The World Bank has said Nigeria’s economic prospects are uncertain and its ability to attract domestic and foreign investment is also plummeting.
It also noted that Nigeria’s welfare situation was deteriorating despite the economic recovery from the recession.
The Washington-based bank said so in its draft report for State Action on Business Enabling Reforms, available on its website.
The bank report read in part: “Although the Nigerian economy recovered from the recession caused by the COVID-19 pandemic and lower oil prices in 2021-2022 and grew 3.6 percent in 2021, with expected growth of 3.2 percent on the year 2022, welfare has continued to deteriorate.
“The country’s economic prospects remain uncertain and are threatened by many issues, including the impact of Russia’s invasion of Ukraine in 2022 on the global economy; lower-than-expected oil production due to technical inefficiencies; increased insecurity; greater uncertainty about the direction of policy due to the upcoming February 2023 general election; and worsening tax risks related to the PMS subsidy deductions.”
The global lender stressed the need to encourage private investment to boost growth and create jobs, noting that this type of investment is declining in the country.
The bank said: “Also, Nigeria’s ability to attract domestic and foreign investment is weak and declining compared to its peers. The contribution of the private sector to growth has declined as a result of macroeconomic and financial policies restricting exports and foreign investment.”
The World Bank also stressed the need for a more flexible and transparent foreign exchange management system, accelerated revenue-based fiscal consolidation, strengthened spending and debt management, and an improved business-friendly environment.
The punch reported in early September that 32 states failed to attract foreign capital in the second quarter of 2022, according to foreign direct investment data released by the National Bureau of Statistics.
Of the 36 states and the Federal Capital Territory, only Lagos, Abuja, Anambra, Ekiti and Kogi saw capital inflows.
Cumulative capital inflows totaled $1.54 billion. Lagos ($1.05 billion) attracted the most capital over the period, followed by Abuja at $453.95 million, Anambra at $24.71 million, Kogi at $2 million and Ekiti at $500,000.
In the first quarter, only six states attracted a total of $1.57 billion in capital inflows. The states included Abuja, Anambra, Katsina, Lagos, Oyo and Plateau.
Nigeria’s capital inflows have been steadily declining and investors are cautious about putting their money into the economy.
In response, an ECOWAS adviser on the common investment market, Prof Jonathan Aremu, said Nigeria lacked attractive factors for investors.
“Investments are crisis-averse. Investments are not made where there are crises. This is because investors want stability and predictability in their investments, particularly returns on their investments.
“When an economy witnesses what we are going through, despite the investment potential of such an economy, investors will wait and see whether the factors that can guarantee predictable and sustainable investment will finally become available.”
An economics professor at Onabisi Onabanjo University, Prof. Sheriffdeen Tella, said that investors lack confidence in Nigeria’s economy due to poor economic policies.
He said: “Part of the problem has to do with the exchange rate. The exchange rate is very high. Investors no longer have much confidence in the economy. We have to change politics.”
