Incentivising private investments in the context of global competitiveness, By Dipo Baruwa

Beyond infrastructure, institutional reform is even more critical to incentivising private investment than fiscal measures alone. Empowering the national investment promotion agency to coordinate investment efforts, per its enabling Act, is vital to ensure strategic coherence and avoid duplication. While recent efforts to streamline port agencies are laudable, they must be sustained free from political interference or institutional bias.

Inherent Opportunities

The global competition for investment has intensified, with investors increasingly prioritising market-driven factors such as political stability, regulatory transparency, infrastructure quality, market access, and ease of doing business over traditional fiscal incentives like tax holidays or subsidies. Coupled with the growing turbulence and changes evolving in the global investment space, strategies for mobilising private investment capital across countries are rapidly shifting toward institutionalising streamlined regulatory processes, often through the integration of digital technologies to minimise human interface and reduce bureaucratic bottlenecks. In parallel, governments are increasingly investing in business-enabling infrastructure, strengthening the enforcement of the rule of law, and ensuring greater policy coherence and consistency to build investor confidence and promote sustainable economic growth.

Nigeria’s investment potential, which has been well-documented, encompasses a diverse range of sectors. The country is endowed with at least 44 commercially viable solid mineral deposits spread across more than 500 locations nationwide. In the energy sector, Nigeria holds approximately 206.5 trillion cubic feet of proven natural gas reserves, positioning it as the largest in Africa and among the top ten globally. Additionally, the nation possesses about 36.89 billion barrels of proven crude oil reserves, ranking it as the largest oil producers in Africa and the 11th largest globally.

Agriculture remains a cornerstone of Nigeria’s economy, with approximately 36.87 million hectares of arable land. This vast expanse traverses diverse ecological zones, from savannahs to mangrove forests, facilitating the cultivation of a wide array of food and cash crops. Historically, agriculture served as the primary revenue source during Nigeria’s early development. Despite the expansion of other sectors, agriculture continues to employ a significant portion of the population, underscoring the country’s enduring identity as an agrarian economy.

This vast natural endowment, when combined with Nigeria’s resourceful, resilient, and technically capable human capital, presents a powerful foundation for transformative socio-economic development. The country’s youthful population, entrepreneurial spirit, and growing pool of professionals across various fields position it well to drive innovation, productivity, and inclusive growth.

However, despite these inherent advantages, Nigeria’s socio-economic indicators paint a less encouraging picture. Persistent challenges such as high unemployment and underemployment rates, widespread poverty, infrastructure deficits, low industrial productivity, and an overreliance on oil revenues reveal a significant disconnect between available resources and the country’s capacity to sustainably generate wealth. This gap underscores the urgent need for a comprehensive reform of its private sector development strategy, strategic investment, and improved governance, to fully unlock Nigeria’s development potential and translate it into broad-based prosperity.

Developing Private Sector Capabilities

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Having recognised the critical role of private sector participation in driving economic growth, Nigeria has instituted a range of well-structured fiscal incentives designed to attract and retain investment across sectors. These include tax holidays under the Pioneer Status Incentive (PSI), tariff concessions on imported capital goods, accelerated capital allowances, investment tax credits, and sector-specific exemptions targeted at agriculture, solid minerals, oil and gas, and export-oriented manufacturing. These measures aim to reduce upfront costs and improve returns on investment for businesses operating within the country.

However, while these fiscal tools remain important, their impact has often been diminished by the absence of a fully enabling environment. Investors continue to grapple with persistent challenges such as policy inconsistency, regulatory unpredictability, bureaucratic inefficiencies, infrastructure deficits, weak enforcement of the rule of law, and outdated/conflicting legal provisions, such as those governing international commercial jurisdiction. These systemic constraints frequently negate the intended benefits of even the most generous incentive packages.

It must be stated and acknowledged that Nigeria continues to attract quality and high net-worth investments, particularly in sectors such as fintech, energy, and the creative industries. The broader lesson, however, is that fiscal incentives alone are not enough to attract and retain investments. Investors are increasingly placing a premium on stability, transparency, policy coherence, and the ease of doing business.

It is therefore not surprising that, despite Nigeria’s prominence in global investment discussions and its consistent inclusion in international project pipelines, the country continues to lose high-value investment projects to smaller African economies with more stable and investor-friendly environments.

