FACTORS PREVENTING FOREIGN INVESTMENT
- Lack of stable electricity in Nigeria: No serious-minded foreign investor will establish a business where citizens scarcely enjoy electrical power for five hours a day. Some investments require stable electric power to run and a lack of stable energy to run such investments is inimical to the business success.
- Exposure to inimical substances from non-renewable energy: Some foreign industries make recourse to highly diesel-powered generators to carry on their businesses in Nigeria. The emissions from these may not be bearable to foreign investors who value and know the aftermath of such exposure. Exhaust, for example, essentially produced by different domestic generators, contains nothing less than 40 toxic air contaminants. These include many known related cancer-causing substances, such as benzene, arsenic, and formaldehyde. In Nigeria, diesel emissions from domestic generators are arguably more than those being emitted by buses and/or workplaces. These pose greater health challenges to humans generally and not only the investors.
- Expenses Incurred: Foreign investors expend a lot of proceeds which could have been used to promote the objects of the companies in the purchase of fossil-fuel related energy resources. If they were stable power from clean energy sources, such expenses would not have been incurred and they decide that Nigeria does not have a friendly economic environment.
- Inadequate legal framework or regulations: In assessing the effect of legislative reforms on the control of domestic generator emissions and other vehicular gases that pose threat to the air quality standards, the writers posited: “Since air quality standards and objectives are designed to protect public health, there is therefore, a need for appropriate air pollution regulations to guarantee these standards and objectives. Proposed legislation on air pollution at the National Assembly should include the introduction of regulations, which are shaped by scientific and expert consensus on the definition of the problem…[7] on the use of renewable energy to attract foreign investors.
Possibility in the Increase of foreign investments if there is a shift
If Nigerian legal policymakers can be intentional about the transitioning of energy from non-renewable to renewable energy resources, foreign investments could be increased in Nigeria. This may be possible by:
- Resorting to the system of energy mix in which renewable and nonrenewable resources can be used side-by-side in Nigeria, will help promote foreign investments as most foreign investors will have the choice to choose from either duo.
- Renewable Energy sources will bring viable solutions to electricity, health care education and affordable internet, especially in some rural areas in Nigeria where people do not have access to electricity. Over 759 million people do not have access to electricity in the world[8] but sunlight is everywhere. This will even help some foreign entrepreneurs to establish businesses in remote areas in Nigeria which have been abandoned by lack of access to electricity.
- Renewable Energy will create new job opportunities as foreign companies that have specialists in the operation of renewable energy resources will have to partner with the government of Nigeria, and Nigeria will be a field for foreign investors to thrive. For example in the solar energy sector. Also, Nigerians will be forced to acquire in this new area so as to be gainfully employed.
- Energy transitioning will always assist in economic incentives and reduce the number of small and medium-sized enterprises that are shutting down. Since Nigeria has been able to attract foreign investors and specialists in solar and wind energy, Nigerian SMEs will partner with them to maximize profits.
- Renewable Energy is in line with the Sustainable Development Goals, part of which includes environmental sanitation and helps to achieve sustainable economic growth. If this is done, it is hoped that foreign investors will have no fear when they set up their businesses in Nigeria.
- Nigeria may also join the number of developed countries that have prioritized energy transitioning and thereby attract foreign investments. According to WEF Energy Transition Index of 2021, Sweden, Norway and Denmark are leading in transition and Europe is leading in the continent.
ADVANTAGES OF FOREIGN DIRECT INVESTMENTS IN NIGERIA
Foreign Direct Investment (FDI) occurs when an individual or business owns at least 10% of a foreign company. When investors own less than 10%, the International Monetary Fund (IMF) defines it simply as part of a stock portfolio. Whereas a 10% ownership in a company doesn’t give an individual investor a controlling interest in a foreign company, it does allow influence over the company’s management, operations, and overall policies.
FDI is critical for developing and emerging market countries. Companies in developing countries need multinational funding and expertise to expand, give structure, and guide their international sales. These foreign companies need private investments in infrastructure, energy, and water in order to increase jobs and salaries.
For Nigeria as a Country, a developing economy at that, there’s every need for Foreign Investments. The advantages that Nigeria stands to gain from these include but are not limited to:
JOB CREATION
The creation of jobs is the most obvious advantage of FDI, one of the most important reasons why a nation (especially a developing one) will look to attract foreign direct investment. FDI boosts the manufacturing and services sector which results in the creation of jobs and helps to reduce unemployment rates in the country. Increased employment translates to higher incomes and equips the population with more buying powers, boosting the overall economy of a country.
HUMAN CAPITAL DEVELOPMENT
Human capital involves the knowledge and competence of a workforce. Skills that employees gain through training and experience can boost the education and human capital of a specific country. Through a ripple effect, it can train human resources in other sectors and companies. This will be one of the benefits that flow with Foreign Direct Investment in Nigeria. Nationals have the chance to work in these establishments and gain experience.
IMPROVED CAPITAL FLOW
The inflow of capital is particularly beneficial for countries with limited domestic resources, as well as for nations with restricted opportunities to raise funds in global capital markets.
With the coming of Investors comes large cash flow. This will aid the economy.
CLIMATE
The United Nations has also promoted the use of FDI around the globe to help combat climate change. This is done through energy transition establishments which canvasses and aids movement from the use of fossil fuels such as oil, natural gas and coal, to an energy mix that is more efficient and less carbon-intensive. This will mean that Nigeria is also contributing to the fight for a better climate, especially with the “Nigerian Decade of Gas” project.