Attracting Quality Investment and Accelerating Development at the State Level.
By: Dr Adams Adeiza
Tags: Ipa, Nigeria, Investment, Strategy, Development

The Imperative of an Effective Investment Promotion Agency

Olam Factory in Kaduna

25 kilometers from Kaduna City (North-west Nigeria), along the Abuja-Kaduna express way, there is this sprawling city.

As early as 4am in the morning, truck horns, people’s chatters and noise from the factory define the atmosphere. Every point you look, you are sure to see trucks loaded with poultry feeds heading to different parts of the country. You will see factory workers, in their hundreds, grinding happily at their duty posts.

At the entrance gate, at any time of the day, there’s a line of people: small-to-large business owners — input suppliers, poultry farmers, feeds and chicks’ distributors, bankers and others — waiting to go in and conduct the business of the day. Stepping inside the massive state-of-the-art factory, especially the multi-floors administrative block, you will see smiling and smartly-dressed staff — salespeople, customer service officers, secretaries, IT personnel and other rank file.

Welcome to Olam Feed and Hatchery Mill — the US$150 million Nigeria’s largest integrated animal feed mill — a poster child of Kaduna State’s recent exploits in investment attraction and economic development.

There is no question that Nigeria urgently needs to accelerate her pace of development by having thousands of productivity centers like the one described above in each state of the federation.

With highly depressed GDP growth rate quarter-in-quarter-out since 2015, 42% poverty rate — affecting nearly 100 million people in multidimensional ways, 55% level of unemployment and underemployment, 40% — 50% infrastructural deficits (130th out of 140 countries according to World Economic Forum 2019), very poor human capital development index (amidst escalating population growth), and frightening level of insecurity, the need for Nigeria to 10x her pace of development has never been more urgent and more future-dependent.

Unlike any other time, the risk of inaction or sub-par actions has never been more existential a threat than it is today. When you add into the mix the pressures and national competition for global resources and investments that AfCFTA will herald in the coming years, the margin of development errors dwindles. The picture clearly shows that there is no longer a room for play, nor is there any room for mediocrity in governance at all levels.

More than ever before, the prevailing socio-economic situation in the country calls for a paradigm shift in where development and increased productivity need to take place.

For decades, the Federal Government has been the prime solicitor and facilitator of high-ticket foreign direct investment projects, albeit in a few concentrated industries like oil and gas. It has been the case that states and local government simply wait for monthly handouts from the center.

The current woeful condition the Nigerian economy is currently in as well as the headwinds that lie ahead, necessitate a radical reorganization and indeed a reversal of roles, whereby various state government are the ones going after and engaging in healthy competition for investible funds from the globe.

Investment Promotion Bright Spots in Nigeria

A few states like Kaduna, Ekiti and Nasarawa are already actively taking this path, and early results confirm that this, indeed, is the path to more jobs, more revenues, reduced poverty, increased stock of infrastructure and greater productivity.

As of 2nd quarter of 2020, Kaduna State was in the lead for FDI in the country, securing investments in excess of US$800 million between 2015 and 2020, with additional US$2.1 in investment commitment over the next two years.

As a result, as the graph below shows, the State’s Internally Generated Revenue (IGR) has been on a growth streak, from N13 billion in 2015, doubling to N26 billion in 2017 and as at December 2019, the state raked in N44 billion in IGR.

In spite of Covid-19, the state Governor, Mallam Nasir El-Rufai, has expressed confidence that the state’s IGR will still grow to about N50 billion in 2020.

Kaduna State IGR since 2015 (in billion Naira)

Kaduna State has been able to achieve this feet primarily because it has an active and well-supported Investment Promotion Agency (IPA).

The Agency is instrumental to attracting such quality investments as Olam (US$150 million Integrated Farm), Vicampro (US$120 million potato farm), African Industries Group (currently building US$600 million steal plant), Tomato-Jos, to Vlisco Textile Park, just to mention a few.

This success points to the fact that if other states — all of which, by the way, have endowments that could be packaged and sold to the world — in Nigeria set up a similar effective structure — backed by solid political will — to actively promote, facilitate and manage investment projects, they would achieve similar results.

For this to happen, state officials, especially the top political leadership need to have a granular understanding of what an IPA means, how to bring such an agency into existence, what its key roles are and how to make it effective. This paper explains all these essential issues.

Meaning, Establishment of Investment Promotion Agency (IPA)

An IPA is an agency of government — which could be at national, state or city level — that helps to design, facilitate, coordinate and implement government’s strategic investment objectives.

