Nigeria can learn from Rwanda how to attract more FDIs

Rwanda has been foremost among African countries attracting the biggest foreign direct investment (FDI) on the continent, according to Ernst & Young’s (EY) 2019 Africa Attractiveness Report. This shows that a focussed economic reform agenda pay off and experts say Nigeria needs significant economic reforms to achieve a similar feat.

Rwanda’s economic growth over the last decade has been remarkable. With a government that is committed to achieving sustainable economic growth coupled with growth in employment opportunities for its people, Rwanda has made progress in rehabilitating and stabilising its economy to exceed pre‐1994 levels.

EY’s 2018’s report assessed which countries could be considered more successful in the competition to attract foreign investment. While South Africa and Morocco were deemed to receive the most FDI in absolute terms when measured relatively with the size of their economies, they were outpaced by the likes of Rwanda, Kenya, and Ethiopia. Assessing the drivers of this growth, the report concluded that the countries adopting business-friendly approaches and easing bureaucratic processes tended to fare better, while those regressing on these fronts tended to fare less well.

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“There is certainly FDI inflow into Nigeria. I think the projected economic recovery will continue to be a magnet for foreign investors. What we have also seen is that the countries that have attracted the most FDI to GDP also ranked higher on the World Bank’s ease of doing business index,” Roderick Wolfenden, Africa Markets leader, said at the launch of EY’s ninth edition of Africa Attractiveness Report.

According to analysts, one of the challenges facing African countries is a perception gap. Foreign companies doing business in Africa see opportunities but this is not the case for those yet to enter the market.

“Nigeria is a market that cannot be ignored. However, insecurity, a tough business environment and little respect for the sanctity of contracts continue to keep investors away,” Henry Egbiki, regional managing partner, West Africa at EY, said.

Only two African economies make it into the first quartile of Ease of Doing Business rankings, namely Mauritius and Rwanda. The latter strongly enjoys the benefits of its efforts, scoring 0.35 per $1bn of GDP, using our FDI scoring methodology, which takes into account capital invested, jobs created and the number of projects in the pipeline.

This is the third consecutive year that Rwanda has exceeded its peer group (by a substantial margin) in attracting disproportionally more FDI than its economic size seems to warrant.