Nigeria and Ghana are two economies in the West African sub-region that have consistently attracted the interest of local and foreign impact investors. The two countries share some similarities and differences which include colonial history, similar climate, economic structures but differ in terms of the size of the market. Our analysis of the distributions of impact investments in the two countries between 2005 and 2019 showed that, based on the nature of the business landscape, the two countries appeared like a trade-off to impact investors.
As Africa’s largest economy-measured in terms of the GDP, there are so many advantages and privileges that Nigeria enjoys which Ghana does not. Nigeria is the most populous country in the entire black world, the biggest market, and very rich in natural endowments. Little wonder why the nation prides itself as the giant of Africa.
But when it comes to impact investing, the attention of impact investors may not be mainly focused on the size of the market, as there are some other salient factors which may rank pari passu as the size of the market.
And this is evident in the trend in the amount of funds invested in both Nigeria and Ghana from 2005 to 2019, that, apart from the size of the market, there are other factors of importance to impact investors when determining how much of their investments should go to either of the West African neighbours.
From 2005 to 2019, according to a report recently published by Dalberg on the impact investing landscape in Nigeria and Ghana, impact investors invested $9.69 billion in the two West African neighbours.
On average, 69 percent of the total impact investments or $6.73 billion went into the Nigerian economy while 31 percent or $2.96 billion went into the Ghanaian economy between 2005 and 2019.
However, on a year on year basis, the distribution of impact investments among the West African countries varied significantly. In 2005, impact investors mobilised $197.5 million into both Nigeria and Ghana. 61.2 percent of $120.80 million went into Nigeria while 38.8 percent or $76.7 million went into Nigeria. In 2006, the total impact investments in Nigeria and Ghana was $234.80 million. Out of this, 81.4 percent of $191.10 million went into the Nigerian economy while $43.70 million or 18.6 million was mobilised into the Ghanaian economy.
In 2007, the impact investing community invested $257.10 million in both Nigeria and Ghana. From this, 64.7 percent or $166.40 million went into the Nigerian economy while 35.3 percent or $90.70 million went into Ghana. But the trend changed in subsequent years.
For the next four years, that is, from 2008 to 2011, the Ghanaian economy was paramount to the impact investing community. In 2008, the total funds that went into impact investing amounted to $275.20 million. But in sharp reversal to the trend in previous years, the Ghanaian economy attracted $187.50 million or 68.1 percent of the total fund. On the other hand, the Nigerian economy got $87.70 million or 31.9 percent.
In 2009, 55.3 percent of the impact investments, or $228 million, went into Ghana while $184.10 million or 44.7 percent ended up in Nigeria. The ratio increased to 86.5 percent or $474.30 million in 2010 in favour of Ghana while 13.5 percent of the total $548.40 million invested in impact investing came to Nigeria. The Ghanaian economy also attracted 77.9 percent of the total impact investments worth $391 million in 2011 whereas the Nigerian economy received $86.50 million or 22.1 percent.
Again, after 2011, Nigeria became the dominant country to impact investors. From 2012 to 2018, impact investments into the Ghanaian economy averaged 18.9 percent while Nigeria’s averaged 81.1 percent. For Nigeria, the highest and lowest ratios of impact investing are 93.9 percent in 2018 and 74.9 percent in 2012.
For Ghana, the highest and lowest ratios of impact investments are 35.3 percent in 2017 and 6.1 percent in 2018.
In 2019, another era where the Ghanaian economy is seen as being more attractive to impact investors than the Nigerian economy started. In that year, total impact investments amounted to $870.80 million. Ghana attracted 60.2 percent or $524.30 million while Nigeria got $346.50 million or 39.8 percent.
Why the pincers curve above signifies is that impact investors are not going to bend their rules to please anyone, especially, rules that have been empirically tested and proved. As Nigeria carves for more investments, there is a need for those in the corridors of power to work on improving Nigeria’s business landscape.
“And that is why, if you look at investment, the amount of investment relative to population, we may say that Ghana is doing better. Nigeria is almost 200 million people while Ghana is about 29 million people. In recent times, Ghana has about $1 billion in impact investment while Nigeria has about $4 billion. If you use populations ratio, you can see they are doing better than Nigeria.
“If you also look at the diversification of the market in terms of where the DFIs are investing-they are investing in ICT, energy, and others; growth sectors that will address the need of other sectors. My major takeaway is that Nigeria should not be sleeping believing that investors will come. We are not the only populous country in the world. Smaller countries are finding ways to get around the number game by coming together to form a bigger market”, Innocent Chukwuma, regional director, West Africa at the Ford Foundation, said.