Why more international firms prefer Ghana to Nigeria

These announcements have generated reactions from Nigerians and re-echoed the claim that more firms are shifting base to Ghana

The recent decision of social media giant, Twitter, to set up its Africa office in Accra, Ghana, has reopened talks on how Nigeria increasingly lose similar opportunity even as more companies relocate to the Ghanian capital. Daily Trust reports on the trend and how it can be reversed.

Ghana, and not Nigeria, has become the preferred destination for international firms hoping to invest and set up offices in Africa, findings have revealed.

Few days after micro-blogging site Twitter announced plans to establish its Africa headquarters in Ghana, the German Government said it has chosen the former Gold Coast country as the location for the West African Centre of Global Health.

“Excellent news: Germany will support the launch of a new German-West African Centre for Global Health and Pandemic Prevention. It will be located in Ghana and be part of 8 new centres worldwide to fight global challenges,” the German ambassador to Ghana, Christoph Retzlaff, tweeted on his official handle on Thursday evening.

These announcements have generated reactions from Nigerians and re-echoed the claim that more firms are shifting base to Ghana.

Many wondered how Nigeria, which has more Twitter users than the entire population of Ghana, was ignored by the tech giant. However, the government has blamed ‘unpatriotic Nigerians’ for the decision by Twitter.

Twitter CEO, Jack Dorsey, in a short message on April 12 stated, “Twitter is now present on the continent. Thank you Ghana and @NakufoAddo.”

Twitter noted that the decision stems from the fact that Ghana is a champion for democracy, a supporter of free speech, online freedom, and the Open Internet.

“As a champion for democracy, Ghana is a supporter of free speech, online freedom, and the Open Internet, of which Twitter is also an advocate. Furthermore, Ghana’s recent appointment to host The Secretariat of the African Continental Free Trade Area aligns with our overarching goal to establish a presence in the region that will support our efforts to improve and tailor our service across Africa,” the social media giant noted.

Ghanaian President Nana Akufo-Addo celebrated the announcement with a reply to the tweet by Jack.

“The choice of Ghana as HQ for Twitter’s Africa operations is excellent news. Government and Ghanaians welcome very much this announcement and the confidence reposed in our country,” an elated Akufo-Addo tweeted.

In separate tweets, the Ghanaian Minister of Information, Mr Kojo Oppong Nkrumah, and his counterpart in the ministry of Communications, Mrs. Ursula Owusu-Ekuful, also celebrated the announcement.

“#TwitterGhana is a big win for Ghana. This means more jobs and opportunities for our youth in the Tech space,” Nkrumah tweeted.

“Twitter chooses Ghana as its regional hub of Africa!! Thumbs up for Digital Ghana! Great news for our local, vibrant tech community. We can’t wait to welcome others,” Owusu-Ekuful posted.

However, Nigeria’s Minister of Information, Culture and Tourism, Alhaji Lai Mohammed, said Twitter chose Ghana because of the activities of unpatriotic Nigerians and negative media portrayal of the country, citing coverage of police reform protests last year. In October 2020, Twitter CEO showed solidarity in the protests against police brutality, #ENDSARS that rocked Nigeria.

Pro-democracy and human rights group, Concerned Nigerians, in a statement by its convener, Deji Adeyanju, debunked the minister’s claim, maintaining that “no entity has damaged the Nigerian brand like the present government.”

 

Closing down, gasping for breath or moving to Ghana

The announcement by Twitter is not the first. Last year, the African Development Bank Group, AfDB, headed by a former Minister of Agriculture and Rural Development in Nigeria, Akinwumi Adesina, provided a $5 million institutional support grant to the African Union (AU) towards the establishment of the AfCFTA secretariat which is located in an edifice in the central business district of Accra, the capital of Ghana.

In 2019, Ghana ranked 13 places higher than Nigeria in the World Bank’s ease of doing business index.

Ghana also ranked as the 43rd most peaceful country in the world in the 2020 Global Peace Index, placing 104 spots ahead of Nigeria – which is battling insurgency, banditry and periodic outbreaks of violence.

Google (GOOGL), Microsoft (MSFT) and Huawei are among international tech giants that have expanded their operations in Ghana, targeting software developers and young creatives on the continent.

Nigeria’s misfortunes have turned to Ghana’s gain thanks to the Economic Community of West African States’ free trade treaty.

In 2006, two of Nigeria’s leading tyre manufacturers – Michelin and Dunlop, relocated their factories to Ghana, citing epileptic energy supply in Nigeria as the chief reason.

A World Bank Enterprise survey reported that 322 private firms closed down in Nigeria between 2009 and 2014 due to stifling business regulations, corruption, and political environment.

The Director of Economic and Statistics Department for Manufacturers’ Association of Nigeria, Oluwasegun Osidipe, was once quoted as saying that 196 manufacturing companies shut down their operations between 2015 and 2017 due to the biting recession.

In March 2019, GlaxoSmitheKline Consumer Nigeria Plc announced plans to shut down its production facility in Agbara by the third quarter of 2021, and hand over production of its consumer health products, medicines, and vaccines to local contract manufacturers.

