Investors’ appetite for Nigeria has continued to shrink in the last few years as crumbling infrastructure coupled with tough operating environment has forced investors to look elsewhere.
Pledges by domestic and foreign investors to projects in Nigeria declined by 74 percent between 2017 and 2020 and 43 percent in the last year.
Nigeria reported $66.35 billion investment announcement in 2017, $90.89 billion in 2018, $29.9 billion and $16.57 billion in 2019 and 2020, respectively as analyzed from the 2020 report by the Nigerian Investment Promotion Commission (NIPC).
Acknowledging the risk-off sentiments across the globe which is generally expected to drive down investment announcements, the “peculiar issues that frontiers markets like Nigeria face” are some of the issues Shakirat Anifowoshe, a Lagos-based investment analyst cited as one of the reasons responsible for the result of the report.
While COVID-19 can be easily blamed for the decline in the value of the proposed investment in Nigeria last year, analysis of the report by NIPC revealed the pandemic only made an already bad situation worse.
After rising from its recession level of $66.35 billion in 2017, investment announcement in Nigeria increased by 49 percent to $90.89 billion in 2018 but quickly dropped by 67 percent to $29.9 billion in 2019. The $60.99 billion decline reported between 2018 and 2019 is much bigger than the $13.15 billion recorded.
“Investment interest in Nigeria was under pressure before COVID-19; coherent investment-supporting policies are urgently required to reverse the trend,” research analysts at NIPC said.
Nigeria retains a long list of economic reforms that can unlock economic growth and reduce poverty but have been stuck. Decrepit infrastructure and the lack of a functional rail system means Apapa, which houses Nigeria’s main post, remains a crying shame.
“Nigeria needs to do the hard work of policy reform, right enabling environment to attract investment and drive recovery,” Ladé Araba, seasoned development finance professional with over 17 years of experience and Managing Director for Africa at Convergence Finance said.
When transporting imported goods from the warehouse in Nigeria’s busiest seaport, businesses spend an average cost of $2,050, according to a research firm, SBM Intelligence. This is nearly ten times the $208 it cost to transport containers from Durban Harbour to South African warehouse. In Ghana, it cost $285 to transport containers to a local warehouse.
Due largely to monetary and fiscal policy challenges in Nigeria, economic growth in Africa’s most populous nation averaged 1.2 percent between 2015 and 2020. The problem with that is the population grew two times faster at an average of 2.6 percent per annum.
“A more proactive all-of-government approach to investor support, across federal and state governments, is required to convert more announcements to actual investments,” NIPC said, adding that the “gaps between announcements and actual investments demonstrate investment potential,” as the gap as widened since 2018.
With a total investment announcement that was valued at $16.75 billion in 2020, the country was only able to attract $1.2 billion in Foreign Direct Investment (FDI), $15.55 billion gaps.
The breakdown of the report by the investment tracking agency shows that a total of 63 projects across 21 states was reported in 2020, a decline from the 112 projects reported across 27 states in 2017, 92 projects across 23 states, and 76 projects across 17 states in both 2018 and 2019, respectively.
Rivers State displaced Lagos as the destination state of choice for investment announcement. While Lagos was the second destination after offshore in 2019, Rivers came top on the list reported for 2020. Kaduna and Kogi received more investment announcement than Lagos last year.
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