Foreign investors wary of Nigeria’s inconsistent policies ―Deloitte

A towel with a print of the Nigerian naira is displayed for sale at a street market in the central business district in Nigeria's commercial capital Lagos February 4, 2016. Picture taken February 4, 2016. REUTERS/Akintunde Akinleye/File - RTSJQR1

Leading global professional services provider, Deloitte West Africa has revealed that its intervention in seven current investment transactions in Nigeria has shown most of the investors are wary of inconsistent polices by the Federal Government of Nigeria.

Speaking over the weekend at the Taiwo Afolabi Annual Maritime Conference, Head of Strategy, Deloitte West Africa, Bola Ashiru bemoaned the prevalence of too many silos in the Nigerian maritime sector.

According to Ashiru, “Last year, Deloitte published a 40 paged article with the title ‘PPP as an anchor in diversifying the Nigerian economy,’ and we used the 2006 port concession as a case study. The report gave us a lot of insight because one of the things we found out is that there are a lot of silos when we speak about infrastructure in the Nigerian maritime sector.”

“As we know, Nigeria already has a very detailed 30 years National Integrated Infrastructure Master Plan, popularly known as NIIMP. NIIMP was published in 2014, and is supposed to be the roadmap, that is the blueprint on which the country execute its infrastructure plan over the next 30 years.”

“If you look at the NIIMP document, you will see that it is a very good article. Now we are in 2017, looking at the realities on ground in the nations maritime sector, maybe we will need that document to speak more on the infrastructure issues in the sector.”

“The maritime sector is a very successful sub-sector of the Nigerian economy, and there is a real need of the government, in developing its 30 years Master plan, to really involve the maritime sector; because it’s not just about building shipping infrastructures, but it should also involve rail infrastructure, road infrastructure, security and several others.”

“Another takeaway that we took from our study is that even though the ports concession has been successful, there is a lot of room for improvement. The area for improvement speaks mainly on investors’ plight when they want to come into Nigeria.”

“Deloitte advises global investors who are planning to come into Nigeria. As we speak, we have about seven investment transactions ongoing into different sub-sectors of the Nigerian economy, but we have found a commonality in the issues these investors have raised.”

“The major issue most of this investors raised has to do with inconsistency in government policies. They asked us, if they bring in about hundred million Dollars today, ‘what is the guarantee that there won’t be a change in government policy that will put that capital at risk?’”

“We have to appreciate that if we were speaking about Public Private Partnership (PPP), it is always a business case situation. Investors onshore or offshore would have already done a business case to say, yes we want to invest in Nigerian economy. So therefore, they need to make sure their money will be protected.”

“Today, as we speak, in Nigeria there are a lot of PPP arrangement that have failed. The one that we have in the maritime sector is actually quite strong, but areas that we think need improvement are mainly from the investors’ perspective angle. This include protection of investors’ investment through consistent government policies and Foreign Exchange issues.”

“When the ports were concessioned, the exchange rate was probably between N138 to N145, today we know what the exchange rate is. There needs to be a mechanism where government can give investors comfort.”

“Again, another thing we found out is that investors want to know under what circumstance they can adjust their rates. Whether it is Terminal Handling Charge (THC) or other charges, under what circumstances can they adjust their rate?”

“For the Dollar based transactions, most operators think they can adjust based on the Consumer Price Index in the United States of America. Maybe that is fair for the Dollar based expenses. But what was not taken into consideration was the huge Naira based expenses that operators also have.”

“Now, what is happening today is that a lot of those adjustments are now limited to the Consumer Price Index move in the US. But the US currency is more stable than Nigeria’s currency, so operators cannot adjust 400 percent but only 3 percent based on the movement of the US Dollars, which end up putting a lot of pressure on the investors that have obligations in Naira.”

“So, those were the things we found out, that investors capital needs to be protected, and that FX adjustment should not just be tied to the US or other county rates, rather we should base our adjustment matrix on the realities in Nigeria.”

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