Firstly, since independence in 1960, the Nigerian political system has been volatile, there have been 7 military coups, and this has made the investment climate unattractive because the nation appears insecure for the foreign investor.
Secondly, they are too many arbitrary and sudden changes in government policies and regulations which have led to a great deal of uncertainty. Foreign banks are scared from funding any project with a long gestation period. With this fear, most of these banks are now turning to major cash centres, that is, they are basically involved in deposits and disbursement of funds without getting involved in long term project financing.
Thirdly corruption is endemic and has spread to every facet of the economy. It is widely prevalent in many government and public agencies and foreign banks believe that business operations may come to a halt if they is “no greasing of palms’’
Another major finding is that of weak legal system, the legal system has also has had its shortfall arising from the executive meddling in their affairs. Those who contravened the laws are not easily brought to book, those involved in trade malpractice or breach of contractual agreements are not properly prosecuted to serve as a deterrent to others. Based on these, most foreign banks tend to be worried about validity and enforcement of contractual agreements.
Foreign banks require healthy private sector that can earn reasonable rate of return in a stable economic environment, that is, when the private sector is healthy, this is a good indicator for the foreign investor that the economy is, stable, thriving and can be a good investment opportunity. Government is too involved in the regulatory approvals .None is even left in the hands of the private sector t ...