More than $4 billion of funding has been raised by start-ups in Africa through 754 deals and Nigeria ranks highest among the top four including South Africa, Egypt and Kenya, with $1.41 billion.
Despite this feat, Nigeria has dropped from Africa’s top 10 investment destinations to 14 as Egypt remains the number one nation.
This is according to a report by RMB, a division of FirstRand Bank Limited, titled ‘Where to Invest in Africa 2021’. The report positions Morocco as second and South Africa in third place, Rwanda and Botswana, now in fourth and fifth position respectively.
Based on their operating environments, other countries have moved up the rankings as Rwanda and Botswana occupy the fourth and fifth position respectively, while Ghana, Mauritius, Côte d’Ivoire, Kenya and Tanzania are the last five.
For Nigeria, RMB attributed its 14th position on the list to constraints on the nation’s economy by a weak policy environment and sore infrastructure provision.
However, the company said Nigeria’s heavy reliance on oil is impacting its economy. “Nigeria’s heavy reliance on oil means that the drop in oil prices and production generated by the Organization of the Petroleum Exporting Countries’ agreement is strongly impacting the economy. COVID-19 came at a time when the economy was still rebalancing from the drop in oil prices during the 2014 to 2016 period.”
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In 2018 and 2019, Nigeria was ranked in the top 10 – eighth in both years, 13 in 2017, and ranked number six in 2016. In 2014, Nigeria ranked as number two and dropped to number five in 2015.
“The sheer size of Nigeria’s economy and large population base has undoubtedly aided the country’s economic environment and has led to an increase in investments in the economy over the past 10 years,” the company said.
Also, the country’s hydrocarbon resources as well as considerable agricultural and mining potential are something to boast about. With fiscal support expected to increase and continue over the next few years, given both the coronavirus shock and oil price collapse, the economy is expected to grow but at a slow and steady pace.
The company further stated that the Nigerian government, which has been criticised for its slow pace of reform, still faces security challenges that destabilise the country, such as the activity of the Islamist terrorist group Boko Haram in the northeast, forcing many people to flee.
RMB Africa Economist, Daniel Kavishe, said the criteria used in measuring the performance of countries that made it to the list took a new approach which was a result of the COVID-19 pandemic.
“We created a new set of rankings that incorporated some of the unavoidable COVID-19-induced challenges, of which the operating environment score was one., as well as fiscal scores which are important indicators of how governments respond to COVID-19. This inclusion aimed to score governments’ fiscal positions and provided a basis from which investors can understand specific jurisdictions,” Kavishe said.
The top five beneficiaries who make up the total funding raised include Opay which secured $400 million, Andela $200 million, Flutterwave $170 million, Kuda Bank $80 million (two tranches), and Decagon $26.5 million (two tranches).