Similarly, when P&G, manufacturers of the popular Always and Pampers brands of sanitary pads and diapers, inaugurated a $300m production plant in Agbara Industrial Estate, Ogun State, in 2017, it was described as the largest single investment by a non-oil firm in Nigeria. A year later, the company announced plans to shut down the plant due to high cost of importing raw materials and unfriendly government regulations and policies. The company has also divested from Vicks Lemon Plus plant in the Oluyole Estate, Ibadan, Oyo State.

Public commentator and researcher Babatope Babalobi in a 2020 publication noted that hundreds of Nigerian manufacturing companies have folded up over the years, the surviving ones are gasping for breath, and some planning to relocate to Ghana.

He listed some of the manufacturing companies and factories that have folded up to include Berec Batteries; Exide Batteries; Okin Biscuits; Osogbo Steel Rolling Mills; Nigeria Sugar Company; Bacita; Tate and Lyle Sugar Company; Matches Manufacturing Company, Ilorin; Nigeria Paper Mill Limited located in Jebba, Kwara State; Nigerian Newsprint Manufacturing Company Limited, Oku-Iboku, Akwa Ibom State; and the Nigerian National Paper Manufacturing Company Limited in Ogun State.

Others include Nigeria’s six automobile assembly plants namely Peugeot Automobile Nigeria Limited, Kaduna, set up in 1975; Volkswagen of Nigeria Limited, Lagos, established in 1978; Anambra Motor Manufacturing Limited, Emene, Enugu, set up in 1980; Steyr Nigeria Limited Bauchi; National Truck Manufacturers, Kano; Fiat Production; and LeyLand Nigeria Limited Ibadan.

Thirty-eight major textile companies closed down business in Nigeria between 1999 and 2009, according to the Nigerian Textile Manufacturers’ Association.

Kano, once the hub of the textile industry, has lost the commercial glory. In 2018, the Kano branch of the MAN reported that 232 manufacturing plants out of the 338 existing in Sharada/Challawa and Bompai Industrial estates in Kano City closed down between 1994 and 2018.

 

International airlines romance Ghana

In June 2016, the United Airlines suspended its daily flight from Lagos to Houston-Texas. One month earlier, the Spanish carrier, Iberia, also ended its flights to Nigeria from Madrid due to foreign exchange policy and difficulty in repatriating profits.

On the flip side, Ghana is replacing Nigeria as West Africa’s aviation hub as major international airlines which used to have their regional operational headquarters in Lagos have moved to Accra.

These airlines refuel and route their journey in Ghana after picking passengers in Nigeria. Reasons for their relocation are high cost and scarcity of aviation fuel, poor navigational and landing aids, high cost and epileptic supply of JetA1 aviation fuel; obsolete infrastructure and poor value of the naira. Recently, some Nigeria-bound flights were diverted to Ghana, causing a national embarrassment.

Sometime in December 2020, many foreign airlines had to divert flights to Kotoka International Airport in Ghana when they could not land at the Murtala Muhammed International Airport (MMIA), Lagos due to infrastructure challenge as the Category 3 Instrument Landing System (ILS) which would have aided zero visibility landing was not calibrated.

Analysts contend that what this implies is that the landing and parking charges meant for Nigeria were paid to Ghana. The same goes for the money that could have been paid to fuel marketers in Nigeria.

The aviation fuel value chain in Nigeria has been described as chaotic. Not only that it is expensive, according to operators, it is also too difficult to get.

As of the time of filing this report, aviation fuel in Nigeria sells for as high as N275 per litre while in Ghana, it is 2.389 cedis (about N180). This disparity makes a number of airlines prefer to go to Ghana to refuel and even pay landing and parking charges in Ghana.

 

… Automotive sector too

Another area where Nigeria is losing out to Ghana is in the automotive sector where the West African neighbour is fast becoming an automobile manufacturing hub in the region.

In August 2020, Volkswagen opened a vehicle assembly facility in Accra, Ghana.

With the investment, Ghana became the fifth Volkswagen vehicle assembly location in Sub-Saharan Africa. The other locations are in Nigeria, South Africa, Kenya, and Rwanda.

While the Nigerian plant remains idle, Volkswagen is shoving up production in Ghana, cashing on the recently approved Ghana Automotive Industry Development Plan which provides the legal framework for prospective investors in the country.

Daily Trust reports that for the past six years, the auto stakeholders have grumbled over the non-passage of the National Automotive Industry Development Plan (NAIDP) which they see as a disincentive to investment.

In the absence of the auto policy, auto firms, original equipment manufacturers (OEMs) like Volkswagen saw Ghana as a fertile ground to invest.

 

Unfriendly policies, insecurity, others threaten investment in Nigeria

Speaking with our correspondent, a former Acting Director-General of the National Automotive Design and Development Council (NADDC), Mr. Mamudu Luqman, said Nigeria would continue to lose out without the auto policy.