For example:

• Ghana has become a preferred location for several multinational firms that initially considered Nigeria. Its relatively stable political environment, transparent regulatory processes, and efficient port infrastructure have positioned Accra as a regional hub. Companies such as Google, Twitter (before its rebranding to X), and Bosch have all chosen Ghana over Nigeria for their West African operations.
• Rwanda, renowned for its reform-oriented governance and investor-focused regulatory regime, has emerged as a destination of choice for tech startups and innovation-led businesses. Many investors who first explored Nigeria have opted for Kigali, citing faster business registration processes, predictable policies, and stronger legal protections.
• Kenya, with its advanced ICT ecosystem and maturing digital economy, has attracted significant venture capital and the regional offices of global tech firms like Microsoft and Visa. Its coherent innovation policy, combined with regulatory agility, continues to draw investments that might otherwise have come to Nigeria.
• Egypt has surged ahead in foreign direct investment (FDI), particularly in manufacturing, infrastructure, and energy, following economic reforms supported by the IMF. These reforms have improved macroeconomic stability and investor confidence, allowing Egypt to consolidate its lead as one of Africa’s top FDI destinations.

It must be stated and acknowledged that Nigeria continues to attract quality and high net-worth investments, particularly in sectors such as fintech, energy, and the creative industries. The broader lesson, however, is that fiscal incentives alone are not enough to attract and retain investments. Investors are increasingly placing a premium on stability, transparency, policy coherence, and the ease of doing business.

Indeed, reports by the Organisation for Economic Co-operation and Development (OECD) and other international institutions affirm that the effectiveness of tax incentives depends not merely on their generosity, but on how well they are aligned with broader development objectives, such as employment generation, infrastructure improvement, domestic value addition, and environmental sustainability. Incentives must therefore be part of a coherent and well-governed national strategy to be truly impactful.

By aligning fiscal incentives with infrastructure upgrades and institutional reforms, Nigeria can offer a more compelling value proposition to investors. While these investments could be private sector driven, the government need to strategically facilitate them. These investments will accelerate economic diversification, boost job creation, and enhance investor confidence, positioning Nigeria as a more serious, reform-driven and future-ready investment destination.

Investing to Incentivise Private Capital

In the context of ongoing reforms to improve Nigeria’s investment climate, it is essential that both government and financially capable Nigerian investors strategically invest in critical enabling infrastructure to boost economic competitiveness and resilience, particularly in trade and industrial production.

A key priority is the development of cold chain facilities at major export exit points, seaports, land borders, and airports, to preserve the quality of perishable goods, reduce post-harvest losses, and meet international sanitary and phytosanitary (SPS) standards, thereby strengthening Nigeria’s agricultural export capacity.

Equally important is the expansion of internationally accredited laboratories for testing, certification, and quality assurance beyond Lagos. Their limited geographical spread currently hampers access for producers in other regions, undermining Nigeria’s ability to meet quality standards under frameworks like the AfCFTA, the EU’s Generalised Scheme of Preferences (GSP), and other trade arrangements.

To support industrialisation, Nigeria must also extend gas pipeline infrastructure to industrial estates and clusters. Direct access to gas-powered electricity would reduce reliance on the unstable national grid, lower energy costs, boost productivity, and enhance Nigeria’s appeal as a manufacturing destination.

Beyond infrastructure, institutional reform is even more critical to incentivising private investment than fiscal measures alone. Empowering the national investment promotion agency to coordinate investment efforts, per its enabling Act, is vital to ensure strategic coherence and avoid duplication. While recent efforts to streamline port agencies are laudable, they must be sustained free from political interference or institutional bias. Similarly, the ongoing tax collection reform should be broadened to cover all payments for government services, such as obtaining business permits, processing immigration approvals, and other regulatory services, to enhance transparency and ease of doing business.

By aligning fiscal incentives with infrastructure upgrades and institutional reforms, Nigeria can offer a more compelling value proposition to investors. While these investments could be private sector driven, the government need to strategically facilitate them. These investments will accelerate economic diversification, boost job creation, and enhance investor confidence, positioning Nigeria as a more serious, reform-driven and future-ready investment destination.

Oladipupo Baruwa is a business climate development analyst.