Lagos, Abuja, Abia, Ogun, Akwa Ibom, and Ekiti states attracted a total foreign investment of $654.7 million in the third quarter of 2023, while others got nothing, according to the latest capital importation report.
The number of states that got investments increased from five in the previous quarter, the report by the National Bureau of Statistics (NBS) showed.
Abia attracted $150.1 million in Q3, marking its first foreign investment in almost two years.
“The state has a leader that understands the needs of investors and is ready to meet those needs. It has a leadership that has clearly specific opportunities for investment within the state,” Johnson Chukwu, group chief executive officer of Cowry Asset Management Company, said.
According to him, Abia is developing the necessary rules and guidelines to make the state attractive to investors.
Alex Otti, governor of Abia State, said in September, during the inauguration of Emelogu Road in Aba South Local Government, that his administration was determined to improve infrastructure in the state, especially Aba, to attract fresh investments, create jobs, and shore up the state’s internally generated revenue (IGR).
The NBS report also revealed that Lagos had the highest investment of $308.8 million, followed by the Federal Capital Territory ($194.7 million), Ogun ($1 million), Akwa Ibom ($0.07 million), and Ekiti ($0.01 million).
Over the years, the geographical composition of capital imported to Nigeria has always been skewed to a few states, such as Lagos, FCT, and Rivers, according to Israel Odubola, a Lagos-based research economist.
“Naturally, capital flows to regions or locations where investors are optimistic or confident of getting value in return. The 31 states that did not attract investments were not proactively showcasing the viable investment opportunities within their respective states,” he said.
He said investors were not seeing any value in these states, adding that most of them were heavily reliant on allocations from the Federation Account Allocation Committee (FAAC).
“The FAAC allocations may make them not have any drive to promote investments for their states,” he said.
Chukwu of Cowry Asset Management added that industrial and commercial activities in a state that are internationally exposed can cause capital inflows into the state.
“A state like Lagos has a base that has some externalities, which are external connections that have businesses, banks, international relations, and foreign relations; the base will automatically be a pull for foreign capital inflows into the state. For Abuja, it is an FCT. And when the federal government attracts funds to the country, it goes to Abuja,” he said.
He highlighted the need for the right leadership attributes and clear policies to boost investors’ confidence and attract capital.
“State leadership must have a clear vision for attracting investment into the state, define the opportunity areas, and facilitate a structure that will make it easy for investment to come,” Chukwu said. “States without investment won’t have supporting financial resources; hence, they will be limited to borrowing from the local market.”
On why states are not attracting investments, Uchenna Uzo, a professor of marketing and faculty director at the Lagos Business School (LBS), said: “Some are not able to attract investments more than others because they have not changed their mindset about what it takes to be competitive.
“It is not about having mineral resources because the world has changed. It is about having and creating an enabling environment based on policy, trade, and work practices that would make businesses and investors willing and happy to bring their resources into that environment.”
He said a lot more investments had gone to areas of the country with more mineral resources available.
“What we have seen now is that there are many more resources, like human resources and technology, and there is the opportunity for partnership which different regions can capitalise on,” Uzo said.
According to Odubola, the implication for states without investment is that there will be more reliance on FAAC allocations.
“And because FAAC allocation is largely constituted from oil proceeds, it makes them more vulnerable to economic shocks,” he said, adding that job creation opportunities will be limited.
“Investment is a catalyst for job creation. Once investment inflows are not there, new job opportunities cannot be created. They would also miss out on revenue opportunities.”
“States can also establish an investment promotion and development agency, saddled with the responsibility of promoting and driving both local and cross-border investment. Lagos has one, Kaduna has one; this agency should be empowered to connect, engage, and drive investments,” Odubola said.
Uzo of the LBS said the states that did not attract investment should take a cue from those that did.
“The opportunity to learn is to be open to partnerships with other states, such as Lagos and Ogun, that are doing that increasingly. With partnerships and reversing their mindset to create a more enabling environment, it will be easier to attract investments,” he added.
