Nigeria and other African countries in 2018, attracted about $75.5 billion in the capital, created 170,000 jobs, and executed about 710 projects.
While the United States and France have remained Africa’s single largest investors, emerging market investors during the period accounted for 34 per cent of Foreign Direct Investment (FDI) projects. They made up over half of all jobs created and capital invested.
At the launch of 2019 Africa Attractiveness Programme Report by Ernst and Young (EY), Wednesday, in Lagos, Head of Markets, EY Africa, Roderick Wolfenden, said the report signalled a return to the growth trajectory of FDI to the continent.
Using the scoring mechanism on a comprehensive assessment of FDI, the report said Egypt, South Africa, and Morocco took the lead as FDI recipients on with $44.8million, $41.7million, and $30million market attraction respectively on projects numbers, jobs created and capital invested.
With the FDI that remained largely steady, the report expressed Africa’s growth remains uneven, with the East out-pacing the rest of the continent, as major economies’ including South Africa, Nigeria, and Angola recoveries remain limped.
The report said Africa grew 3.8% in 2018, with sub-Saharan Africa rising somewhat slower, at 2.6%, largely due to three of its largest economies all facing continued challenges.
The three collectively account for over half of the region’s total GDP ($800billion).
However, the report maintained that West Africa remains a high-growth region despite its largest economy lagging. Led by Nigeria, the region remains a key FDI hub, and attracted major Telco media tech FDI, in line with its rising technology hub focus.
Again, despite Nigeria’s economy remaining hamstrung by restrictions on foreign exchange, and a small concentrated tax-base, it saw a rise in FDI in 2018, following two slower prior years.
Similar to South Africa’s position, Nigeria’s ability to attract greater FDI will depend on its willingness to adopt much-needed policy reform and to unite behind a vision that builds on its successes to date. Neighbouring Ghana and Cote d’Ivoire are also increasingly important FDI destinations, both growing in excess of 5% and attracting investor interest as a result.
Despite its dominance and influence across the western region, the report showed that Nigeria is only gradually recovering from the recession it faced in 2015. This recovery has proved to be haphazard, and below its long-term growth potential.
It said this is likely to continue through the next five years, with the country struggling to return to the 5%+ growth recorded prior to 2015. Growth is impacted by continued insurgency across the northern parts of the country, along with its over-reliance on oil exports to generate government revenue.
Its diversification efforts require time before the benefits begin to kick in, with a major new oil refinery and agriculture production (the country’s staple rice crop), likely to start driving growth.
It explained that funding infrastructure must be sustainable and profitable. It said with an increasingly uncertain geopolitical outlook, Africa can shape its own future through the African Continental Free Trade Agreement.
For Nigeria to be among the top leading economies in Africa, Regional Managing Partner, West Africa, EY, Henry Egbiki told The Guardian that there is the need to focus on right economic reforms and to right microeconomic policies.
“We have to ensure that the regulatory framework is good and we have to deal with the challenges to attract more investors on poor infrastructure. We need to make a conscious investment to mobilise funding and invest in the right infrastructure, especially on roads, rails and aviation currently.
“We need to deal with security concerns. Investors would not want to invest in an environment that is volatile where there is no proper security.”
In the report, for Nigeria, the amount invested in the capital is not commensurate with the number of jobs created.
For instance, with about $8billion invested in Nigeria, only 10,000 jobs were created, while in Kenya, about 6,000 jobs with an investment of $2billion.
Egbiki said: “That talks the type of project that the investment came into. Nigeria invested in more capital-intensive projects, whereas if they went into services and retails, it will create more jobs. The outcome is not still bad.” On Ease of Doing Business Report, he said it has to do with the regulatory framework and security challenges. “We have not dropped off the radar completely. That tells you of the potential of the Nigerian economy.
“The potential and resources are there, it is just how we get the leadership focused to do the right thing so that we can have the multiplier effect in terms of GDP growth, employment creation, and validation for every Nigerian.
“No investor can ignore Nigeria, the focus and attraction are there. The focus is just to deal with the challenges so that we can actually get the chunk of what you deserve in terms of FDI.”