Nigeria’s Foreign Direct Investment: Advancing Steadily Despite Missed Opportunities

The decision by Twitter to take her African head office to Ghana has continued to generate huge bickering, especially among those who feel all key investments in Africa must come to the continent’s largest economy.

Indeed, Nigeria has attracted several mega-companies across the globe, which have boosted her Foreign Direct Investment (FDI) in the last decade.

However, stakeholders in the business ecosystem are still wondering why the country continues to trail behind many Africa countries on various performance indices, even when there is an executive order assented to by President Buhari on the ease of doing business.

In the World Bank 2020 edition of Doing Business Report, Nigeria ranked 131st worldwide in the ease of doing business, representing a leap from the 2019 edition when Nigeria ranked 146th.

In 2019, Ghana ranked 118th which is 13 places higher than Nigeria in the World Bank’s ease of doing business index.

Despite this limitation, Nigeria has attracted a strong inflow from American companies including giants brands like Uber, Facebook, as well as emergent permit, MeltWater Group. China is also investing considerably in Nigeria’s Textile, automobile, and aerospace industries.

Nigerian startup, Flutterwave secured $170 million in capital injections into the economy from investors. The brand is now valued at over $1 billion. Google , Microsoft, and Huawei are among international tech giants that have expanded their operations in Nigeria and Ghana, targeting software developers and young creative hands-on the continent.

In 2018, Facebook opened its first community hub space in Africa in Nigeria’s commercial city, Lagos for Sales, Partnerships, Policy, and Communications.

This new office follows the 2018 opening of NG_Hub, the first community hub space in Africa in partnership with CcHub, and the 2019 opening of Small Business Group (SBG) Operations Centre in Lagos, in partnership with Teleperformance.

Another foreign investment came from Kelloggs-Tolaram Nigeria Limited, a joint venture between the Kelloggs Group of the United Kingdom and the Tolaram Group of Singapore. They are opening a cereal factory in the Lekki Free Trade Zone (FTZ).

The facility is financed by Stanbic IBTC Bank on a ₦6bn loan to the Kellogg Tolaram Nigeria Limited, the joint venture between Kellogg’s and Nigerian food manufacturer Tolaram Africa.

In 2015, Kellogg’s announced a $450m joint-venture partnership with leading food manufacturer Tolaram Africa, “to develop snacks and breakfast foods for the West African market.” The deal also included the future right to acquire a stake in Tolaram Africa Foods, which owns 49% of Dufil Prima – the Nigerian consumer goods manufacturer best known for its popular Indomie noodles.

While the country is witnessing the entry of some giant firms into the Nigerian market, she is also witnessing the acquisition and exit of others such as Konga and Shoprite. Konga was acquired by Zinox Group from South Africa’s Naspers because the online shopping mall wasn’t ‘growing’ as expected.

Recently, Shoprite Chief Executive Officer, Pieter Engelbrecht speaking on plans to exit from Nigeria in 2021 said, “We are at the approval stage in terms of the sale of our Nigeria supermarket operation.”

Nigeria is set to benefit from oil-rich Qatar, as the Arab country plans to invest $5 billion into Africa’s largest economy.

The investment partnership’s decision was made following an exchange visit in 2016 by President Muhammadu Buhari to Qatar, while His Highness Tamim Bin Hammad Al-Thani visited Nigeria in 2019.

The Nigerian government was pushing for Qatar’s investment in Nigeria’s Sovereign Wealth Fund, while the Arab nation has now agreed to infuse $5 billion into the Nigerian economy.

Analysts have opined that widespread corruption, political instability, intense bureaucracy, lack of transparency, and poor quality of infrastructure are limiting the country’s FDI potential.

Twitter chief executive Jack Dorsey having concluded his tour of Africa in 2019 announced it will set up its first Africa social media platform based in Ghana, West Africa.

Twitter in a statement described Ghana “as a champion for democracy, a supporter of free speech, online freedom, and the Open Internet.”

Twitter also cited Ghana’s hosting of the secretariat of the African Continental Free Trade Area (AfCFTA) as another reason for moving there, stressing that it aligns with “its ambition to establish a presence in the region that will support our efforts to improve and tailor our service across Africa.”

As pointed out earlier, Twitter’s announcement has generated vicious debate among Nigerian users of the social media app, and rekindled the rivalry between the two countries, referred to as the ‘Jollof Wars.’

Many Nigerians tagged Twitter’s decision as a rebuff to the continent’s largest economy, which is witnessing rapid growth and investment in its tech ecosystem.

The NOI polls also show that 39.6 million Nigerians have a Twitter account, which is more than the entire 32 million population of Ghana.

However, some Nigerians blame the country’s “harsh business environment” for Twitter choosing Ghana over Nigeria.

Tech investor, Iyinoluwa Aboyeji, said it’s not enough for us to just be a big market, but we need to start thinking very carefully about enhancing democracy and the rule of law, freedom of speech, and most importantly, our role in enabling the Africa Free Trade Agreement.

Bosun Tijani, Nigerian tech entrepreneur and investor, who also heads a tech innovation lab, CcHUB, said Twitter simply chose a more productive market to run its Africa operations, adding that while Nigeria has a huge market that Twitter would love to target, the business environment here is quite demanding, strenuous, while the cost of running a business here is high.

Tijani posited that with the AfCFTA single market agreement which Africa is signed up to, a company like Twitter can choose to set up shop in a small market like Ghana and still serve the Nigerian market.

However, Ghana is said to be actively courting tourism and tech investors from the Diaspora and in particular African-Americans, wooing some with citizenship and encouraged to return to their roots.

Read Also: Growing National Sufficiency With Investment Funds

Ghana also ranked as the 43rd most peaceful country in the world in the 2020 Global Peace Index, placing 104 spots ahead of Nigeria, which has been tackling Boko Haram insurgency, among other violence.

On FDI, The UNCTAD 2020 World Investment Report revealed that FDI flow to Nigeria totaled USD 3.3 billion in 2019 showing a 48.5% decrease compared to the previous year’s flow of USD 6.4 billion in 2018 under the effect of austerity measures.

According to the National Bureau of Statistics, Nigeria Foreign Direct Investment in 2015 is $3.06Bn (0.63%) 2016 is $4.45Bn (1.10%) 2017 is $3.50B (0.93%) 2018 is $2.00B (0.50%) 2019 is $3.30B (0.74%). However, Nigeria’s economy attracted a total FDI of $2.6 billion in 2020 down from the $3.3 billion it attracted a year earlier. This represents a decrease of 12.86% compared to Q2 2020, and a -74.03% fall from Q3 2019. Nigeria also attracted more Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) in the Q3 of 2020 for the first time since Q4 2016.

Nigeria attracted $414.79 million foreign direct investment in the 3rd quarter of 2020, compared to $407.2 million in foreign portfolio investment.

Nigeria’s FDI has not been growing steadily going by the data from the NBS, but it has however continued to attract foreign investors.