Impact of Nigeria’s Political Environment on Foreign Businesses

Impact of Nigeria’s Political Environment on Foreign Businesses

Introduction 

The political environment of any country largely determines the position of foreign businesses and investors. Every investor wants a country with a stable economy so that they are guaranteed of returns on their investment. Nigeria is among the top African countries that have enjoyed a fairly large and stable economy. This is as result of the oil business which has seen the country’s economy thrive over the years. The economic stability has, however, in recent years been dwindling with multiple factors at play. One of the key factors in the political instability which has had direct effect on foreign investment (Hamilton & Webster, 2015). This discussion delves deeper on how foreign businesses have been affected by an increasingly unstable and unpredictable political environment in the West African country. 

Corruption in Government 

Nigeria recently held presidential elections were highly divisive mainly on ethnic and religious lines. This has in turn resulted to protests and unrest making the environment highly volatile and unsuitable for businesses. Further, over the last few years, the government has been struggling to collect substantial revenues from oil production citing challenges by corruption cartels (Hamilton & Webster, 2015). With a reduction in revenues collected, the currency has been hit hard and this has seen a significant drop in the growth of country’s economy. This in turn has seen a withdrawal by foreign businesses as they seek to protect their investments. 

Insecurity 

According to (Ndungu, 2014),Boko Haram is one militia group that has been causing mayhem by attacking and killing people along religious lines. While the government has put measures in place to deal with the group, a lot of damage has been done. The 2014 incident of kidnappings of school girls drew international attention with government seemingly helpless. Such scenario’s have discredited the stable and thriving economy that Nigeria has enjoyed over the years. In effect, more foreign businesses are keeping away in a bid to avoid being caught up (Ndungu, 2014). This also means that the government cannot guarantee the security of both her people and foreigners. Foreigners have therefore been advised by their respective governments to keep away and this too has an adverse effect on foreign businesses. 

COVID 19 Pandemic 

Although this is not a direct result of political environment, the pandemic has also seen a significant drop in international trade. From government statistics, since 2020, there has been a notable drop in revenue generated by foreign businesses. Although there has been an improvement towards end of 2021 and coming to 2022, the drop compared to other years is still notable. The government notes that Covid-19 aggravated an already grave situation as far as foreign trade is concerned. 

Conclusion 

The Federal Government of Nigeria has a huge responsibility to win back the confidence of foreign investors. The instability mainly in the oil and energy industry, which is the main economic earner, has seen investors keep away. It is a trend that is worrying because Nigeria’s large population heavily depends on the revenues of oil for her economy to stay afloat. The country will be going to the polls in 2023 to elect a new government. One can only hope that the incoming government will put better structures in place to salvage an economy that seemingly hangs in the thread. Meanwhile, the government of Muhammadu Buhari must tighten the ropes for the remaining part of his term if only to get back half of the lost foreign investors. 

Reference 

List Hamilton, L & Webster, P. (2015). The International Business Environment. Oxford University Press. 

Ndungu, K. (2014). Societal Perceptions of Foreign Businesses in Nigeria: A Case Study of  Shell in Niger Delta. GRIN Verlag.