The US house of Representatives has just passed a legislation expanding the power of U.S. regulators to review, and possibly block, foreign investment deals that could pose or are presumed to be capable of posing a national security risk to the US.
The bill which was passed with 400-2 (400 for and 2 against) votes on Tuesday, June 25th and known as “The Foreign Investment Risk Review Modernisation Act” broadens the scope of transactions subject to review by the Committee on Foreign Investment in the United States.
The committee is charged with the responsibility of advising the US president on whether to block such investment deals or not. The breadth of the new law is that it would grant the committee additional power to review “joint ventures and other transactions involving contributions of U.S. intellectual property, U.S. real estate transactions and other investments in U.S. technology or infrastructure companies”.
According to Maxine Waters, a Democrat and ranking committee member, the bill addresses “growing concerns that foreign entities may be using acquisitions of, and partnerships with, U.S. businesses to chip away at American technological leadership.”
Though the law is aimed at “transactions and countries that truly present a national security risk” to the US, it is not clear yet if Nigeria falls into this classification. If Nigeria does fall into this classification, then it may have some consequences for foreign direct investment flow to Nigeria from the US.
Foreign Direct Investment inflow to Nigeria has been dwindling for some time now. According to UNTAD, FDI flows to Nigeria decreased by 24% in 2017 to $3.4 billion, although global foreign direct investment fell by 16%. However, UNTAD projected that based on strong macroeconomic fundamentals, global FDI flows are expected to increase in 2018 but it also warned that elevated geopolitical risks and policy uncertainties could undermine the anticipated growth.
Among the geopolitical risks identified by the organisation is the possibility that protectionist rhetoric might translate to trade restrictive actions, a prophesy that seems to be coming true so quickly. It also noted that tax reforms in the US were likely to significantly affect investment decisions by US Multi National Enterprises, MNEs, which could have some consequences for global investment patterns.