Last week, I wrote about the potential for growth in Nigeria. That kept me thinking about the many opportunities companies have to contribute to the socioeconomic development of the country if investing in the right industries – and doing so in the right way! Wondering about foreign direct investment (FDI) in the country, I came across some interesting information* which I thought of sharing with you.
In 2015, inward FDI in Nigeria was estimated at US$ 8.6 billion, down from US$ 10.8 billion in 2014 (21.2 % reduction). This means that Nigeria was the 2nd largest recipient of the capital invested in Africa (12.1%) only behind Egypt (20.6%).
It came through 53 projects, and its sector distribution was the following:
The Africapitalism Institute considers a sector as strategic to the extent that it can deliver broad economic and social value in addition to financial results. These include – but are not restricted to — industries such as agriculture, power, healthcare, and finance.
Of outmost importance is how investments are made. Keeping transfer prices at fair levels and reinvesting profits in the host country can contribute to economic development. But investments go beyond capital flows. Investment decisions are made by business leaders who have a responsibility for how their projects are implemented. This includes labor conditions, respect for the environment, and so on.
If you have this type of decision-making power, don’t forget that you have a responsibility – and the capacity to benefit not only shareholders but all of your stakeholders.
Any experiences or thoughts?
*Nigeria by the Numbers – country report by Analyse Africa of the Financial Times
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I hope investment in Africa continue to growing, we really need!
Yes, we need more investment in Africa — and hopefully it will increasingly come from Africa itself!
Fantastic opinion, Africa! More investment should indeed come from Africa itself. This is a hot topic!
I am encouraged to see more African countries are coming into terms of looking inwardly (within Africa). Starting from regionalism connectivity (East African community, for example) to sectoral specific advantage (e.g. Rwanda pursuing specific sectors in Morocco, and Morocco looking in Tanzania to explore or expand its sectoral growth). I believe, this is what may move the continent forward in terms of allowing home grown firms to growth and expand regionally and across the continent/or beyond. This may as well enable individual African countries to dictate terms and appropriateness of FDIs for their macro economic and social needs.
Regarding stakeholders, and considering the Nigerian FDI table above, I am for the opinion that more FDI should also look into the ICT and electronic sector. My reasoning here is that we have so many millennials in Africa (urban & in rural places) who are super connected electronically and are unemployed. Majority of them may not want to seek employment in energy (e.g. extractive mining). As the future of the continent, I believe by investing more on ICT and electronic sector, the super connected millennials would have positive impact on other sectors as well … such as those connected with technology: Retail, the environment, & financial services. They are also very connected to the social, political and economic discourse of their countries and the continent. (They are actually defining a new direction to conduct research in Africa away from the traditional/conventional approaches :-))
Thank you for this interesting conversation, Africa.
Until recently, I was, as you, amazed by Africa’s rapid development of Africa but was forced to temper my enthusiasm in light of the latest political developments (including RSA’s withdrawal of the International Criminal Court (ICC) which will soon be followed by other African countries plus the October 24th “Luanda meeting” between the Central African countries supporting Kabila’s decision to postpone for two years the Congolese elections).
The signals emitted at present by Africa (including Nigeria) in the direction of the International Community are, once more, not encouraging.
Many investors we met recently are unanimous with regard to the huge economic potential of Africa but are increasingly skeptical about the incurred risks. Their pessimism is perceptible to the point of wondering if there is a glimmer of hope on the medium and long term..
NGO’s are frustrated by their successive failures and are reconsidering their African strategy.
It seems that a new sustainable development model, initiated and driven by Africans themselves, is a key issue.
Now, the question is: what are the views of Africans?
Marc,
Thanks for your comments!
Personally, I am more focused on the positive trends happening across the continent rather than relying on some incidents like the ICC, the Congo situation, and what some NGOs and other investors have to say. The African views, such as myself, is that current trends towards regionalism and inwardly (within) seeking-specific FDIs are positive directions for the continent’s socio-economic growth.
Aloys
Hi, sorry to come in a bit late to this party!
I agree with Marc-Henry that development needs to come from within the continent. That’s why — same as Aolys — I see with optimism intra-Africa FDI. If properly managed, international expansion of indigenous companies to other countries will contribute to the socioeconomic development. Previous models have proved not to work out — it has to come from within. Still foreign companies can play a role via partnerships with local copmpanies.