might flow into neighbouring states. Investment experts say Ekiti was like a Pariah state to foreign investors between 2014 and 2018 but expressed optimism that the policies of the new government are already yielding positive results. The state government disclosed that it has secured $2.10b direct investment between 2018 and first quarter of 2020.

For Ogun State, a partnership with Odu’a Group to boost local cassava production will further boost its manufacturing capacity and profile among South-western States.

Similarly,, the Presidential Artisanal Gold Mining Development Initiative is expected to drive exploitation of gold in Osun, while Bitumen in Ondo provides an opportunity to increase volume of investments in the Southwest region.

If many of the states develop their agro-allied industries and address impediments to investment, they are likely to enjoy the spillover from Lagos, Ogun and make the states the off-taker for many goods.

Mr. Akin Oyebode, the Special Adviser to Governor Kayode Fayemi on Trade and Investment, told The Guardian that between 2014 and 2018, the foreign direct investment to the state was zero. He noted that there was no investment promotion agency and government, at the time, did not make effort to woo investors. He said it was difficult for investors to come into the state because of uncertainty, insecurity, lack of access and clear policies/laws.

 “Since Governor Kayode Fayemi returned to office, Ekiti State has started to attract significant foreign investment. Our government has secured a partnership with the United Nations Office for Project Services (UNOPS) and the Sustainable Housing Solutions (SHS) Holdings to invest $2b to build 50,000 houses with renewable energy within the state from 2020 to 2023.”

According to him, a breakdown of the investment includes the $10 million by Promasidor for Ikun Dairy Farm and the UNOPS – $2b for affordable housing. An Investment expert and Chairman, Board of Ogun Guandong Free Trade Zone, Prince Gboyega Nasir Isiaka, said Lagos and Ogun State were able to attract investment because of their location and proximity to the Sea Port. He noted that there is no exceptional facility provided in Ogun that is not also available in Ekiti or Osun states.

He said other states in the South West could not attract as much investment as Lagos’ and Ogun’s because of difficulties in moving raw materials and finished products from one location to the other as well as poor power supply. He, however, advised Oyo, Ekiti, Osun and Ondo to design strategies to promote their comparative advantages and improve on their infrastructure.

Ondo State officials said the three and half years of Governor Oluwarotimi Akeredolu has seen the state enjoy more than $3 billion in FDI across the three senatorial districts, creating 19, 224 jobs. Special Adviser to the Governor on Development and Investment, Mr. Boye Oyewumi, said it led to economic prosperity and more prospects.

Oyewumi recounted that a lot of foreign investors had shown interest in the state recently, especially in the agricultural sector which included the Austra-Trade for cocoa, cassava and tomatoes, estimated at €125m, giving them 5,000 hectares of land and waiting for financial closure.

He listed others to include bitumen, which has begun modular exploitation; Wewood, Ondo-Linyi and Ore Industrial Park with five functional factories: the hub is majorly connected to the City of Linyi in China. Oluwa Glass Factory, which is to be resuscitated by German partners; Russian tractor assembly plant.

Oyewumi, who is also the Chief Executive Officer of Ondo State Development and Investment Promotion Agency (ONDIPA), identified another foreign plywood and MDF company in Ondo, the headquarters of Ondo West Local Government Area of the state.

According to him, there are foreign interests in Ondo Deep Sea Port, put at over $1.2b investment. The other is the Sunshine Egg Processing Plant in Emure-Ile by Belgian partners, estimated at N4.5b with capacity to produce 500,000 eggs daily and creating 10,000 direct jobs.

He noted that the pasteurized egg factory would save the country $34.5b of foreign exchange annually, while the Sunshine Chocolate Factory in Idanre, a partnership with Spagvola, is a multi-million Naira project.

Aside huge investment financially, he revealed that the state has enjoyed technical support and partnership from foreign investors, who see huge prospects in the state.

Speaking on the impact, he noted that it has created 19, 224 jobs in the last two years. “Some of these factories, industries and ventures are still at the rudimentary stage. By the time a lot of them get fully on board, the total number of jobs will increase,” he said.

Senior Special Assistant to the Governor on Energy and Mineral Resources, Mr. Femi Akarakiri, said that the state government had made investors see the investment potentials, especially when it comes to security of investment.

An Economic Development Expert and former Ogun State Commissioner of Finance, Mr Kehinde Sogunle said for the states that did not have Higher Attractive Factors (HAF) for FDI in the South West to get out of the doldrums, they must increase the purchasing powers of their residents and develop “State Specific Economic Development Strategy instead of relying on the National Economic Development Strategy, which is generic.

He said: “Foreign Investors will consider market and the purchasing power of the people before investing in any environment. They will also consider Business Climate, that is, the availability of other corroborative industries, both service and manufacturing – that will support their investment.

“Government policies that will add value to investment such as tax holiday and other incentives like good road network, adequate power supply can attract foreign direct investments.

“The more investors move away from Lagos, the more difficult investment becomes in terms of getting returns on their investment because of inadequate manpower and difficulties in retraining most of the graduates to fit into modern business environment.”

He said Ogun State had substantial foreign direct investment because of its proximity to Lagos and the fact that Lagos is already congested for investment. He, however, advised other states to leverage on their natural advantages to attract more investors.

