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I spoke to a consultant who is attempting to convince the head of one of the best airports in Canada and third largest in the world to bid for the takeover of any of the two leading international airports in Nigeria under the Federal Government’s proposed concession plan.
While I was optimistic about the idea, he was doubtful considering the challenges surrounding investing in Nigeria. In the course of our research, we found out about many ugly situations in the Nigerian aviation sector that may make the sector unattractive to foreign investors and most notably, we discovered the story of a company that has benefitted from one of federal government’s airport concession in the early 2000s. From the reports we saw, the investment journey of this company has not been rosy. It has been treated unfairly by the federal government and even took the federal government to court over a breach of contract. The court ruled in the favor of that company and ordered the federal government to pay a certain huge amount as penalties to that company but it’s been almost a decade, the federal government is yet to comply to such order. This is the story of a government and private sector investment deal where the Federal Government breaches the deal and has failed to obey court order that seeks to redress that unfair treatment to the investing company.
The deductions was that the story is going to be a huge turnoff for future investors especially in the aviation sector. Ideally it should.
This conviction was further supported by the news of the extension of the deadline for bids by the federal government due to the one problem of having few credible bidders.
My consultant friend went ahead to school me and rightly so about how the legal system of a country is one of the most important factor foreign investors consider before investing in any country.
How strong are your laws ? How credible is your government ? Is the rule of law upheld in your country ? Do your government keep to agreements with investors and if they fail, what hope do investors have to correct any wrong that will cost them money ?
Nigeria’s ratings in relation to the above questions is abysmally low and discouraging and as such it will deter foreign investors from coming in.
While I agree with the unfortunate assertions about Nigeria, I do not totally agree that there are no potentials for foreign investors to make money after investing in Nigeria.
I told my consultant friend that this is not entirely the case. These challenges he identified are true but there are foreign investors who came to Nigeria and have stayed in Nigeria for years despite all these challenges.
When MTN came to Nigeria, there was no rule of law. MTN is still here raking billions in profits after investing in Nigeria even when there is still no rule of law.
There is no rule of law but the Chinese are flocking in.
In my conversation with my consultant friend, I reminded him that the company who the federal government is said to have treated unfairly, is still here. They are still managing the terminal concessioned to them despite all their ugly travails. The argument is, if they are losing money, it is almost 15 years and they haven’t packed out. This gave rise to me concluding that in choice of investment, investors will choose profits over the rule of law.
In the Nigerian market, there are challenges and there are opportunities. The best investor who is able to navigate the challenges and survive within will make huge profits.
Few days ago, I saw a report where the same company, whose story of investment in the aviation sector will be a big deterrence to future investors, asking the federal government to give the proposed airports concession contracts to them.
How can a company who got into trouble in the first deal with the federal government be seeking to get into more deals with the same federal government ? Having operated in the aviation industry for over 10 years, they have firsthand information about the challenges and ugly situations in that sector yet, they are still trying to lobby the federal government to give them more. There is no way they are not making money. If they aren’t making money, considering their experiences with investing in Nigeria, they would have left and better still, they won’t be interested in getting their two feets into the water. This same company even went ahead in the report to caution the federal government against the concession of the airport to foreign investors like the one my consultant friend is trying to bring into the deal.
This confirms the assertion that investors will always choose profits over rule of law.
When China became the number 1 destination of investors, there was no rule of law. China has since been an authoritarian country whose Government can make and destroy any business overnight. But companies and factories rushed into China despite this because they were sure of making more profits investing in China. Thousands of US companies including the biggest manufacturing companies in the US left the US and opened factory in China. They left the US with all the democracy and rule of law that the US had and went into China with all the autocracy and Government control there. It is always money over rule of law.
Investors don’t mind going into North Korea as long as they will make more money there. There are foreign investors who make more money in war infested and troubled areas than peaceful areas. There are also foreign investors who make more money in the absence of rule of rule of law or in countries with weak legal systems and Government.
Nigeria is one of such countries where investors can get away with a lot of irregularities and bad practices. There are many examples that abound for us to see.
The rule of law is essential for creating a good business environment but it is not the most factor all the time. The goal of investment is to make money. If money can be made in the face of daunting legal and political challenges, a smart investor will always get his head in, sail the stormy waters and go home with fishes.
Caleb Onyeabor is a Nigerian intellectual, an avid advocate for political justice, social justice, and economic justice. Author of Diary of a Messed Up country. Follow him on Twitter via twitter.com/caleb_onyeabor
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