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Unravelling Nigeria's investment crisis 11 Aug 2025

Nigeria, Africa’s most populous country, faces a paradox: despite its vast potential, it struggles to attract Foreign Direct Investment (FDI). In 2023, Nigeria secured a mere $1.873 billion in FDI, ranking eighth in Africa. While the continent saw a record $97 billion FDI flows in 2024, Nigeria was not in the top 10 of the recipient countries. This underperformance is not just an economic issue. It reflects deeper systemic problems rooted in weak rule of law, insecure property rights, and arbitrary governance. 

Two incidents at the end of June – the demolition of Peter Obi’s brother’s property in Lagos and allegations of improper Abuja land allocations by the Minister of the Federal Capital Territory (FCT), Nyesom Wike – highlight these challenges. At the heart of the crisis lies the Land Use Act of 1978, which grants excessive discretionary powers to state governors and the FCT minister, undermining investor confidence and stifling development.

The rule of law in Nigeria is fragile, characterised by inconsistent and unpredictable enforcement. Laws exist on paper but are often applied selectively, eroding trust in institutions. The demolition of Peter Obi’s brother’s property in Lagos, without a valid court order or proper permit, exemplifies this crisis. Suppose a prominent figure like Obi – a former governor and former presidential candidate – cannot secure protection for his family’s property. That’s a chilling message to investors. The public outrage sparked by the event only masked the climate of fear and frustration that pervades the country’s social and investment landscapes.

Secure property rights are essential for economic growth, yet Nigeria’s landscape is marred by arbitrary enforcement. Despite its $200 million value and job creation, the Landmark Beach Resort's demolition for the Lagos-Calabar Coastal Highway project demonstrated the vulnerability of investments. Reports claimed minimal notice was given, and alternative routes were ignored, raising questions about due process.

Further complicating matters are allegations against Wike. In the last week of June, reports surfaced that the cabinet minister allocated over 2,000 hectares of prime Abuja land to one of his sons, valued at $3.6 billion. While Wike’s office denied the claims, stating the land was allocated to an agricultural company in a less prestigious district, the controversy persists. Critics point to his March 2025 revocation of 4,794 land titles over unpaid ground rent as evidence of opaque decision-making. Another contentious case involved property developer Nicholas Ukachukwu, whose land was allegedly revoked and demolished despite a court order, with Wike accused of ethnic bias. Whether proven or not, these incidents paint a picture of a system where land administration is susceptible to abuse.

The Land Use Act of 1978 is central to these issues. It vests all land in state governors, who hold it in trust for the people, while the FCT Minister controls Abuja’s land. The Act requires a Certificate of Occupancy (C of O) for land use and mandates governor’s consent for any land transactions. While intended to prevent speculation, this system concentrates excessive power in the hands of officials, enabling corruption. The Act also allows land revocation for “public interest,” but this clause is often manipulated for political or personal gain, with inadequate compensation for affected parties. Wike’s alleged actions illustrate how such discretionary power can undermine property rights and deter investment.

Beyond flawed laws, Nigeria’s erratic enforcement further damages investor confidence. Bureaucratic hurdles, policy inconsistency, and a sluggish judicial system exacerbate the problem. The case of Zhongshan Fucheng Industrial Investment Company against the Federal Government (FG) as a proxy for Ogun State is a stark example. The Chinese firm won a $70 million arbitration award against Nigeria for breaching a bilateral investment treaty, but Ogun State’s failure to pay led to the seizure of Nigeria’s assets abroad, including presidential jets, because the FG guaranteed Ogun State’s part of the deal. Such cases tarnish Nigeria’s reputation, signalling that even legally binding agreements may not be honoured.

Similarly, airlines faced difficulties repatriating $850 million in trapped funds, a crisis only partially resolved by the Tinubu administration. This foreign exchange scarcity deterred investment and harmed Nigeria’s global image. Even minor incidents, like the Ogun State Government’s premature announcement of a dairy deal with Qatari firm Baladna at the end of June, later denied by the company, highlight mismanagement and erode trust in government communications.

The cumulative effect of these issues is a severe decline in investor confidence. Nigeria’s FDI struggles are often attributed to insecurity, poor infrastructure, and corruption, but the root cause lies in weak rule of law and property rights, exacerbated by the Land Use Act. When investors perceive their assets as unsafe, they divert capital elsewhere. The consequences are dire: job creation stalls, technology transfer slows, and poverty and unemployment rise. Brain drain accelerates as skilled professionals seek opportunities abroad, further depleting Nigeria’s human capital. Social inequality widens, and the country’s global standing suffers, perpetuating a cycle of instability and underdevelopment.

Addressing Nigeria's ongoing investment crisis demands a multifaceted approach. Significant reforms are needed, beginning with a critical re-evaluation of how land is managed and allocated.

The discretionary powers currently held by governors and the FCT minister over land allocation and revocation must be significantly curtailed. Robust checks and balances are essential to prevent abuse and ensure fairness. Alongside this, transparency in all land transactions is paramount. This means making information on land allocations, transactions, and revocations publicly accessible, with clear, pre-defined criteria guiding all decisions.

Furthermore, judicial oversight needs to be strengthened. Courts must be empowered to review land revocations, ensuring that due process is followed and fair compensation is provided. The process of land acquisition itself requires significant simplification to facilitate legitimate development, all while upholding robust property rights. Crucially, compensation for land acquisitions must shift to a market-based value, moving away from arbitrary government rates to ensure equitable treatment for landowners.

While land reform is fundamental, it is part of a larger picture. The rule of law must be consistently upheld, requiring an independent judiciary whose orders are respected, and due process must be rigorously followed. Incidents such as the demolition of Peter Obi's brother's property demand a thorough investigation and appropriate remedy to demonstrate a commitment to justice.

Policy consistency is another vital element for attracting and retaining investment. Investors require predictability but frequent policy shifts and opaque regulations create an environment of uncertainty, which deters long-term investment commitments.

Moreover, a strong emphasis on accountability and anti-corruption is essential. Officials engaging in arbitrary actions or mismanagement must face clear consequences. Past failures, such as the Zhongshan case, should be reviewed thoroughly to extract lessons and prevent recurrence.

While improvements in infrastructure and the ease of doing business are undoubtedly important, their full potential can only be realised if underpinned by strong legal frameworks. 

Finally, transparent communication from the government is crucial. Agreements should be thoroughly verified before public announcements to avoid embarrassing incidents like the Baladna case. Nigeria must also honour its international obligations, including prompt settlement of arbitral awards, to restore its global credibility and foster investor confidence.

Nigeria’s potential is undeniable but unlocking it requires systemic change. The Land Use Act’s excessive discretionary powers, weak rule of law, and insecure property rights are major barriers to investment. Without addressing these foundational issues, Nigeria will continue to underperform, missing opportunities for sustainable development. 

Reforming governance, ensuring transparency, and upholding the rule of law are not just economic imperatives; they are essential for Nigeria to realise its promise as the "Giant of Africa." Until then, the nation will remain trapped in a cycle of underinvestment and stagnation, with profound consequences for its people and future.

Cheta Nwanze is Lead Partner at SBM Intelligence.