Nigeria’s ranking as the 19th most attractive country for investments flowing into Africa, among the 54 countries tracked by the research unit of Quantum Global, will probably be reviewed upward this year, as dollar shortages ebb and economic fortunes improve.
“We are taking note of the success of the newly created Investor and Exporter window and it is likely Nigeria rises up the ranks at our next review in October, to allow for improvements in its exchange rate risk,” said Mthuli Ncube, head of Quantum Global Research Lab, the research arm of Quantum Global.
Nigeria averaged 13th position in the last three years, sliding a spot to 19th in 2016, from 18th in 2015. Botswana was ranked the most attractive economy for investments flowing into Africa, followed by Morocco, Egypt, and South Africa. The bottom ten countries range from Madagascar to Somalia.
A rebound is however on the cards for Nigeria which was in top five in 2012, according to Ncube, who once served as the chief economist and vice president of the African Development Bank.
“Despite the current economic challenges, we are quite confident on the medium to long term market prospects,” Ncube said of Nigeria, particularly pointing to higher oil prices and production volumes, as well as declining inflation and better access to foreign exchange.
In a separate but similar index by UK-based advisory services firm, Ernst & Young (EY) Nigeria ranks 17th among its African peers, after falling two spots from 15th in 2016.
Investors pulled the plugs on Africa’s largest economy, irked by capital controls introduced by the Central bank to halt a slide in the naira, after oil revenue shrank.
The draconian controls dented the country’s investment appeal and led to a dry-up in foreign investment inflow, which plunged to a nine-year low of $5.1 billion in 2016, according to data compiled by BusinessDay.
Foreign Direct Investment (FDI), a key component of the AII, came in at just over a billion dollars in 2016, according to the National Bureau of Statistics (NBS). In the first three months of 2017, FDI rose 21 percent to $211 billion from $174 billion in the comparable period of 2016.
Authorities have since tried to normalise the currency market and curb ballooning inflation which has deterred foreign investors from its markets.
The recently introduced “Investors & Exporters FX Window,” which allows investors trade at market-determined rates is one of recent moves to arrest a crippling dollar shortage. Stocks have since rallied to a two-year high, on the back of the new window.
The economy contracted 1.5 percent in 2016, the first such slump in 25 years, but is now tipped to expand 0.8 percent this year, according to the International Monetary Fund (IMF) as oil revenues receive a boost from rising production and higher prices relative to last year.
Inflation has also cooled from an 11-year high of 18 percent in 2016, to 16 percent in May, the fourth straight month of decline this year. The government targets 12 percent inflation rate and 2.5 percent GDP growth for the full-year. An oil-led economic recovery is however spurring fears that an economic rebound may elude Nigeria’s 180 million people, given the sector’s paltry contribution to job creation.
Ncube is of the view that the country’s “investment in infrastructure will underpin the growth of the economy” and meet the needs of a burgeoning population.
Nigeria has earmarked a significant amount of capital to develop critical infrastructure in the country and there are various opportunities for public private collaboration providing investors’ return on their investments, Ncube observed.
The country has set aside 30 percent of its total expenditure for capital projects in 2017. This comes to about N2 trillion of the N7.4 trillion budget signed by acting president Yemi Osinbajo.
Frantic efforts toward diversifying the economy are rife and government officials have laid out a roadmap to enhance public infrastructure and support high growth sectors in the country, such as manufacturing, ICT and agriculture, amongst others, to meet the local demand, along with boosting exports globally in the short to medium term, to stabilise the macro-economy.
Africa’s biggest economy has a GDP of US$ 415 billion that is projected to grow to about US$595 billion by 2020. This presents a big market for goods and services, according to Ncube.
“Nigeria presents tremendous investment opportunities in these areas, which would not only support the local economy but also deliver significant yields to foreign investors,” Ncube said.
Worried by its low ranking on the ease of doing business index, the Federal Government has implemented reforms to boost and restructure the economy, including the introduction of the Nigeria Industrial Revolution Plan (NIRP) establishing the Enabling Business Environment Council (PEBEC) to make Nigeria more attractive for investments.
Quantum Global’s Africa Investment Index is constructed from the World Bank Group’s Ease of Doing Business Indicators and a raft of other macro-economic and financial indicators from foreign investment inflow, GDP growth rate forecast and population augmented GDP growth factor.
Other indicators are real interest rate, the difference of broad money growth to the GDP growth rates, inflation differential, credit rating, import cover, the country’s external debt, current account ratio, and the country’s population size.
LOLADE AKINMURELE
