In May 2014, Nigeria will host the World Economic Forum (WEF) on Africa. The World Economic Forum itself is the highest level of global gathering for top-level business, academic and political leaders. The aim of the World Economic Forum, founded in 1971 by Professor Klaus Schwab, a German academic, is to bring advancement to mankind by promoting collaboration between corporations, academics, Non Governmental Organisations, social activists etc. What the WEF is far more known for is its annual meeting in the Swiss resort town of Davos. It was at one of such that the late Nelson Mandela was quietly persuaded not to execute the African National Congress disastrous plan of nationalising South African industries.
The WEF also stages a mini-Davos in Africa, Latin America and the Middle East to better focus the attention of global capital on emerging and promising economies in these regions. Nigeria will be hosting the World Economic Forum for West Africa in May 2014 and has selected the theme “Inclusive Growth and Job Creation” for the event. The question arises about the extent to which Nigeria’s monopoly of the attention of the CEOs of world’s leading firms, financial groups and property developers policy experts, media and social activists for four days could be used to promote growth and jobs in Nigeria.
First of all, the selection of Nigeria to host the World Economic Forum on Africa is a public relations triumph that a 10 billion dollar Good Nation, Good People marketing campaign cannot deliver. It is said that an economy starts to join the league of global economies when a McDonald franchise opens in it (Nigeria has started with KFC which is not bad at all). Hosting of the World Economy Forum regional meeting is a strong signal that a country is a serious proposition for international investors. Such badges of approvals are important in the world of international business and finance where perceptions matter as much as reality. What the world sees of South Africa is less the violent mugging and rape incidents but the presence of international manufacturing, technology and financial brands-Mercedes, Barclays, Ford etc. No doubt these international businesses are in South Africa because of its buoyant market and the existence of decent infrastructure. But the fact is that Nigeria has lost out on international investment far more than is warranted by our governance or infrastructure fundamentals. South Africa has hosted the World Economic Forum on Africa 18 out of 20 times it has held. South Africa has used this event to cement her image as Africa’s economic powerhouse and to further integrate her economy into the global economy.
Nigeria’s huge and growing population and our oil wealth ought to be a huge draw for foreign investment. Due to political and governance bottlenecks, our investment inflow is below our absorptive capacity. Malaysia, with a population of less than 30 million attracted $12, 000, 760, 000 in foreign direct investment while Nigeria attracted $8,841,952,784 in 2012. What is far more important is the destination of this investment and its consequences for jobs creation and inclusive growth. The bulk of FDI in Nigeria has traditionally gone into the oil sector, an industry that creates limited jobs. Countries like Malaysia channel investments into manufacturing of consumer and light industrial goods the making of which creates a virtuous circle of increased-incomes -increased investment-increased consumption-increased jobs-increased investment. This is partly why Malaysia has a per capita income of $11,340 compared to Nigeria’s paltry $1,500.
There’s no denying the fact that there is a strong link between how wisely Nigeria spends its oil income and the rate at which it will attract foreign investment. In the 2013 Global Competitiveness Report, an annual report published by the World Economic Forum, Nigeria ranked 120th out of 148 countries. We are not doing any better on rankings of corruption. Yet, we have seen considerable investment flow into sectors such as telecommunications and recently retail. Reforms are stirring in a critical sector like real estate with the formation of a Nigerian Mortgage Refinance Company that will boost the demand for housing in a revolutionary way as thousands of Nigerians are able to pay for housing like citizens of more successful economies-through 15-20 years mortgages. This will release so many drivers of growth in the economy all at once; demand for building materials, skilled artisans, home decorations and furnishing etc. It will also free the billions of naira Nigerians lock down either in savings to buy or build houses or in houses that are completed over 10 years. Companies with the finance and expertise to build houses for Nigerians to acquire are required; many of them will come from abroad with skills and finance that will transform the national housing, construction and real estate industries.
The hosting of the World Economic Forum on Africa in Abuja is a big opportunity for Nigeria to showcase these reforms. This is a two-way interaction. Investors will no doubt ask questions. How come we have not passed the all-important Petroleum Industry Bill that will bring more investment into the country and boost national income? What are we doing about the long-standing review of the Land Use Act which everyone now accepts is an impediment to investment? But because the image of Nigeria has for long being worse than the reality, many investors will decide to commit investments. Those who are close to investment circles say that only about one investor out of ten that investigate sectors or companies for investment ends up actually making the investment in Nigeria. Nigeria would have gained a lot if this number increases to 3 or 4 as a result of Nigeria hosting the World Economic Forum on Africa in May 2013.
The hosting of the World Economic Forum on Africa will thus boost foreign investment even if the Nigerian Government does nothing to enhance our attractiveness to foreign investment. Some investors will meet Nigerian partners, strike a rapport and decide to commit funds in Nigerian investments. Others will see our glittering malls and Abuja’s orderly and smooth roads and will be subtly swayed to carry on with projects they were considering because the reality of Nigeria is so different from the image they had in mind. Of course, we shouldn’t set such terribly low expectations. Big events such as the World Economic Forums are an opportunity for domestic reformers to push forward their agenda even for a few meters in the marathon that economic reform is. The power sector reform was continuously locked down partly through investor fora. The Economic Team of the Federal Government should commit to one or two bold reforms that will boost jobs and promote inclusive growth during the World Economic Forum for Africa in Abuja.
Despite everything, Nigeria still has a lot to parade in the pageant for foreign investment. For a decade and running, we have maintained an enviable average of 7% growth rate. The country current debt to GDP at 18% is one of the lowest in the world, some countries has 250%. In addition, we have moved from a double-digit inflation rate to single digit. We already attract 10% of the FDI into Nigeria. We should leverage these by parading reforms in the housing/mortgage finance and power sectors and unfolding an agenda for meaningful reforms in a sector like mining which could become a major driver of investment, jobs and inclusive growth. Likewise, Nigeria should commit to completing long-mooted reforms of the Land Use Act and the oil and gas sector. As global investors, statesmen and media get ready to converge in Abuja, the question is not whether hosting the World Economic Forum on Africa will benefit Nigeria; it is the extent to which Nigeria can use the event to attract investment and inclusive growth.
Mr. Adeyemi is a Public Affairs Consultant with WNT Capitas