Nigeria, Morocco and Kenya recorded strong growth in greenfield project announcements last year, according to the 2024 global investment trends monitor report.
The report, released by the United Nations Conferences on Trade and Development (UNCTAD) on Wednesday, shows that foreign direct investment (FDI) flows to the continent dropped by one percent to an estimated $48 billion.
“Greenfield project announcements increased, mostly due to strong growth in Morocco, Kenya, and Nigeria. However, project finance deals fell by one-third, more than the global average decline, weakening prospects for infrastructure finance flows,” the report said.
It added that global FDI flows in 2023, at an estimated $1.37 trillion, showed a marginal increase (three percent) over 2022, defying expectations as recession fears early in the year receded and financial markets performed well.
“However, economic uncertainty and higher interest rates did affect global investment. The headline increase was due largely to higher values in a few European conduit economies; excluding these conduits, global FDI flows were 18 percent lower,” it said.
UNCTAD reported in July that FDI inflows into Nigeria, Africa’s biggest economy, turned negative in 2022 for the first time in at least 33 years.
This was disclosed a month after President Bola Tinubu took office; he stoked foreign investors’ interest with some of his actions including the removal of petrol subsidy and foreign exchange reform.
Tinubu has hosted several major companies including Airtel, ExxonMobil, Shell Petroleum Development Company and Bank of America as part of efforts to drive up investments in the country.
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During his trip to India in September, he attracted $14 billion in investment pledges from Indian investors. Some of the companies that pledged investments were Indorama Petrochemical Limited, which promised a new investment of $8 billion in the expansion of its fertiliser production and petrochemical facility in Eleme, Rivers State.
Jindal Steel and Power Limited, one of India’s largest private steel producers, committed to investing $3 billion in iron ore processing and steel development in the country.
Jitender Sachdeva, founding president of SkipperSeil Limited, said his firm would invest $1.6 billion in the establishment of 20 100-megawatts power generation plants across the states of Northern Nigeria, amounting to 2,000MW of new power within the next four years.
In the third quarter of last year, foreign investments into Nigeria dropped to $654.7 million, the lowest level since the National Bureau of Statistics started collating the data in 2013.
The decline in investments came despite reforms implemented in Q2 to lure back foreign investors in a bid to boost economic growth.
The reforms have worsened inflation, currently in double-digits and at the highest level in 20 years. The rising inflationary pressures have weakened the purchasing power of consumers, even as businesses grapple with higher operating costs.
A breakdown of the capital importation data shows that FDI remained the least contributor, accounting for 9.13 percent of total capital importation at $59.8 million in Q3, representing a decline of 30.5 percent from $86.0 million in Q2.
“Capital importation figures show continuous quarterly decline suggesting persistent challenges of investor confidence in the Nigerian economy,” analysts at KPMG Nigeria said.
They said the recent persistent dominance of trade credits, loans, and related forms of short-term capital inflows with portfolio and especially foreign direct investment slowing was a major concern.
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“While there is an urgent need to restore external investor confidence, Nigeria needs to strike a balance between attracting foreign capital and promoting domestic development (thereby reducing its reliance on foreign capital),” they added.
UNCTAD also revealed that FDI in the European Union jumped from negative $150 billion in 2022 to positive $141 billion due to large swings in Luxembourg and the Netherlands.
“Excluding those two countries, inflows to the rest of the EU were 23 percent down, with declines in several large recipients. Inflows in other developed countries also stagnated, with zero growth in North America and declines elsewhere,” it said.
It added that FDI flows to developing countries fell by nine percent, to $841 billion, with declining or stagnating flows in most regions.
“FDI decreased by 12 percent in developing Asia and by one percent in Africa. It was stable in Latin America and the Caribbean as Central America bucked the trend.”
Authors of the report noted that in West Asia, FDI remained stable (two percent) due to continued buoyant investment in the United Arab Emirates, which saw greenfield announcements rise by 28 percent to the second-highest number after the United States.
“Greenfield numbers also jumped in Saudi Arabia, by 63 percent. In Latin America, Brazil reported 22 percent lower FDI inflows. While greenfield project numbers held steady, international project finance plummeted, with 40 percent fewer deals than in 2022,” they said.
“Mexico reported an increase in FDI, as well as a further increase in new greenfield project announcements, solidifying its position among the top global recipients,” they added.
