Nigeria’s FDIs Shrink Amid Drop in Investment Flows to Africa

By Adedapo Adesanya 

Foreign direct investments (FDIs) into Nigeria turned negative by $187 million, according to the latest report, which showed that foreign flows to Africa slumped to $45 billion in 2022 from the record $80 billion set in 2021.

According to United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2023, FDI flows accounted for 3.5 per cent of global FDI.

Meanwhile, the number of greenfield project announcements rose by 39 per cent to 766. Six of the top 15 greenfield investment megaprojects (those worth more than $10 billion) announced in 2022 were in Africa.

Giving a breakdown of the investments, UNCTAD noted that in North Africa, Egypt saw FDI more than double to $11 billion as a result of increased cross-border merger and acquisition (M&A) sales.

Announced greenfield projects more than doubled in number to 161. International project finance deals rose in value by two-thirds, to $24 billion. Flows to Morocco decreased slightly, by 6 per cent, to $2.1 billion.

In West Africa, Nigeria’s FDI flows which turned negative to -$187 million, happened as a result of equity divestments.

The report showed that announced greenfield projects, however, rose by 24 per cent to $2 billion.

Flows to Senegal remained flat at $2.6 billion, while foreign flows to Ghana fell by 39 per cent to $1.5 billion.

In East Africa, flows to Ethiopia decreased by 14 per cent to $3.7 billion; the country remained the second-largest FDI recipient on the continent. FDI to Uganda grew by 39 per cent to $1.5 billion on investment in extractive industries and FDI to Tanzania increased by 8 per cent to $1.1 billion.

In Central Africa, FDI in the Democratic Republic of the Congo remained flat at $1.8 billion, with investment sustained by flows to offshore oil fields and mining.

In Southern Africa, flows returned to prior levels after the anomalous peak in 2021 caused by a large corporate reconfiguration in South Africa. FDI in South Africa was $9 billion – well below the 2021 level but double the average of the last decade. Cross-border M&A sales in the country reached $4.8 billion from $280 million in 2021 and in Zambia, after two years of negative values, FDI rose to $116 million.

The UN agency noted that in the past five years, FDI inflows have risen in four of the regional economic groupings on the African continent.

FDI in the Common Market for Eastern and Southern Africa (CMESA) grew by 14 per cent to $22 billion. Flows also rose in the Southern African Development Community (SADC) quadrupled to $10 billion, and the West African Economic and Monetary Union (WAEMU) doubled to $5.2 billion) and the East African Community (ECA) saw its inflows up 9 per cent to $3.8 billion).

The report showed that intraregional investment remained relatively small, despite an increase over the past five years. In 2022, intraregional greenfield project announcements represented 15 per cent of all projects in Africa (2 per cent in terms of value), as compared with 13 per cent (2 per cent in value) in 2017.

However, looking at announced projects invested in by only African multinational enterprises, three-quarters of their value remained on the continent.

In 2022, the biggest increase in announced greenfield projects was in energy and gas supply (to $120 billion from $24 billion in 2021). Project values in construction and extractive industries also rose, to $24 billion and $21 billion, respectively. The information and communication (ICT) sector registered the highest number of projects.

International project finance deals targeting Africa showed a decline of 47 per cent in value ($74 billion, down from $140 billion in 2021) but a 15 per cent increase in project numbers to 157.

European investors remain, by far, the largest holders of FDI stock in Africa, led by the United Kingdom ($60 billion), France ($54 billion) and the Netherlands ($54 billion).