The unfriendly business environment in Nigeria is making the country have a hard time in attracting foreign direct investments (FDI) as investors look to other African markets.
FDI inflows to the country declined 36 percent from $3.5 billion in 2017 to $2.2 billion in 2018, according to a report from United Nations Conference on Trade and Development (UNCTAD), making it the lowest foreign inflows that Africa’s largest economy has recorded in past 13 years when the Geneva-based permanent intergovernmental body started tracking FDI data across the globe.
According to the report, Nigeria lagged major African countries like Egypt, South Africa and Angola in direct investment inflows despite a 7 percent increase in FDI across the continent.
FDI into Egypt in 2018 stood at $7.9 billion; South Africa $7.1 billion; Ghana $3.3 billion while Angola was $ 5.5 billion.
“The monumental growth of 446 percent in FDI recorded in South Africa and the single digit growth of 7 percent recorded by Egypt is a reflection of investors’ confidence in their economies given that their economies coupled with their favourable business environment,” said Gbolahan Ologunro, an equity research analyst at Lagos-based CSL Stockbrokers.
Similarly, Nigeria’s much smaller West African Neighbour, Ghana overtook the oil rich African Nation as the largest recipient of FDI in the region despite Nigeria boasting a GDP that is about eight times larger.
“The paucity of FDI into Africa’s largest economy despite its huge endowment of natural resources, dynamic and youthful population continues to reflect the dearth of critical infrastructural facilities that will make the business environment conducive for businesses for thrive as well as the absence of key reforms in vital sectors of the economy,” Ologunro said.
For Johnson Chukwu, CEO, Cowry Asset Management Limited, the direction and the uncertainty from upcoming elections seems to have worsened the concerns and confidence of investors.
“The economy has been growing at a very sluggish rate since we came out of recession. And the growth of an economy is what drives FDI .Investors are looking for an economy where they will optimize their returns,” Chukwu said.
A lot happened in Nigeria’s business landscape in 2018 to influence negative investor sentiment , from a backlash between its apex financial regulator and its largest non-oil direct investor (MTN) that controls about 39.7 per cent market share and services about 66 million subscribers to the closure of local offices of two global lenders UBS and HSBC.
MICHEAL ANI & BUNMI BAILEY