Pledges by domestic and foreign investors to projects in Nigeria declined by 67 percent in the first half of 2020, the Nigerian Investment Promotion Commission (NIPC) has said.
Proposed investments by the investors dipped to $5.06 billion from $15.15 billion reported in the comparable period of 2019, NIPC said in a report released over the weekend.
According to the investment tracking agency, the decline in Nigeria’s investment announcement is consistent with the expected downward pressure on investment flows, given the negative global economic impact of COVID-19.
“This is not surprising, given the risk-off sentiment in the global investment landscape. New investors and investment announcements are expected to be at bay given the risk-off sentiments across the globe as well as peculiar issues that frontier markets like Nigeria face in turbulent times,” Shakirat Anifowoshe, a Lagos-based investment analyst said.
Anifowoshe explained that she won’t be “surprised if the announcements were from investors that already have some sort of footprint in the country.”
Analysis of the report by NIPC showed that domestic investor’s pledge amongst 10 other countries accounted for 16 percent of the value. This is compared to the 43 percent by investors from the US and 31 percent from South Africa and 8 percent from the United Kingdom.
According to the report, the fund was to be deployed into 34 projects across 16 states including the Federal Capital Territory (FCT). This is compared to the 43 projects announced across 12 states in the first six months of 2019.
Breakdown of the H1 2020 report shows that Kaduna State was the biggest beneficiary, with 51 percent of total value at $ 2.61 billion; Lagos, Nigeria’s commercial capital got 4 percent of the proposals worth $221million while Nasarawa State ($56 million), and Ekiti State ($50 million) got 1percet each.
Distribution of the recipient sectors of the investments shows that transportation & storage and information & communication gained more investor’s interest accounting for 39 percent of the total value and 32 percent respectively. Mining & quarrying, and agriculture also made the list of top five investment destination with 20 percent, and 5 percent respectively.
While the NIPC report that was tracked from January to June 2020 may not contain exhaustive information on all investment announcements in Nigeria during the period, the agency explained that its data “gives a sense of investors’ interest in the Nigerian economy.”
More than two months after the Federal Government began to re-open the Nigerian economy on May 4, 2020, following the 5-week COVID-19 lockdown in FCT, Lagos and Ogun state, analysts say businesses are nowhere close to recovery from the impact of the pandemic.
According to analysts, Nigerian businesses and the economy has not been so much in need of capital following to the drop in crude price and disruption in economic activities due to COVID-19.
Africa’s top oil exporter who relies on crude sales for around 90 percent of foreign exchange earnings and more than half of government revenue is projected to post as much as 5 percent contraction in 2020.
Further breakdown of the H1 report by NIPC revealed there were no investment pledges in February, the month Nigeria joined the rest of the world to record its first COVID-19 case.
Meanwhile, the highest investment pledges were reported in January with four announcements as against three in June and one each in March and May.
