•Looting, destruction of properties send danger signals
•Investorsassets’ security not guaranteed
•Unemployment, inflation may worsen …•Country risks loss of investor-confidence
By Odinaka Anudu, Emelike Obinna and Amaka
The events of the last two weeks could push Africa’s most populous nation further down investors’ pecking order at a time it is battling flagging economic growth, low foreign direct investments and high unemployment rate.
It first started with peaceful #EndSARS protests across the country targeted at ending reckless brutality in the hands of a rogue and brutal police unit widely known as the State Anti-Robbery Squad (SARS).
The protest turned bloody mid-way on October 20 as soldiers shot peaceful protesters, fuelling crisis across the nation. Hoodlums seized the opportunity to vent their spleen on police officers and their stations, private residences of politicians, media houses and businesses owned by local and foreign investors.
The whole hullabaloo has changed Nigeria’s investment outlook, according to economists and investment experts, at a period when the country is in dire need of DFIs.
In the second quarter (Q2) of 2020, total investments into Nigeria, including portfolio, equity and foreign direct investments, stood at $1.29 billion as against $5.85 billion recorded in the preceding quarter, representing a 77.88 percent decline over the period. The $1.29 billion also indicates a 78.1 percent crash from $6.05 billion reported in the corresponding period of 2019.
The FDI figure in Q2 of 2020 is the lowest inflows since the first quarter of 2017 when the country slipped into recession owing to a global collapse in oil prices.
With that outlook, analysts say this is not the right time to do anything that could be antithetical to investments.
With the shooting and consequent massive looting and wanton destruction of private and public properties, analysts see worsening unemployment rate that could throw millions more into the labour market. In the Q2 of 2020, unemployment rate stood at 27.1 percent and reached 56 percent when underemployment is factored in. About 14 million youths are jobless in Nigeria as of the Q2 of 2020, according to the National Bureau of Statistics (NBS).
Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI), said the regrettable actions of the hoodlums would have very negative impact on investor confidence, saying that the economy is worse-off when investor confidence begins to wane.
“No investor, who witnessed the massive lootings and destruction, will want to invest now, particularly on projects that are customer-focused, like the retail outlets because you can see how vulnerable such investments are to any social unrest,” Yusuf said.
Speaking further, the LCCI director-general noted that those who are thinking of investing in Nigeria would begin to think twice now because of the high level of insecurity, lawlessness and crime during the protests.
“It does not give a sense of security even to the investors because if the looting can happen so freely, then the society is not secured, as well as, your investments,” he further said.
Ademola Okikiola, a stockbroker, noted that the impact of the looting and wanton destruction of lives and properties is already felt in the economy as investor confidence has dampened further from its low point occasioned by the lockdown.
“On Wednesday, October 21, 2020, the stock market lost N113 billion because investors’ appetite dampened due to the tensed security situation in the country,” Okikiola said.
The stockbroker was sad that the market, which had remained stable for some time now with marginal gains, is losing again because investors have reduced their demand for equities as they reacted to the prevailing security situation occasioned by #EndSARS protests.
In his review of ACCA Global Economic Conditions Survey (GECS) for Q4’19, Thomas Isibor, head, Association of Chartered Certified Accountants (ACCA) Nigeria, noted that with double digit inflation, which results in low economic growth and decline of Gross Domestic product (GDP) per capita, investor confidence is bound to drop in any economy and Nigeria is not different.
Considering the huge loss of revenue and closure of businesses torched during the protests, economic analysts think that the situation would impact negatively on Nigeria’s economic growth and gross domestic product (GDP).
“Investors are the employers and when they are not convinced that their investments are secure, they will shut down, leaving many unemployed and denying the economy the much needed revenue to boost the GDP,” Emele Onugha, an economist, said.
Nigerian economic growth crashed by 6 percent in the Q2 of 2020 due to COVID-19 lockdowns which disrupted the value chains across the world. But the shooting and looting have both raised a new risk for a weak economy.
For the LCCI director general, the lootings and destruction of properties would worsen unemployment in the country because a lot of companies torched by the hoodlums during the protests have shutdown, while their employees have lost their jobs. “It is when you have business that you employ people,” he said.
Speaking further on the impact, Yusuf noted that some of those who suffered losses during the protests may not be able to recover because they borrowed money, stressing that some might have paid two years’ rent in advance, which are looking wasted.
“It will affect unemployment, investment, government revenue, and also the general psyche of the average Nigerian,” he noted.
Analysts say the unresolved shooting of protesters in Lekki by soldiers could present Nigerian government as authoritarian and unable to make lives better for the people in the comity of nations.
