Nigeria’s economy saw a decline of $3.2 billion in investment inflow from $8.48 billion in Q1 2019 to $5.82 billion in Q2. The NBS said that the total figure represents a decrease of 31.41 percent compared to Q1 2019 and 5.56 percent increase compared to Q2 2018. The largest amount of capital importation by type was received through portfolio investment, which accounted for 73.76 percent or $4.29 billion of total capital importation. This was followed by “other investment,” which accounted for 22.41 per cent of $1.3 billion of total capital imported and Foreign Direct Investment, which accounted for 3.83 percent or $222.89 million of total capital imported in Q2 of this year. The breakdown into sector showed that investment inflows by banking dominated in the Q2 reaching $1.89 billion of the total capital importation in the period. The UnitedKingdom emerged as the top source of capital investment in Nigeria in the Q2 with $3.13 billion, accounting for 53.85 percent of the total capital inflow in the period under review. Lagos was the top destination for capital investment in Nigeria with $4.13 billion, accounting for 71.09 percent of the total capital inflow during the period. Stanbic IBTC Bank was at the top of capital investment in Nigeria with $1.76 billion, accounting for 30.34 per cent of the investment inflow during the period.

President Buhari has signed the Nigeria Police Trust Fund Act 2019 which means that companies operating in Nigeria will now contribute 0.005 percent of their profits after-tax to the newly formed Nigeria Police Trust Fund which is aimed at improving funding and training of personnel of the force. The NPTF would also consist of an amount constituting 0.5 percent of the total revenue accruing to the federal account. The fund would consist any take-off grant and special intervention fund as may be provided by the three tiers of government to meet its objective by the National Assembly in the budget as aids, grants and assistance from international bilateral and multilateral agencies, non-governmental organisations and the private sector. According to the Act, the fund would cover all personnel of the NPF, including its auxiliary staff in Nigeria and abroad. However, it would only operate for six years from the commencement of the Act and shall, at the expiration of that period, cease to exist unless it is extended for any further period by an Act of the National Assembly.

Lagos state has seen more than 5000 jobs lost to the reprisal attacks in response to the surge in xenophobic violence in South Africa. Lagos State governor, Babajide Sanwo-Olu, who spoke after an inspection of some damaged facilities in the wake of the xenophobic attacks in the state, condemned the attacks and the looting of goods in the shopping malls, including the Novare and Surulere Plazas. Unfortunately, Sanwo-Olu said, those businesses affected were all indigenous stores and companies. Even with the names that are synonymous with South Africa, he said, there were over 150 staff that could not get to perform their duties because of the destruction as Nigerians were in the main affected by the job losses.

Boko Haram fighters stole a large amount of money from the Nigerian military following an ambush on a logistics convoy a week ago. Soldiers of the Nigerian Army’s Super Camp 3 and the 231 Battalion — both under Sector 2 Operation Lafiya Dole — were moving supplies from Damaturu, Yobe State, to Biu, Borno State, when they drove into a Boko Haram pitfall around Azare-Kamuya end of the highway at about 0900 hours, military sources said. A fierce firefight that followed left at least one soldier wounded and large military equipment destroyed. A gun truck for the 231 Battalion was seized by the insurgents and taken away. They also made away with ₦15,492,000 ($43400) in ration cash allowance for soldiers on the frontlines. The day before, insurgents opened fire on the convoy of the governor of Borno State, Babagana Zulum in Konduga, while he was returning from a trip to Bama LGA.

Commentary

  • In 2018, a cocktail of poor macroeconomic data and the government’s dispute with the likes of MTN saw investor confidence wane and led to a decline in foreign investments for the year. Foreign Direct Investment particularly took a hit in 2018, falling 45% to USD1.9 billion, while Ghana secured USD3.3 billion during the period. The trend has continued in 2019 as the uncertainties over the general elections and the FIRS’s aggressiveness over taxes has precipitated more jitters in the minds of foreign investors. Whilst Foreign Portfolio Investments still account for over 70% of the inflows, this has not reflected in the stock market, which is down 13% year to date, as investors prefer lower-risk fixed-income investments. This despite President Buhari’s 52 foreign trips in 51 months as president, which has led to questions about the dividends. The simple answer is that talk only gets you that far when the government has failed to fix basic infrastructure, often fails to adhere to the rule of law and continues to make off the cuff policy pronouncements. What these figures scream loud and clear is this – investors have options. Despite all the rhetoric, in the last half-decade Nigeria has not presented itself as an investment-friendly environment. As a matter of fact, the government has scapegoated foreign investors and actively made life difficult for them. There is only so much people are willing to risk for the potential return in Nigeria. If the risk outweighs the returns as it does today, they will vote with their feet and move to less risky places in spite of possible lower returns.
  • Although the intent of the Police Trust Fund Act seeks to solve the perennial problem of the Nigeria Police Force, the seemingly small tax on companies increases the overall burden companies operating in Nigeria have to pay: besides the corporate income tax, they are obligated to make pension contributions (minimum of 7.5% of employee’s salary), 2% for TETFUND as well as other levies which may vary from state to state. This increases the cost of doing business in Nigeria. Furthermore, the question of accountability is important considering the fact that the Police is the least trusted institution in Nigeria. Despite constant complaints of being underfunded, the top brass of the police is seen to be living well and in luxury. Not only that, a previous attempt at increasing the funding of the police and the quality of policing, the Police Equipment Fund/Foundation got enmeshed in corruption scandals in 2007, a case that has still not been fully resolved. This trust and accountability deficit will create the perception that this fund simply increases the amount of money available for embezzlement without necessarily improving the quality of policing. Then there is the larger economic implication. Everyone seems to be keen on taking their piece of company profits in Nigeria. When government should be shrinking, the National Assembly went ahead to create a new agency and are extracting hard-earned profit to fund it, when we should be encouraging businesses to expand and drive growth. It should surprise no one when businesses vote with their feet as they already are doing and will leave only enough to tap into Nigeria’s market. With the AfCFTA taking off, it will soon be feasible to set up shop in any of Nigeria’s neighbours and ship goods to Nigeria. This outcome’s likelihood has been significantly increased. Nigeria needs to compete for businesses, not tax them to oblivion to fund a creaking system of patronage.
  • We agree with putting as much diplomatic pressure on the South African state as Nigeria can muster for its attitude and complicit tacit encouragement of xenophobia, but we are against making Nigerian owned and Nigerian employing businesses suffer such repercussions. Any non violent protest is within the rights of Nigerians. However, resorting to violence in response to violence puts us on the level of the originally violent, and this is where the trouble really begins. Last week, we pointed out that reprisal attacks on purported South African companies in Nigeria are an ill wind that blows no one any good. While there was national outrage over the xenophobic attacks in South Africa, the reprisal attacks point to a bigger problem in Nigeria: with youth unemployment as high as 38% in Nigeria, it means that as many as 27 million people are without employment, a number that continues to rise as more people join the labour force by virtue of age and graduating from school. Creating jobs to absorb the multitude of unemployed young people is a matter of urgency not just from an economic perspective but also from a security perspective.
  • At ₦1,000 per day, the amount stolen by the terrorists can cover allowances for 20,000 troops for a week, giving this attack huge implications for morale as well as welfare. While attacks on military convoys are fairly regular, this particular attack on the convoy carrying cash raises the question of possible information leaks within the military, and whether the terrorists had inside help. It also brings into question the choice of the military to transport the cash across long distance in a volatile region as opposed to doing bank transfers. This attack will further erode the trust of the civilian population in the military’s desire to bring this war to an end. It is very important that the military review their Standard Operating Procedures for transportation of cash to the frontlines.