Nigeria must have its rather successful Eurobond sale of Tuesday to thank for partly overshadowing its woeful performance in the 2021 “where to invest in Africa” report where the continent’s biggest economy did not qualify to be listed in the ranking of the top 10 countries.
The report was released by Rand Merchant Bank (RMB) on Tuesday, the same day leading investors from around major markets of the world were snapping up the $4 billion on offer by Nigeria, leading to a massive oversubscription categorised as one of the best things out of Africa in 2021.
In the ‘Where to invest in Africa’ ranking, Egypt was placed first and followed by Morocco and South Africa in the second and third place, respectively.
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Rwanda, Botswana and Ghana followed in the pecking order while Mauritius, Cote d’Ivoire, Kenya and Tanzania made up the remaining places.
In the same ranking for 2020, Nigeria placed seventh but this year the country is completely missing from the top 10, a mark of how the investment climate in Africa’s most populous country had deteriorated in 12 months.
Daniel Kavishe, Africa economist at RMB, said Wednesday that this year’s ‘where to invest’ report was also impacted by the ongoing COVID-19 pandemic as well as the significant disruption in cross-border payment to suppliers in a number of key markets that were ranked.
A key indicator this year was fiscal score measuring the size, nature and efficiency of government fiscal measures to strengthen resilience in the midst of the COVID-19 lockdown in major markets across Africa.
While Nigeria is tipped by the International Monetary Fund (IMF) to grow by 2.5 percent in 2021, South Africa, the continent’s second largest economy, is projected to expand 4 percent. Egypt and Morocco are projected to expand by 2.8 percent and 4.5 percent, respectively.
Johnson Chukwu, managing director/CEO, Cowry Asset Management Limited, says the African countries that made it in the top 10 ranking have a stable socio-economic environment, stable leadership and have invested in infrastructure and their economies are growing.
Chukwu notes that Nigeria is not among that group as its economy has been struggling since the past six years, and in that period, Nigeria has suffered two recessions that have seen GDP per capita decline every year since 2015, causing poverty to deepen.
According to Chukwu, investors go to countries that are free of insecurity and have strong legal systems. He is worried that investors in Nigeria find it difficult to repatriate their investment returns.
Investment inflows into Nigeria have dwindled since the economic recession in 2016, a sign of the country’s weakening allure to foreign investors. However, it did raise a $4 billion Eurobond on Tuesday that was oversubscribed four times as bids totalled $12 billion compared with the $3 billion that was initially planned.
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“That the Eurobond was oversubscribed is not a measure of foreign investors’ confidence in the Nigerian economy,” a Lagos-based investment banker states.
“The fact is Nigeria has never defaulted on a Eurobond payment, and what matters to bond investors are not necessarily the economic fundamentals but Nigeria’s ability to repay the loan, which it easily can,” the investment banker says.
