Why Nigeria Needs To Improve Business Environment, Attracts More FDI ~FSDH

The Nigerian economy remains vulnerable to shocks in the oil and gas sector as the sector continues to dominate the main source of foreign currency inflow to the country, Analysts at FSDH merchant banking group have said.
In its commentary on the latest balance of payment report released by the Central Bank of Nigeria (CBN), FSDH said the weak balance of payment position of the country in the last quarter of last year buttresses the urgent need to create multiple sources of revenue and foreign exchange earnings for Nigeria.

In the CBN balance of payment position, Nigeria recorded a surplus of $2.8 million lower than the surplus of $6.18 billion recorded in the corresponding period of 2017, but higher than the deficit of $4.52 billion recorded in Q3 2018. 

Between Q3 2018 and Q4 2018, Nigeria was able to reduce its imports and increased its export of goods. The effect of these actions led to a significant reversal of Nigeria's

The Merchant banking group said while the country's current account balance was driven mainly by crude oil and gas exports, representing 93.79 percent of total exports, the financial account component was in deficit in the last quarter of last year.

It noted that during the period more investments moved from Nigeria to other countries than they moved to Nigeria. 

"Investments from other countries to Nigeria were dominated by portfolio investments attracted by good return in the financial sector, particularly in fixed income securities."

FSDH said there is a need for the government to improve the business environment in Nigeria to attract direct investment. 

Such an improved environment would lead to job creation, and ensure foreign currency stability and prosperity of the Nigerian economy. 

Among other recommendation for an improved business environment by the bank include; reduction in administrative delays in obtaining licences and approvals, investment in infrastructure through partnership with the private sector, and removal of multiple exchange rate systems.

The CBN report had shown that the country's forex buffers was at $42.59 billion in the last quarter of last year, sufficient enough to cover 13 months of imports. 

This is higher than the 3 months global benchmark and 6 months West African Monetary Zone (WAMZ) benchmark. 

This also provides temporary stability for the value of the Naira. 

FSDH, However, noted that the long-term stability of the value of the currency will depend on the ability of the country to generate foreign exchange from multiple sources and to build domestic capacity to save, invest and consume goods and services that are produced locally