He said: “Oyo State has land mass that is fertile for agriculture that should attract investors that would add value to produce, just as Ekiti and Ondo States should be able to produce enough yam and tomatoes to attract foreign investors.

Speaking on the capital importation records of states in the South West, the Executive Secretary, Manufacturers’ Association of Nigeria (MAN), Oyo /Osun /Ekiti and Ondo State branch, Mr. Nanzing Rimdan, disclosed that, in the last one year, there had not been any new manufacturing company in the states.

He also said that, in the last five years, “Only two companies got new sites for expansion”.

The Development Agenda for Western Nigeria (DAWN) Commission said a lot is being done in the region to attract and retain investors.

Head, Economic Development and Investment of the Commission Ololade Fatunsin, said: “We are familiar with the figures from the NBS that the large chunk of FDI is in Lagos State. We understand why Lagos has such huge investments, which is not far-fetched. It is the commercial hub of the country. It has been doing a lot when it comes to attracting and retaining investments in the past years.

“It is not that other states are not doing well. Ogun State has enjoyed the proximity to Lagos at its comparative advantage. What you see is that most of investments in Ogun State are a spillover from Lagos State. Some of the investors will tell you that they were in Lagos but one or two things happened that made them move to Ogun State. As far as they are concerned, they are in Lagos. You can see that Ogun State is sharing that investment parcel with Lagos.

She said that studies had been conducted on the business environment of the region with a view to identifying the gaps or any form of hindrances. “We were able to identify some bottlenecks. One of the bottlenecks that we have been working on for years is tax harmonization. We have multiplicity of taxes. That singular act affects a lot of businesses. We have been working with the states to harmonise. There were quite a lot of bottlenecks but we prioritise, based on the one we can have a significant impact.”

She stated that the four states of Oyo, Osun, Ondo and Ekiti are largely agrarian and have comparative advantage in agriculture, tourism and solid minerals. She added that the Commission worked on security of the region leading to the birth of Amotekun Corps.

For the Associate, Economic Development and Investment of the DAWN Commission, Oludele Folarin, who advised the state governments to think outside the box, development is hinged on entrepreneurship. She said the most important thing is for government to design policies.

For a Development Economist and former Consultant to UNDP, Dr. Samson Olalere, one of the major factors militating against investment flow into the Southwest and the entire nation is the deficit in infrastructural development and instability in both economic and development policies in the polity.

He said no investor would come and take any investment risks under such conditions, noting that the drive for inflow of investments by powers that be in the region is very low because of over-dependence on the monthly cash inflow from the Federal Government in terms of revenue allocation and distribution.

Olalere said, “The solution to this problem is restructuring of the polity, that will bring about resource control that will allow each state to look inward to annex her resources for growth and development. It will also foster healthy competition amongst states and zones. It will discourage the over-dependence on crude oil resources that has made states go cap-in-hand on monthly basis to collect allocation from the centre, often to the detriment of oil producing states whose environment is being destroyed.”

However, a very harsh regulatory regime, especially as related to taxes and levies in Lagos State, and infrastructural challenges, may be pushing investors to neighbouring South West states, as witnessed in the bike hailing services and industrial firms.

Capital Importation by type of investment in the last five years showed that Foreign Direct Investment into the country and other forms of investment are largely concentrated in equity, other capital, bonds, money market instruments, trade credits, loans and currency deposits.

By Destination of Investment, Lagos state emerged as the top destination of capital investment in Nigeria in Q2 2020 with $1.13 billion. This accounted for 87.30% of the total capital inflow in Q2 2020.

In Q2 2020, Ekiti, Ondo, Osun, Oyo attracted nil investment, while Ogun raked in $11 million. Between Q1 2019 and Q2 2020, Lagos raked in about $24 billion, with Ogun State following with $28.71 million, while Oyo ranked third with $3.74 million. Other South Western States struggled to attract significant investments.

To members of the Organised Private Sector, Lagos State is unique in many ways, as it is the sixth largest city in the world and the most populous state in Nigeria and is also the leading non-oil sector contributor to the country’s Gross Domestic product (GDP).

The state contributes more than 30% of the nation’s GDP, consumes more than 60% of its energy, pays 65% of its Value Added Tax (VAT), and accounts for 90% of Nigeria’s foreign trade and 70% of all industrial investments.

While speaking with The Guardian, the Director General of the Development Agenda for Western Nigeria (DAWN) Commission, Seye Oyeleye, acknowledged investors’ preference for Lagos and Ogun states as choice States for investment due to the level of infrastructural development and access to market.

He also noted that other states in the region are not relenting but also setting up Investment Promotion Agencies to address bureaucracies hindering investment inflow to their States.

He explained that Ondo has intensified efforts towards its Bitumen exploration, while Ekiti has reduced the right of way (RoW) charges for telecommunication companies to N145 per linear metre in a bid to enhance broadband penetration.

For Oyo State, he added the Governor’s strategy is to embrace public-private partnerships as a means of reviving moribund assets for efficiency and profitability. He however noted that the political will to make certain decisions and realign agenda to attract needed investments rests with the leaders of the states, adding that collaboration among the states would aid their commonwealth.  (The Guardian)


Source: News Express

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