Nigeria’s FDI inflows increased 4% to $2.4bn in 2020 – UNCTAD

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Foreign Direct Investment (FDI) inflows to Sub-Saharan Africa decreased by 12 per cent to $30 billion, with investment growing in only a few countries. In West Africa, inflows to Nigeria increased slightly, from $2.3 billion in 2019 to $2.4 billion.

This is contained in the United Nations Conference on Trade and Development (UNCTAD) World investment report 2021, Brand Spur reports. According to the report, Nigeria emerged as the third-largest economy, alongside Ethiopia ($2.4 billion), which attracted FDI inflows in Africa last year. Ethiopia, despite registering a 6 per cent reduction in inflows to $2.4 billion, accounting for more than one-third of foreign investment to the subregion.

Although the Ethiopian economy suffered from the pandemic, especially in hospitality, aviation and other services, it still grew a substantial 6.1 per cent. The manufacturing, agriculture and hospitality industries drew the highest shares of investment in 2020. The Government initiated a programme to facilitate foreign investment in the manufacturing of personal protective equipment (PPE), and several Chinese firms have already started production.

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Egypt was the largest recipient in Africa, however, with a significant reduction of 35 percent to $5.9 billion in 2020; followed by the Republic of the Congo ($4 billion), while South Africa was fourth with $3.1 billion (a decline of 39 percent).

The average price of crude oil dropped by 33 per cent in 2020, and lower demand along with supply-side constraints caused by the slowdown in site development restricted FDI to the country in the first half of 2020.

Despite the pandemic, the long-term policy of FDI diversification appears to have had some impact. One important greenfield investment ($66 million) in the non-oil economy was the construction of a manufacturing facility in the Lekki Free Trade Zone by Ariel Foods (Kenya).

There was also a significant M&A deal in the same region, with China Communications Construction Company providing the initial $221 million equity injection in Lekki Deep Sea Port, out of a planned total investment of $629 million.

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Other transactions that contributed to FDI diversification, such as the investment by Multichoice Group (South Africa) in Betking, a provider of data hosting services, were relatively small.

Global foreign direct investment (FDI) flows are expected to bottom out in 2021 and recover some lost ground with an increase of 10% to 15%.

FDI flows plunged globally by 35% in 2020, to $1 trillion from $1.5 trillion the previous year, the report says. Lockdowns caused by the COVID-19 pandemic around the world slowed down existing investment projects, and the prospects of a recession led multinational enterprises (MNEs) to reassess new projects.