Nigeria in Transition - Tinubu's Plan for Nigeria's Economy
We at 14 North are closely watching Nigeria’s incoming President, Bola Tinubu, and whether he will recharge foreign investment in Africa’s largest economy. During his tenure as Lagos State Governor, Tinubu was known for his strong record of cooperation with international investors. This earned him praise. But will he replicate this success on the national stage?
When he assumes office on 29 May 2023, Tinubu will lead a Nigerian economy struggling with low and falling foreign direct investment (FDI). According to The National Bureau of Statistics, FDI dropped to US$ 468 million in 2022 from US$ 698 million in 2021, reflecting the downward trend since the 2008 global recession. Since its peak in 2008 at US$ 4.7 billion, FDI has plummeted by 90%.
Tinubu, once an executive at Mobil Oil Nigeria, has committed to boosting oil and gas production, an industry that has traditionally drawn substantial FDI into the economy. During his campaign, he acknowledged that Nigeria’s multiple, unpredictable exchange rates and central bank dollar rationing had discouraged foreign investors, negatively impacting oil and gas revenues. To address the volatility in the Nigerian dollar, Tinubu plans to prioritize economic policies that streamline exchange rate management, reduce foreign debt obligations, and focus on the domestic debt market.
Tinubu also recognizes the importance of increasing capital for infrastructure projects, which he believes will help attract investment to Nigeria. Tinubu is averse to austerity measures and intends to implement an expansive budget—which he will fund with a deliberate deficit.
Critical to achieving his ambitious goals will be whether he can effectively coordinate and collaborate with various stakeholders, including the legislature, state governments, unions, the central bank, and Bretton Woods Institutions. If those align, we see these as the biggest opportunities for foreign investors:
Oil and gas, as the new government will be bullish on it and plans to launch Nigeria’s first offshore bid round in 15 years.
Infrastructure projects like energy, roads, and ports will create opportunities for public-private partnerships.
Mineral resource exploration and exploitation, which the new government believes have been unproductive.
Despite Tinubu’s plans and intentions, success is not guaranteed. To minimize risk and make informed decisions, we think investors should understand the regulatory environment, closely monitor the progress of Tinubu’s initiatives, and stay informed on political developments.