The major goal of an IPA is to effectively promote the state and attract quality investments needed for the achievement of the state’s development objectives. IPAs are usually a creation of law. That is, they are an act of parliament, having a legal right to do business on behalf of the state, and thus can sue and be sued.

To bring an IPA into existence, a bill, usually an executive bill (but could also be a private member bill) is sent to the state assembly.

The details of the bill include such issues as the composition of the board, the appointment of the Executive Secretary or Director General (ES/DG), the key functions of the agency, the staff of the agency and so on.

The bill will ideally go through all the standard parliamentary procedures (including public hearings) and when passed and assented to by the Governor, eventually becomes a law guiding investment promotion, facilitation and execution in the state.

The Management of IPA

The most effective IPAs have a dedicated board with leaders and members that are well-networked and well-versed in the world of investment attraction.

The board should be there primarily to open doors of investment opportunities and ensure the effectiveness of the agency. Members of the board should ideally be people that have influence and can deploy such influence to bring investments into the state. Needless to say, the appointment of people into the board should not be for political patronage.

The effectiveness of most IPAs lies in the team managing its daily affairs. The head (ES/DG) must be a reform-minded true professional (preferably not a core politician), a team-player that understands, at emotional level, the critical roles that the agency is set up to do.

He/she must also have the energy, competence (especially intellectual capacity to comprehend and apply best practices), skills (strategic, leadership, communication, marketing, networking, human relations etc.) and attitudes (listening, positive spirit, open-mind, tolerance etc.) to effectively pilot the affairs of the agency.

From the profiles of the people heading IPAs that have been most effective in Nigeria — Umma Aboki (Kaduna), Akin Oyebode (Ekiti) and Ibrahim Abbdullahi (Nasarawa) — the ES/DG/Special Adviser should possess an advance degree and experience in any of business administration, management, marketing, economics, finance, entrepreneurship, law or investment banking. An academic with consulting experience in Trade, Investment and Competitiveness could also do excellently well in the role.

The staff of the agency, just like the board and the management, must be carefully selected against set criteria.

They must not be core civil servants that have been cultured in destructive office politics, sycophancy and brown-nosing or ass-kissing behaviors. They must be development-oriented people, who would go the extra miles to help the agency achieve its goals.

Above all, whatever their specific role in the organization is, they must have excellent customer service behaviors.

Key Roles of IPAs

The roles and functions of IPA are directly derived from the visions and missions of the agency. The agency’s vision and mission themselves are supposed to be derived from the overall economic development objectives and policies of the state or city where the IPA operates.

So, it makes sense that before establishing an IPA, the state must have developed an Economic Development Plan (EDP) with clearly stated development goals, milestones and guiding philosophies.

The management of IPA will then pick the EDP and turn it into actionable guide for attracting the required investment and resources to achieve the state’s economic goals.

In general, the primary role of an IPA is to develop an effective strategy for attracting, keeping and expanding quality investments in the state. The following are among the specific roles that the agency needs to deliver on.

i. Designs and implements innovative investment policies and strategies to attract high quality investments into the state.

ii. Acts as a One-Stop Investment Center (OSIC), promoting the state and serving the needs of investors.

iii. Supports the execution of the state’s strategic investment promotion goals.

iv. Advises the state on strategies for supporting the growth of the private sector, including how to boost the productivity of Micro, Small and Medium Enterprises (MSMEs).

v. Coordinates all investment promotion activities, including programs and events to showcase the investment potentials of the state.

vi. Provides advocacy for reforms and actions needed to improve the state’s business environment and competitiveness.

vii. Sources funds and mobilizes resources (where necessary), on behalf of the government, for consummating high-impact investments in the state.

viii. Prepares and periodically publishes a comprehensive and up-to-date investment status of the state as well as a compendium of investment opportunities in the state.

ix. Provides superior aftercare services and foster expansion of existing investments within the state.

x. Performs any other roles necessary to assure rapid economic development of the state.

Conclusion

It is high time that every economic unit in Nigeria became as productive as they could be. States are the ideal units for coordinating productive activities in the country.

Given the current economic challenges that the country faces, deliberate efforts must be made to accelerate development at the state level. Without doubt, attracting private sector investments is a sure route to the achievement of states’ development goals: exploitation of natural resource endowments, increased productivity (GDP), more jobs, increased IGR, infrastructural development, security and social cohesion and so on.

To these ends, state government in Nigeria are increasingly becoming aware of the need to set up IPAs, but there is a gap in the understanding of what the agency is really expected to do and how to make them effective.

This paper has explained the meaning, key roles and important things to be considered in hiring the team that pilots the affairs of the agency.