Nigeria continued its slide as a choice investment destination in Africa for the third consecutive year, according to rankings by Africa Investment Index, accentuating the worries of many economic analysts who had noted that investors were shunning Nigeria as they move their funds to friendlier countries.
The African Investment Index (AII) published by Quantum Global Research Lab, has ranked Nigeria 19th among 54 African countries in terms of investment allure; Botswana is the most attractive economy for investments flowing into the continent despite being among the smallest economies in the continent as it is ranked 21st in terms of GDP size.
The top five African investment destinations attracted total FDI of $13.6bn. Morocco was ranked second on the Index based on its increasing solid economic growth, strategic geographic positioning, increased foreign direct investment, import cover ratio, and an overall favourable business environment.
Egypt was ranked third due to an increased foreign direct investment and real interest rates, and a growing urban population. The fourth country on the list, South Africa, scored well on the growth factor of GDP, ease of doing business in the country and significant population while Zambia, was the fifth country on the list due to its significant domestic investment and access money supply.
“Despite considerable external challenges and the fall in oil prices, many of the African nations are demonstrating an increased willingness to achieve sustainable growth by diversifying their economies and introducing favourable policies to attract inward investments,” said Prof Mthuli Ncube, Head of Quantum Global Research Lab about the index.
“Botswana is a case in example – its strategic location, skilled workforce and a politically stable environment have attracted the attention of international investors leading to a significant influx of FDI.”
Nigeria was ranked the 13th most attractive country in 2013. It retained the position in 2014, but dropped 4 places to 18th in 2015. The index indicated that exchange rate risk, hostile business environment, and weak economy subdued such favourable factors as real GDP, external debt position, and demographic characteristics, to push investors from Nigeria.
Africa’s biggest economy’s returns prospect had strongly lured funds from global investors; positioning it in the top three most invested countries on the continent up to 2014. Latest Data on capital importation from the National Bureau of Statistics, the country’s official statistics body, shows that total foreign direct investment was $699 million as at the third quarter (Q3) of 2016, 47 per cent decline from the 2015 levels. Foreign direct investment in the country stood at $1.3 billion as at the third quarter of 2015 and $1.8 billion as at the third quarter of 2014.
Taiwo Oyedele, West Africa tax leader at PwC, said in a telephone chat with BusinessDay that it is not difficult to know why Nigeria has lost its place as the prime investors’ destination in Africa.
“For instance, there has been uncertainty in Nigeria since the build up to the elections in 2015. Investors do not like uncertainty, so they left as soon as uncertainty set in. Then you have the issue of inconsistency in monetary and exchange rate policies.”
Christian Orajekwe, head of research and strategy at investment firm, Cordros Capital, said that Nigeria should reform the business environment to hook the interest of investors. He said that Nigeria has not been serious about reforming the business environment as all the reforms the managers of the economy has talked about have only been rhetorical.
“If you look at the countries that ranked above Nigeria such as Egypt and Tanzania, they have implemented one or more policy reforms recently,” Orakekwe said. “We should have a truly diversified economy, not one in which only 2 or 3 sectors account for over an unduly large portion.”
The bottom 10 countries according to the AII are Somalia, Eritrea, Central African Republic, South Sudan, Sierra Leone, Liberia, Malawi, Equatorial Guinea, the Gambia and Madagascar.
Morocco, the second most attractive country in the continent, scored well in risk factors such as current account ratio and import cover, and ease of doing business. Egypt scored well on the growth factor of the size of GDP, demographic factor of population size, liquidity factor if real interest rate and ease of doing business.
The AII indicated that South Africa, the continent’s second largest economy and ranked 4th, aided by the growth factor of GDP size, the demographic factor of population size, and ease of doing business.
Seven countries joined Botswana as the top ten countries that attracted the most investments in 2016. These include Egypt, Zambia, Cote d’Ivoire, Algeria, Tanzania, and Burkina Faso.
Oyedele and Chukwu said that the Nigerian government’s economic recovery and growth plan could bring back investors if properly implemented.
Chukwu said that some gains have already been made in the drive to improve the ease of doing business in the country, citing the reduction in the number of agencies at the ports and improvements in the visa process.
For consumers in a country hit by recession for the first time in over 25 years, spending power dropped significantly as many people lost their jobs and businesses faced multiple operating challenges including rising costs. This debilitated the effective demand of the populace, dissuaded foreign investors, and left the country to rue lost opportunities.
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