Reforms to Promote Investment in Southwest Nigeria

Proshare

Sunday, January 23, 2022 / 06:57 AM / by Olufemi Awoyemi, mni / Header Image Credit: DAWN

 

Being the text of a discussion by Olufemi AWOYEMI, mni; Founder/Chairman of Proshare at the Southwest Nigeria Investment Promotion Agencies Conference (IPA-1) 2022 of the DAWN Commission held on the 19th January 2022.


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The absence of regional political autonomy under the existing federal structure has mainstreamed the need for strategic collaboration, coordination, and cooperation to achieve economic autonomy across the six geopolitical zones. The realities of culture, commerce, and community make it a necessary and natural thought process that should otherwise occupy the thoughts of the leadership and people of Southwest Nigeria.

 

To the region's credit, many collaborative investment initiatives have been launched since the dissolution of the regional government with considerable success and many more initiatives are still underway. However, the large infrastructure gaps in the region might deprive it of the opportunity to upgrade its economic structure through participation in products value chains.

 

Thus, the associated supply chain threats and the disjointed input-output matrix of the region underscores the need to rethink, reimagine, and re-strategize the infrastructure and technological investment promotion models of the Southwest region.

 

Regional Approach to the Development of Southwest Region 

Fundamental to any economic bloc is the presence of critical infrastructure to drive trade, power businesses, connect workers, create opportunities, and protect communities from avoidable natural disasters. The entire nation-Nigeria is faced with unprecedented infrastructure challenges that have made it difficult to be competitive and productive in the scale of things.

 

The World Bank (2012) report revealed that there is a positive correlation between infrastructure investments (per capita) and the level of a nation's development (proxied by GDP per capita).

 

In Rwanda, for instance, the World Bank estimated that infrastructure investment must grow by 8.4% of GDP from 2019-24 to meet the government's project 6.5% annual real GDP growth. A similar conclusion was drawn for Nigeria and other African states. To narrow the argument further, infrastructure investment needs to grow by a near-similar proportion in the Southwest region to boost the cumulative GDP of the region. The Southwest region is currently in need of a huge infrastructure to drive its economic autonomy.

 

Meanwhile, an infrastructure corridor may facilitate mobility but if there are no goods and services to trade and market, the infrastructure remains a redundant facility. Thus, while it is imperative to overcome the geographic and institutional obstacles that impede both infrastructure and trade expansion, the region needs to also collaborate closely in trade and investment to leverage economies of scale. The focus on and around trade, investments, and industry within the region needs to specifically be guided by three anchors: trade facilitation, trade agreements, and ease of doing business.

 

For instance, Oyo State with its huge agricultural outputs can feed the manufacturing hubs in Ogun State while Lagos State serves as the export terminal and market for the produce. This is a very good prism with which a fit-for-purpose conversation around sub-national productivity and competitiveness can be approached.

 

In terms of infrastructure funding, there have been advocacies for member States to create a joint investment project in the form of a Sub-regional Wealth Fund (SWF) through a PPP model where existing investment companies such as Odu'a Investment Company Limited interface with the Fund which may be private-sector managed.

 

Better still, the region may consider leveraging the existing infrastructure companies such as INFRACO or multilateral corporations to bridge the infrastructure gaps. 


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Other Infrastructure Heads for Integration 

As health and education play a significant role in any economic bloc by empowering citizens and bolstering productivity, there is the need to rethink investing in human capital to adapt to the changing economic opportunities and economic shocks.

 

A joint world-class and purpose-built educational institution featuring colleges of technical vocations and engineering, sports academy, business school, and other specific areas of business interests of the region can be considered. However, with the failure of public institutions by most standards, this can be privately operated with a high operating standard. The region could have a scholarship programme on a quota system for indigent students from member states.

 

The region can also collaborate to build a world-class tertiary health institution with equity interest by the six states but privately operated to avoid excessive bureaucracy and political interests.

 

Trans-border security investment, manufacturing and technological integration, regulatory alignment, and joint industrial parks are also viable investment options for the region.

 

The accelerating pace of progress and systemic interactions among converging digital, physical, and biological technologies raises fundamental, long-term challenges for economies at all levels of development. The Southwest region needs to create a Smart Financial Centre where technological innovation is pervasive and diffusive but also safely adopted. The target should be to further stimulate the growth of the vibrant FinTech and startups in the region.

 

However, while some regulatory differences are appropriate, duplication in regulatory requirements may be a barrier to a consistent, efficient, high quality, and sustainable business environment in the region. Regulatory alignment in terms of convergence of rules governing trade and other economic activities across the six Southwest States would also prove useful to the region. 


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Mountain to Lower for Investment in Southwest Region 

Development efforts are being pursued in isolation by the member states of the Southwest region. Between 2013 and Q1 2020, foreign investors considered four of the six states in the Southwest region unattractive for investment. Yet, Lagos and Ogun States received about 97 percent of the Foreign Direct Investment (FDI) that flows into Nigeria within the period.

 

Similarly, some existing bilateral public investment projects such as the Ladoke Akintola University of Technology (LAUTECH) failed under joint management by two states but had regained its strength under single state management.

 

There is also a lack of budgetary allocation among member states for the Southwest agenda. Ideally, the annual budgetary provision of member states should promote a viable Southwest region.

 

These instances underscore some legacy issues and State egoism in joint investment projects where states within the region compete rather than collaborate for development. Competition in itself isn't bad, but the competitions in most instances are unhealthy competitions that stifle growth.

 

The Southwest region needs collaboration and not competition. The region needs to strengthen its investment and development drive through close collaboration rather than competition leveraging investment promotion agencies of member states.

 

During the First Republic, the region had a collaborative plan and strategy. Chief Obafemi Awolowo's robust agro-industrial strategy synchronized the productive strengths of the six states to build a network of infrastructure into the different rural agricultural farms and plantations, research institutions, schools, hospitals, and the industrial areas where factories processed the produce. We can adapt such a model to the present-day reality of the region.

 

With a huge and ready market in the region, the missing link is collaboration at the leadership and private sector levels to harness the developmental potentials of the region.

 

The establishment of the Development Agenda for Western Nigeria (DAWN) Commission to design and implement the regional integration agenda and the 45 years existence of Odu'a Investment Company Limited with substantial investment in different sectors should have spurred more investments in the region than it is now.

 

Hence, it is time for DAWN, Odu'a Investment Company, Investment Promotion Agencies, and private sector players in the Southwest region to be deliberate and aggressive in creating the much-needed economic bloc for investment by first attracting infrastructure investment funding to bridge the infrastructure gaps limiting trade and commerce.

 


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