The writer is a development finance specialist.

Nigeria risks becoming a stark example of how not to attract foreign direct investment (FDI), despite the new government’s efforts to lure investment into the country. 

FDI depends on getting the basics right, starting with trust. This means trust that deals will be honoured not discarded. Trust that money sent into a country, and assets thereby created or maintained, cannot simply be seized without compensation. Trust that if and when disputes arise, independent courts, mediators or arbitrators will be permitted to assess the facts, reach their own conclusions and see their decisions implemented.

Seizing Chinese assets

President Bola Tinubu’s administration, which took office in May 2023, must rebuild trust following its recent high-profile problems. These include allegations of government bribery by Binance’s CEO and its demolition of a beachfront on Victoria Island, which has sparked a damages claim worth N42bn ($28m) by developer Landmark Africa.

The government risks worsening its trust deficit, and is making a big and self-defeating mistake by choosing to defy or ignore court rulings over a major investment dispute with an overseas investor. 

The administration is refusing to implement decisions reached by UK tribunals and courts — and has lost consequential court cases in the US, Canada and Belgium — in a dispute over the seizure without compensation of assets belonging to a foreign investor. The target, the Ogun Guangdong Free Trade Zone, was seized in 2016 by the local Ogun state government from Zhongshan, a Chinese company, in order to give it to a different Chinese investor. But the implications go much wider. 

At the time of the seizure, Zhongshan was successfully developing the free trade zone which had been established by the Nigerian government in 2007 to incentivise FDI. Multiple manufacturing and consumer goods businesses had established themselves in the zone, which had received international recognition.

Following the seizure, which included arresting and imprisoning Zhongshan employees, an international tribunal ruled in 2021 that Nigeria is in breach of its obligations under the China–Nigeria Investment Agreement. The tribunal awarded Zhongshan some $70m in damages. Multiple foreign courts have since recognised the award, but despite its international obligation to do so, Nigeria has failed to pay up. Years later, it still refuses to do so.

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Contradictory approach 

This is not a sustainable position for Nigeria. The country cannot take the stance that contracts and court decisions do not matter, while simultaneously running a high-profile campaign telling the global investment community that the country is once again open for business. 

Global investors will naturally take note, and become wary. Future allocations of capital cannot be safely designated to countries that seem to have a less than full-hearted commitment to their legal obligations to protect foreign investors. Indeed, transnational investment in these places may be limited, or only come with a significant risk premium attached. 

In truth, the vast majority of governments in every region of the world understand this. They know that global investment is essential for jobs, growth and prosperity, but should never be taken for granted. Investors have no obligation to commit their resources to any particular place, but understand that with the right level of mutuality, a genuinely beneficial outcome for all parties can be secured. 

Trust must be earned and can come at a cost. But trust, once secured, is priceless; as it grows, so will national, regional and global economies. The sooner Nigeria chooses to recognise the benefits of following the rules, the better the region of Africa will be for everyone. 

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