Nigeria’s growing magnetism for foreign investment
Nigeria’s foreign investment story is a riveting one, with figures escalating at an unprecedented rate as the country’s GDP and reputation as an emerging market mecca continue to grow. The increase between 2012 and 2013 is particularly noteworthy: total foreign capital inflow (FCI) for the period of January to May in 2013 was US$ 10.005 billion, according to government statistics, compared with US$ 6.141 billion the previous January to May season. This is an astounding increase of 65 percent.
The biggest player in Nigeria’s growing FCI is portfolio investments (FPI); for the period of January to May 2013 FPI accounted for 84.07 percent of total FCI. By contrast total FDI was 8.31 percent, a decrease from the year before when it was 10.93 percent of total FCI. That said the country remains within the top three FDI destinations in Africa and according to the United Nations Conference on Trade and Development (UNCTAD) received an FDI inflow of N 5.6 billion in 2013. The biggest FDI players in Nigeria’s economy at present are the US (essentially because of Chevron Texaco and Exxon Mobil investments), the UK (which contributes roughly 20 percent of all FDI into Nigeria), China (Nigeria is its second biggest African trade partner), South Africa, Italy, France, the Netherlands and Brazil. In the Jan-May 2013 period other investments (OI) accounted for 7.62 percent of Nigeria’s FCI, up from 6.80 percent the year before.
Draws and pullbacks of investing in Nigeria
One of the primary pitfalls to investing in Nigeria is that which is common to many African nations: political stability and safety. In Nigeria the issue of safety is mostly only a problem in the volatile northeast of the country. Other areas requiring consideration by potential investors are the country’s dependence on oil (which makes its economy vulnerable to global price fluctuations), corruption, and a changeable business environment, however with regard to the latter the Government is making marked efforts to diversify the economy in accordance with its National Development Plan.
The potential windfall of doing in business in Nigeria is immense for whoever is prepared to accept the risks. Its new status as Africa’s largest GDP country, its population of 170 million, which offers an immense workforce and consumer base, its rich mineral resources and vast arable land, and its growing business environment are just some of the draw cards pulling investors in.
ITPO to be established in Nigeria
Last month the United Nation Industrial Development Organisation (UNIDO) gave the go ahead for an Investment and Technology Promotion Office (ITPO) to be established in Nigeria. in response to this announcement Nigerian Minister of Industry, Trade and Investment Olusegun Aganga said, “There are only a few countries in the world where UNIDO has set up ITPO to promote investment into the area of technology. The establishment of the ITPO in Nigeria will not only have a big positive impact on the Nigerian economy, it will also help in the innovation of the industrial sector.” The industrial sector is very much on the agenda in terms of diversifying the country’s economy and its development will help to draw in even further FDI.
The Economist Intelligence Unit (EIU) has estimated that Nigeria’s annual net direct investment will be US$ 11 billion by 2016. This figure is encouraging in terms of the country’s 2020 Vision, which has set the aim that “By 2020 Nigeria will be one of the 20 largest economies in the world, able to consolidate its leadership role in Africa and establish itself as a significant player in the global economic and political arena.”