Nigeria’s FDI averages just 0.5% of GDP, lags peers – W’Bank Group

…says Nigeria can Unlock $20bn in private investment by 2030

Nigeria’s foreign direct investment (FDI) remains a fraction of its peers with inflows amounting to just 0.5% of its GDP, findings from the World Bank Group have shown.

This underperformance is stark compared to some other African nations, where FDI often plays a crucial role in economic growth and development.

But critical reforms could transform the Country into a magnet for private investors, potentially unlocking as much as $20 billion in new investments by the end of the decade, the bank also estimates.

This influx would be pivotal in driving economic growth and development across key sectors.

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This is contained in the Country Private Sector Diagnostic (CPSD) by the World Bank Group, comprising the World bank, IFC and the Multilateral Investment Guarantee Agency (MIGA) presented in Abuja on Thursday.

Dahlia Khalifa, Regional Director, International Finance Corporation (IFC), for Central Africa, Liberia, Nigeria, and Sierra Leone, who presented the findings, said those reforms, which included ICT infrastructure; agribusiness, especially in cassava and soybean; energy generation through solar PV; as well as pharmaceutical manufacturing, would also enable the Country to generate over 800, 000 jobs within the period.

The World Bank Group acknowledges Nigeria’s large domestic market and abundant natural resources, including a fast growing population with regional trade ties, rich agricultural and mineral resources as well as improved macroeconomic stability.

Yet, at an average 0.5% net inflow as share of GDP, Nigeria attracts less Foreign Direct Investment (FDI) than peers, including Chile at 5.3%; Ghana at 4.4%; Ethiopia and Brazil at 3.5% respectively; Malaysia at 3.1%; Mexico at 2.7%; Egypt at 2.3%; South Africa at 2%; Indonesia at 1.9%; Sub-Saharan Africa at 1.8%; China at 1.6%; and Russia at 0.9%.

“Nigeria’s average FDI net inflows (share of GDP) between 2014 and 2023 are below those of its aspirational and regional peers,” Khalifa stated.

CPSD takes a private sector perspective in identifying constraints and draws on data and interviews to identify sectors that offer attractive private sector opportunities if critical policy actions are taken; clear factors that discourage private investors in those sectors; and concrete policy actions that government can take in the near term to enable investment in their next three to five years.

The World Bank estimates that if critical actions were taken in ICT infrastructure, Nigeria could unlock between $900m and $4billion, creating between 200,000 and 229,000 jobs.

Solar PV could attract between $3billion and $8.5 billion, and deliver up to 365,000 jobs; agribusiness, especially in cassava and soybean could ramp up between $4,8billion and $6billion investment and up to 344,000 jobs; while pharmaceutical manufacturing is poised to yield between $1.1 billion and $1.6 billion investment, and deliver between 30,000 and 40,000 jobs.

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As part of its recommendations to boost ICT infrastructure broadband, the Bank noted that States should be encouraged to comply with the National Economic Council (NEC) commitment to a maximum of N145 per meter rights of way (ROW) fees.

It also suggested an amendment of section 92 of the Nigerian Communications Commission (NCC) Act to require the Commission to make analysis and enforce obligations on dominant operators while consolidating 26 licence categories and creating a new licence for national wholesale Fibre-optic infrastructure.

It also recommended that the Government should launch a phased regional tenders for institutions to pre-purchase Fibre capacity to boost investment in underserved areas.

For solar power, the Bank urged the Government to ensure effective implementation of the already existing Customs waiver procedures for imported solar equipment, increase the mini-grid permit cap from 1mw to 5mw, as well as design a partnership framework to mobilise at scale local currency institutional capital in the DRE sector.

To boost investment in the pharmaceutical sector, the World Bank urged a boost in NAFDAC’s efficiency in licensing and other regulatory work through streamlined and coordinated processes, and increased professional training, especially for regulating new products like APIs and excipients.

It further encouraged Government to ensure consistent application of duties and fees, by Customs and revenue Agencies to shorten clearance times, and lower additional costs and financial uncertainties for producers.

In agriculture, focusing on cassava and soybean, the World Bank sees the need to expand and transform current extension service delivery models, improve the quality of inputs, as well as enhance programme delivery through farmer Associations.

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Sérgio Pimenta, IFC Vice President for Africa, said CPSD received diverse inputs from both the public and private sector in the selected sectors, including Ministries, Departments, Agencies (MDAs), Chambers of Commerce, Bankers’ Associations and other stakeholders, whom he appreciated for their contributions.