Prospective investors all over the world take into cognisance the issue of security of life and property, among other factors, before deciding where to invest their hard-earned savings. Even countries that embark on road shows to exhibit their investment potentials often mention the presence of security as a unique selling point.
It is therefore worrisome when a nation, especially a developing one, is faced with the daunting issue of national insecurity. While it may sound rather impressive from official position that foreign investors are willing and ready to come to Nigeria to invest, the current security situation in Nigeria may prove counter productive. For investors who are not quite convinced about the military campaign and other efforts at subduing insurgency and terrorism in the country being embarked by the Federal Government, investing in Nigeria may still be largely dicey.
Already, there are reports that the prevailing situation is taking a toll on investors’ confidence in the market as shares on the Nigerian Stock Exchange are being affected negatively, despite the impressive recovery being witnessed in the Exchange. This is because crisis breeds uncertainty, which also affects investors’ confidence. Interestingly, the stock market is a barometer for measuring a country’s economy.
This notwithstanding, the current level of insecurity, aside resulting in low inflow of Foreign Direct Investment, FDI, may force institutional investors to look for other stable economy to inject their funds. One investment analyst takes the view that the impact of sectarian violence, political instability and ripple effects of Euro economic crises had brought the Nigerian Capital Market and investors’ confidence to its lowest status in recent years. This has led to a high level of capital flight, and declining interest of foreign investors in the economy, although some have continued to show interest in Nigeria ’s economy. This may be informed by the fact that the higher the risk in an economy, the probability of an equally higher returns. This, however, does not discount the fact that investors are attracted to where they may incur minimal risk on their investments.
But, the huge impact of these crises is a reminder that Nigeria is part of one unified global entity, as seen in the impact of the Euro economic crises in emerging markets. The crisis in Europe had increased the rate of capital flight in the country, thereby reducing the rate of capitalisation at the NSE at the time. To underscore the essence of security to investment drive, when a former president of United States of America, drew a list of 10 most important countries in the world before the 21st century, Nigeria was one of them. The nation made the list then due to anticipated growth in investment across various sectors of the economy. Sadly, on a recent visit to the country, he did not see Nigeria with huge expectation as earlier projected due to growing insecurity across the country.
Although the nation currently witnesses less kidnapping of oil workers in the South, the spate of insecurity in the North has indeed left Nigerians and other nationals as well, worried about the new twist where kidnappers currently focus on prominent personalities, especially in the eastern part of the country. The scenario is posing a big threat to investment in the country, especially the hospitality sector that thrives on peaceful environment and free movement of people as most investors in the hospitality industry tend to shy away from the North due to insecurity. This development negates the dream of tourism and hospitality becoming a sustainable alternative to crude oil earnings. Hospitality industry is estimated to contribute over N50 billion annually to the nation’s economy if well developed and administered.
The negative impact of insecurity to investment drive can only be imagined. It is commendable that the Federal Government is working extra hard to tackle terrorism and other related crimes in the country. But to harness the gains in economic terms, it has to convince prospective investors with verifiable proves that its security measures are working. In other words, the national security of the country is safe and friendly enough for investors.