Foreign direct investments, FDIs, into Nigeria reduced from $7.1 billion in 2012 to $5.6 billion in 2013, as a result of divestments by the International oil companies.
This happened following uncertainty trailing the oil and gas sector over stalling in the passage of the Petroleum Industry Bill (PIB) as well as oil theft in Nigeria’s Niger Delta.
The United Nations Conference on Trade and Development, UNCTAD, in its latest World Investment Report 2014 said that Nigeria led West Africa’s 14 percent decline within the period, which amounted to $14.2 billion.
Despite losing its place to Nigeria, which is now Africa’s largest economy, South Africa contributed significantly to FDI inflow into Southern Africa, a region whose FDI almost doubled to $13 billion.
“In Nigeria, uncertainties over the long-awaited Petroleum Industry Bill, PIB, and security issues triggered a series of asset disposals from foreign Trans National Companies, TNCs. National companies and other developing country TNCs are taking over the assets of the retreating TNCs.
Examples are two pending mega deals that will see Total (France), and ConocoPhillips (United States), sell their Nigerian assets to Sinopec Group (China), and local Oando Plc for $2.5 billion and $1.8 billion, respectively.”
UNCTAD also said that the sharp reduction in FDI to Nigeria bucked a continental trend: “FDI inflows to Africa rose by four per cent to $57 billion, driven by international and regional market-seeking and infrastructure investments.”
The report refers to Angola as a country that “continued to register net divestments, albeit at a lower rate than in past years. Because foreign investors in that country are asked to team with local partners, projects are failing to materialise for lack of those partners, despite strong demand.”
The report further said that there is a rebound of greenfield FDI, driven by large scale energy projects.
The number of new projects reached a record high, and the value of investments reached their highest level in three years. The driving force was robust gains in the services sector, contributing 70 per cent of total greenfield investments. Greenfield investments in energy (in 11 projects) and in transport, storage and communications (in 59 projects) both hit their highest levels in 2013, it stated.
According to UNCTAD, greenfield FDI from developed economies was at a 10-year high, led by record high investments from Iceland and Japan to least developed countries, LDCs. A single large electricity project from each of these home countries boosted greenfield investments in LDCs.
The largest fossil fuel electric power project from Japan was linked with the development of a newly established special economic zone (SEZ) in Myanmar. Iceland’s $4 billion geothermal power project in Ethiopia received support from the Government of the United States, as part of its six-nation Power Africa initiative, a $7 billion commitment to double the number of people with access to electricity in Africa.
UNCTAD also said that India continued to lead greenfield FDI from developing economies to LDCs, with South Africa and Nigeria running second and third. Among investors from developing economies, India remained the largest, despite a 21 per cent fall in the value of investments in LDCs. Greenfield investments from India were mostly in energy, led by Jindal Steel & Power, and telecommunications projects led by the Bharti Group in African LDCs.
It said the greenfield investments from South Africa and Nigeria to LDCs showed a strong increase. The fourth largest project in Mozambique accounted for two thirds of greenfield FDI from South Africa to LDCs. Whereas greenfield FDI projects from Nigeria to LDCs hit a record high, led by the Dangote Group’s cement and concrete projects in five African LDCs and Nepal ($1.8 billion in total). Greenfield projects from Nigeria also boosted greenfield investments in non-metallic mineral products in LDCs.