Jonathan Nicol, president of Shippers Association of Lagos State, said the after-effect of the massive looting and destruction in Nigeria last week has forced some businesses to close down, revealing that shippers are cancelling orders due to the uncertainty in the polity. He observed that Nigerian environment is no longer safe to conduct business.
According to him, the burning and looting of private businesses is a reflection of bottled-up anger, which sends dire signal to both foreign and domestic investors. He said the fact that many embassies including the American Embassy in Nigeria had to shut down their visa application centres is an indication of what could come.
“We believe the peaceful protest was in line with the reality of the present time. It was all over the country. It was writing the history of our present situation of retrogression in all fronts apart from the institution of corruption. It was a signal that the older generation has failed. The governments should have been more diplomatic with the peaceful protesters. It was an expression of dis-satisfaction in a failed system which could have been managed with wisdom. It was a time bomb that was detonated by irrational decision of force,” Nicol explained in a phone interview with BusinessDay Sunday.
Citing example, Nicol further said that his principals recently refused to invest in fishery business in Nigeria due to constant harassment of fishing vessels within the Gulf of Guinea region by pirates which portrays the height of insecurity on the nation’s waterway.
“The pockets of protest are still continuing in several parts of the country and there seems to be no end in sight. People are hungry because the outbreak of Covid-19 shut down a lot of industries and while such people are trying to bounce back gradually, the nationwide protest started. How can an investor invest in a situation of lack of security to investment? Investors are already leaving the country in their numbers,” he further said.
The Lagos Chamber of Commerce and Industry (LCCI) disclosed that Nigeria lost about N700 billion in just two weeks of protest. Nicol said that the loss has reached over N1.6 trillion across the country going by the massive burning of property across the country.
“Nigerians are tired of paying unnecessary bills for services that do not commensurate to the sums being levied. The government is doing nothing for her citizens. No good roads, no good hospitals, businesses are dwindling and closing shops while the global oil price remains epileptic,” he said.
These, he noted, has contributed to the frustration faced by Nigerians across the country as many households and families have continued to face difficulties in the provision of basic needs as well as payment of children school fees.
On the way forward, Nicol suggested that government should in addition to putting an end to using force to quell legitimate demands, also accept the 5-point demand of the youth and engage them in meaningful dialogue.
“After spending seven to eight years in school, there is no work for the graduating students. Therefore, government should be able to console the youths and offer them meaningful jobs in all the states. Jobs are not meant for one tribe. So, there should be true federal character in recruitment of people into government institutions,” he added.
On his part, Tony Anakebe, managing director of Gold-Link Investment Ltd, a Lagos-based clearing and forwarding company, confirmed that the massive looting and destruction of private businesses would definitely scare away investors from investing their money in Nigeria even as he disclosed that some of his principals (importers) were already cancelling their order due to the uncertainty in the country.
According to him, a lot of businesses such as Shoprite and Samsung that lost heavy investments during the protest are suspending plans to expand their investment in Nigeria.
He however, called on government to consider financial empowerment, which could come in form of tax rebate or holiday for private companies that lost their investment during the nationwide protest in order to cushion the effect of the loss on their bottom-line.
In January 2020, a survey by the Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA) revealed that investor confidence in the Nigerian economy dropped below its nine years average in the last quarter of 2019.
From -7.6 index points in 2019, investors’ confidence dropped to a staggering -17 points in September 2020, according to data from the Central Bank of Nigeria (CBN).
While the huge loss of confidence was attributed mainly to the uncertainties of the 2019 elections, investor confidence dampened further due to the travail of the Nigerian economy in recent times; from border closure, insecurity, lockdown and most recently, the mass lootings and destruction of public and private properties during the #ENDSARS protests across the country.
For many investors, the massive lootings and destruction of properties was unprecedented and a pointer to the high level of insecurity of both lives and properties in the country.
They feared that investors’ confidence in the Nigerian economy, which has dropped very low since the lockdown might be witnessing the worse decline in history due to the impact of the unprecedented lootings and destruction of businesses by hoodlums during the protests.
“But there is a light at the end of the tunnel,” said Ike Ibeabuchi, an analyst and manufacturer.
“I believe the country is still the best place to do business. This is a short-term risk, but it presents an opportunity for the government at different levels to make the environment better for investors. Government does not create jobs, but the private sector. Remove multiple taxation, solve the infrastructure problem, Apapa and port challenges, and the economy will begin to create jobs for the youth again,” he noted. (BusinessDay)