He said, “You see, unlike Nigeria where we failed to pass a bill for investors’ confidence, Ghana did. As a result, the African Association of Automotive Assemblers (AAAM) made all their resources available in support of Ghana, Ethiopia (recently) to drive investment.

“Investment in the automotive industry is capital intensive. A country with a very low appetite for consistent policies doesn’t usually attract such investment.  Incidentally, Nigeria was the first stop for AAAM but their patience ran out over the period especially as Nigeria passed an act which more or less truncated the Nigeria automotive policy six years into its 10 years tenure.”

Reacting to this development, the President National Association of Nigerian Traders (NANTs), Barrister Ken Ukaoha, said: “Nigeria is ranked 131 out of 190 in the 2019 World Bank annual rating of ease of doing business, which ranks countries against each other based on how the regulatory environment is conducive to business operations.

“Ghana was ranked 118 for the same period, implying the business environment in Ghana was not drastically different, as Ghana’s main edge is relative security and stable energy supply.

“If we fix power supply and insecurity, the exodus of corporate firms, manufacturing companies, and factories to Ghana would be less attractive.”

Tunde Ajileye, a partner at SBM Intelligence, a Lagos-based political and economic risk advisory firm, has an explanation for Nigeria’s apparent retrogression.

“Prior to now, what compelled people to come into Nigeria was Nigeria’s large market, but this population has gotten poorer and poorer over the last decade. People’s purchasing power has reduced and it is thus not as large a market as Nigerians have come to believe. When you add to this the current government’s stance on trade and foreign investment, it explains why people are looking at other destinations for travel and investment,” noted Ajileye.

He also believes that Nigeria’s hostile regulatory environment, and an atmosphere of insecurity and lawlessness, have spooked investors.

“There is also the issue of security, particularly kidnapping which foreigners are very prone to. So, it is not one thing, but a number of things aggravated by a government not showing up in terms of trade, culture, investment and travel,” added Ajileye.

 

What Nigeria must do – LCCI

The Director General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, who said that the country must be made conducive for investors to do business; added that if the environment is not conducive in terms of being friendly and ease of doing business, investors will leave.

According to him, the incessant kidnapping, ethnic clashes, armed robbery and banditry among others have given Nigeria a terrible image.

“If anyone wants to come and invest and he/she is looking at Africa or West Africa, you will do an analysis of the risks in all the countries and then locate your industry where the risk is low and where you can get good returns. That is what I think happened in the case of Twitter. Look at the whole environment, security risk, kidnapping, ethnic clashes, armed robbery and banditry among others. It has given us a terrible image. In addition to these, there are policy issues. If the policies are not good, or too tight, and if the nation’s foreign exchange policy and trade policy are too tight for investors to operate, they will leave.

“We have investors here in Nigeria who have not been able to repatriate their dividends with profits to their parent company. We also have issues with the depreciation of the currency, because as a foreign operator, your principals outside the country will be looking out for the dollar equivalent of your investment or profits so if the changes have depreciated over the years by almost a hundred percent, what profits are they going to be making? So, the depreciation too can be a problem as they do a comparative analysis of the environment and see whether it is worth staying here,” he said.

The way forward according to Dr. Yusuf is to make the environment much more conducive.

“Nigeria government needs to find a lasting solution to the security challenge bedevilling the country as no foreign investor would want to invest in an unsecured environment,” he added.

Abubakar Suleiman, the CEO of Sterling Bank also counselled Nigerians to promote the country, rather than celebrate her challenges.

“First, you tell the world Nigeria is a zoo. Then you hear @TwitterSF has chosen @Ghana as their WA headquarters & you are wondering why.

“If you can’t sell yourself, nobody will buy you.  Nigeria remains the heartbeat of Africa, our current struggles notwithstanding,” he posted on Twitter.

 

A tale of two neighbours

Ghana’s ‘Right to Return’ campaign has generated huge interest among African-Americans and Afro-Caribbeans who want to visit or relocate to the continent. In 2018, Ghana issued roughly 80,000 visitor visas. 750,000 visitor visas were issued between January and September 2019, allowing more money and skills to easily flow into Ghana.

A relatively friendly regulatory policy towards foreign investment is also helping Ghana to reduce poverty.

After emerging from military rule at the turn of the century, Ghana has successfully established the rule of law and deepened its democracy. It also suffers less from internal conflict and unrest than its English-speaking neighbours.

Nigeria, by contrast, has a notoriously long and expensive visa application process and a surprisingly difficult path to citizenship.

While its $385bn economy with nearly 200m population should be the most obvious destination for investment and repatriation from the African Diaspora, Nigeria has chosen to scare away investors with corporate shakedowns.

It also bullies its smaller neighbours with unilateral border closures, and generally thumbs its nose at the world.

This has created a perception of a country that is as unfriendly as it is poor, which Ajileye believes, can only end badly.

“In Economics, perception is everything. If people believe that things will get better, they usually do, and if people believe that things are going to get worse, they also usually do,” says Ajileye.

From Abiodun Alade, Sunday Michael Ogwu, Abdullateef Aliyu & Christiana T. Alabi, Lagos