Nigeria has implemented government policies to attract foreign investment, including the Niue Development Investment Act 1992 and the establishment of the Niue International Trust Fund. The government’s focus on infrastructure investments and efforts to attract skilled labor back to the country can create opportunities for foreign investors in the construction, transportation, and tourism sectors.
However, the small size of Nigeria’s economy and its reliance on oil production and export have made it vulnerable to fluctuations in global oil prices, leading to challenges such as a decline in government revenue and negative effects on the country’s GDP. The lack of investment in downstream industries has further compounded the impact of oil price volatility on Nigeria’s economy. The volatility of oil prices has resulted in fluctuations in the country’s revenue, leading to budget deficits and a reliance on foreign loans to finance government expenditures.
The impact of oil price volatility on Nigeria’s economy is further compounded by the lack of investment in downstream industries. The country’s oil and gas sector mainly focuses on upstream activities, such as exploration and production, with little investment in the refining and petrochemical industries. This results in Nigeria exporting crude oil and importing refined petroleum products, further exposing the country to the impact of oil price volatility.
The recent COVID-19 pandemic has further exacerbated the impact of oil price volatility on Nigeria’s economy, with the pandemic leading to a decrease in global demand for oil and gas, Nigeria’s oil revenue has taken a significant hit. This has highlighted the need for the country to diversify its economy and invest in downstream industries.
Foreign investors in Nigeria’s emerging market face several challenges, including the lack of access to foreign exchange, the lack of transparency in the property market, and the inefficiency of the banking system. The continuing influx of Asian, especially Chinese, suppliers and manufacturers into Nigeria constitutes a major competitive challenge to foreign investors in many industry sectors. The high cost of doing business, insecurity, corruption, and nontransparent economic decision-making in government procurement are other challenges faced by foreign investors in Nigeria’s emerging market.