By Jeph Ajobaju, Chief Copy Editor
Africa’s top 10 Foreign Direct Investment (FDI) destinations – among them Egypt, Nigeria, South Africa, and Ghana – received over $300 billion in the decade between 2011-2020, according the latest data from the World Bank.
Egypt got $56.2 billion, Nigeria ($45.1 billion), and South Africa ($41.3 billion).
Investment, foreign or local, impacts Gross Domestic Product (GDP), a major indicator of growth and standard of living in any country. FDI especially is a trigger to economic growth.
Nigeria’s GDP was $432.2 billion in 2020, a 3.53 per cent decline against the $448.1 billion peak in 2019, which rose 12.82 per cent on 2018.
The World Bank 2020 Ease of Doing Business Report ranked Nigeria 131st globally for ease of doing business, meaning a lot of investment it could have attracted was moved to countries better ranked.
But there have been some signs of progress. Being ranked 131st in 2020 is better than 146th in 2019.
The World Investment Report 2020 also categorised Nigeria among the most promising poles for growth in Africa, being third-best host economy for Foreign Direct Investment (FDI) behind Egypt and Kenya, per Nairametrics reporting.
However, informed conclusion about Nigeria’s macro-economic performance can only be made after comparison with other African countries, which Nairametrics analysed below:
GDP
GDP provides information on the size and performance of a country’s economy. Growth in per capita GDP increases living standard for individuals.
Nigeria leads Africa in this metric, with $432.2 billion GDP in 2020.
Egypt comes next ($363 billion), then South Africa ($302 billion), Kenya ($99 billion, and Ghana ($72 billion).
FDI
This is how the top five countries stack up in DFI inflows:
Egypt
North African countries suffered a decline in investment inflows in 2019, with the exception of Egypt which raised FDI or by 11 per cent to $9 billion, the largest in Africa.
Egypt’s strategy is diversification away from oil and gas into telecommunication, real estate, and consumer goods.
This, to a great extent, improved its macroeconomic stability and strengthened investors’ confidence. Thus, while there was a general lull in inflows in other North African countries, Egypt soared.
South Africa
South Africa’s inflow was encouraging after a horrendous three years from 2015 to 2017 when it averaged $2 billion a year, an amount too small for its capacity and potential.
It made $4.6 billion in 2019, a 15 per cent decline on 2018. The country appears diversified enough, with mining, manufacturing, and services constituting its markets.
Nigeria
Nigeria has not been able to diversify its economy as expected. The development of the $600 million steel plant in Kaduna is a sluggish step but in the right direction.
Its major selling point is oil and gas. But with dwindling investment in this sector, there is little chance for improvement in FDI inflows.
Consecutive FDI increases in 2017 and 2018 almost halved in 2019 to $3.3 billion.
It is unfair and unrealistic to attribute all of the economic travails to the dwindling marketability of oil and gas. Insecurity and rising operational costs, if not addressed, will continue to put off investors.
Ghana
FDI to Ghana totalled $2.3 billion in 2019, a 22 per cent drop. Ghana to an extent has diversified into agriculture, and oil, and does major business with mining.
West Africa generally has suffered the worst in terms of FDI with investors favouring the other regions – North, East, South, and Central.
Kenya
Kenya may just have lost ground to Ethiopia and Uganda in attracting FDI.
It made huge investment in ICT but still endured a worse off position in 2019 by 18 per cent, with only $1.3 billion mobilised.
Uganda grew FDI almost 20 per cent to $1.3 billion and Ethiopia had $2.5 billion
Top 10 FDI destinations in Africa
The World Bank carried out an analysis on Africa covering the decade 2011-2020 and made these findings:
- The top 10 African countries – which include Egypt, Nigeria, South Africa, and Ghana – generated over $300 billion.
- Egypt tops the chart with $56.2 billion, followed by Nigeria ($45.1 billion), and South Africa ($41.3 billion).
- Ethiopia grew the most in the period, rising over 200 per cent. South Africa contracted 15.6 per cent.
- Financial Derivatives Company estimates that Africa may garner $29 trillion by 2050 based on current trend.
- Africa’s real GDP contracted 2.1 per cent in 2020, deviating from its consistent improvement trend because of coronavirus.
- As Egypt has done, if Nigeria diversifies and addresses rising costs and insecurity, it may live up to its billing as Africa’s giant and attract more FDI.