By Chinwendu Obienyi
Investments influences the rate of economic growth and this is because it is a component of aggregate demand and more importantly, influences the productive capacity of the economy.
They also act as an indicator to project the GDP, Inflation, National income, etc., of a country, that is why developing countries like Nigeria accepts Foreign Direct Investments (FDIs) into the country even though it is currently at its lowest ebb.
Most developing countries face the enormous task of finding sufficient capital in their development efforts and this is because shifting capital to sustainable infrastructure presents a daunting challenge as well as an opportunity for significant rewards for investors (domestic and foreign).
According to a report, developing countries will need to invest more than $2 trillion a year in infrastructure just to keep pace with projected GDP growth over the next 15 years—yet many of them face challenges in mobilizing the resources to finance this investment.
Recently, the African Development Bank (AfDB) stated that Nigeria requires strong private sector investments to meet its climate change and green growth goals. The bank in its report, titled; Nigeria Country Focus Report (CFR) 2023, said that mobilisation of private sector climate finance is critical in meeting the 2030 nationally determined contribution targets of the country.
The bank said that Nigeria needs an annual investment of $20.5 billion in renewable energy, sustainable transport and waste management. It also stated that the strength of the private sector to finance climate change initiatives in the country lies in its ability to harness the interest of investors, investment funds and credit institutions.
Hence, to close the funding gap, governments in these countries, (particularly Nigeria) together with their partners in development finance institutions (DFIs), will need to unlock private- sector infrastructure financing at scale. Also, given the scale of investment requirements and limits to public-sector financing capacity, increased private-capital mobilization for long-term infrastructure investment, especially in developing and middle-income countries, will be critical.
There are innovative approaches available that could trigger an exponential increase in private financing in developing countries. First, a well-thought multifaceted approach involving infrastructure development, incentives and partnerships which are aimed at attracting bankable investments, increasing the scale of investment by bundling together individual projects and providing a portfolio of products in which such providers of capital can invest and addressing the governance and capability gaps that often hinder private-sector investment.
These considerations were based on the recent Anambra State Investment Summit monitored by Daily Sun, organized by the Anambra state government.
The summit themed; Laying the foundation for a prosperous and smart mega-city, saw the Anambra State Governor, Chukwuma Soludo, sign a Memorandum of Understanding (MoU) with thirteen organisations across different economic sectors including commerce and automobile to develop the state.
Stakeholders’ view
Speaking shortly after the signing ceremony, Governor Soludo recalled that MoUs had been signed with seven estate developers including Awka Millennium City, to develop the new Awka, assuring that progress reports will be given by next year.
The Governor expressed willingness to partner with more investors on what he described as “bankable projects”, saying that the state government is intentionally packaging Anambra as the choice investment destination.
Governor Soludo, who revealed that Anambra has the highest population density per square kilometers described the state as a locational hub, added that Anambra is number one out of seventeen states in the Southern part of the country on ease of doing business.
In a keynote speech, Chairman, Afreximbank, Dr. Benedict Oramah, represented by the Executive Vice President, Afreximbank, Kanayo Awani, noted that Governor Soludo has ushered in a new lease of life into the state’s growth trajectory, expressing the readiness of the bank to partner the state in a $400 million dollar industrial city project, to bring export-oriented businesses into the state.
For his part, the Country Director for Nigeria, World Bank, Shubham Chaudhuri, whilst noting that bankable investments are those that private investors find commercially viable and attractive, said that investments should offer a competitive advantage for businesses to set up or expand their operations in the country.
He said that infrastructure such as roads, power, and digital connectivity is essential for economic activity. This, he said, must be in place to attract businesses and investors to the region. He added that clear and consistent policies and regulations are crucial for attracting investments as investors need to know that the business environment will remain stable over time.
According to him, providing incentives or de-risking strategies can make viable opportunities even more attractive to investors. Chaudhri said, “Sometimes, an opportunity might be viable but with a little bit of added incentives or de-risking or subsidization of the upfront capex. What I hope and heard is that in terms implementing the technical version of unlocking bankable investments, I think Anambra has gone about it the right way in thinking about the complementary investments, informing potential investors about what the state has to offer in terms of competitive advantage of its people, key location of its transit hub”.
He further added that there is a need to involve the private sector from the outset and in the implementation of projects as it helps to ensure the commercial viability of bankable investments and reduce reliance on government agencies.
Conclusion
Attracting bankable investments in developing countries requires a strategic and multifaceted approach involving collaboration between the government, private sector, and international partners. Hence, it is expedient that the Tinubu-led administration must continue in its efforts at creating an attractive investment climate through stable policies, infrastructure development, and targeted incentives is essential to mobilise the necessary funds for sustainable development initiatives.