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Ghana outpaces Nigeria in foreign direct investments first half of 2020

A better way to measure

Ghana may have an economy seven times smaller than Nigeria’s but the West African country has raked in two times more foreign direct investments than Africa’s biggest economy in the first half of 2020.

With a gross domestic product (GDP) of $67.077 billion, Ghana has recorded total investments of US$869.47 million, with total foreign direct investments (FDI) value amounting to US$785.62 million between January to June 2020 as FDI inflow showed rare strength in the final moments of the second quarter of the year, undeterred by the Covid-19 pandemic.

The total FDI of US$785.62 million represents investment recorded by the Ghana Investment Promotion Centre and the Petroleum Commission.

The seemingly positive performance of foreign direct investments (FDI) inflows to the country has been to an extent attributed to the gradual easing of the Covid-19 restrictions as well as government initiatives and incentives rolled out to buffer businesses and the economy at the height of the pandemic.

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For the same period, however, Nigeria with a GDP of $446.543 billion has attracted $362.84 million in foreign direct investments. This represents a 29.70 percent drop from $470.51 million in the corresponding period of 2019 (H1’19). This represents the highest Year-on-Year, YoY, decline in the last three years.

Development economists and financial analysts attributed the development in FDI in H1’20 to the sharp decline in crude oil earnings and the negative impact of the coronavirus pandemic on the global economy.

Worldwide, the United Nations Conference on Trade and Development (UNCTAD) has estimated that the Covid-19 pandemic would send global FDI plunging by about 40 percent – driving the total value of FDI below US$1 trillion for the first time since 2005.

Despite a sluggish start in the first quarter of 2020 and a worrying slump at the beginning of the second quarter due to severe lockdown measures to contain the spread of the coronavirus, FDI to Ghana has begun to rebound resulting in a notable increase in FDI inflow for the first half of the year.

At the GIPC, a total of 69 projects with a total estimated value of US$688.74 million was recorded by the end of June 2020. Of this, the total FDI component amounted to US$627.52 million while the local components accounted for an estimated US$61.22 million.

The FDI value of US$627.52 million was a considerable increase of about 409.10 percent from last year’s FDI value of US$123.26 million recorded within the same period (Jan-Jun 2019), depicting a strong performance irrespective of the global pandemic.

Out of the 69 projects recorded, the services sector registered a majority of 25 projects followed by the manufacturing and export trade sector with 21 and 11 projects respectively.

With regard to value, general trading recorded the highest amount of US$246.05 million. This was tailed closely by the mining exploration sector with US$231.02 million having sealed some major investments such as the Chirano Gold mine project for the exploration of minerals.

The manufacturing sector also saw significant investments valued at US$170.67 million on the back of some notable ventures such as a deal by Matrix industries for the manufacture of paper and aluminum products as well as the Rainbow Paints Limited project which is a joint venture between Ghana and Kenya for the manufacturing of paints and related products.

Meanwhile, additional equity totaling US$11.56 million was re-invested by existing companies within the first half of the year, while a total of GHC1, 365.26 million was recorded as investments from 28 wholly-owned Ghanaian businesses.

Regardless of the upbeat performance, the United Nations Conference on Trade and Development (UNCTAD) predicts that FDI will continue to see a decline of 5-10 percent in 2021 with a slow recovery to be initiated in 2022 driven by restructuring of global value chains and a general rebound of the global economy.

In this regard, the GIPC remains cautiously optimistic about the flow of FDI to Ghana. That notwithstanding, the Centre plans to assiduously pursue worthwhile investments for economic development as well as support government initiatives such as the COVID-19 Alleviation and Revitalisation of Enterprises Support (CARES) Programme to help bolster the Ghanaian economy towards recovery and remain resilient pre and post-pandemic.