The weak demand for Nigeria’s crude oil in 2019 led to a decline in foreign direct investment flow into the country, the latest World Investment Report 2020 stated.
The report published by the United Nations Committee for Trade and Development said that FDI into Nigeria declined by 48 per cent to $3.3bn in 2019 from $6.4bn in 2018.
It noted that that Africa experienced a general slump in FDI flows in 2019 by 10 per cent to $45bn due to more moderate economic growth and dampened demand for commodities.
The report said, “Inward FDI to Nigeria almost halved, to $3.3bn due to a slowdown in investment in the oil and gas industry.
“The development of a $600m steel plant in Kaduna state offers some evidence of investment diversification, a long-standing policy objective.”
According to the UN findings, there was reduced investment flow to countries with relatively more diversified FDI inflows such as South Africa, Morocco and Ethiopia as well as flows to commodity-exporting economies such as Nigeria and Sudan.
The report noted that few countries received higher inflows in 2019 with Egypt being the largest recipient of FDI in Africa having received $9bn from investors.
The report added that decreased investment to traditional major investment hubs like Nigeria, South Africa and Ethiopia dragged FDI flow to Sub-Saharan Africa down by 10 per cent to $32bn.
The UN agency said, “After a significant increase in 2018, FDI flows to Sub-Saharan Africa decreased by 10 per cent in 2019 to $32bn.
“FDI to West Africa decreased by 21 per cent to $11bn in 2019. This was largely due to the steep decline in investment in Nigeria, after consecutive increases in 2017 and 2018.”
The UNCTAD predicted that Africa would see a decline of FDI between 25 and 40 per cent in 2020.
It added, “Despite early concerns about the potential spread of COVID-19 in Africa, the continent appears to have been spared the initial outbreak seen in other parts of the world. Although it also suffers from structural vulnerabilities and commodity dependence, recent macroeconomic indicators show a relatively more solid growth path than in other regions.
“The ongoing regional cooperation, including through the African Continental Free Trade Area, may also prove instrumental in designing regionally coordinated responses to the crisis and supporting regional trade and FDI.”