- Records 3.8% drop in FDI projects
EYâ€™s (formerly Ernst & Young) Africa Attractiveness Index (AAI) for 2016 has ranked Nigeria 17th among 25 countries in terms of choosing a location to invest in the region in 2017.
The latest index showed that the country fell by two points, compared with the 15th position which it was placed in 2016.
The EY revealed this in its Attractiveness Programme Africa report titled: â€˜Connectivity Redefined.â€™
Nigeria only ranked above Cape Verde, Cameroun, Ethiopia, Burkina Faso, Mozambique, Madagascar, Mali and Benin.
On the other hand, Morocco was ranked first in the survey and was closely followed by Kenya, South Africa and Ghana, in that order.
Also, the report showed that the amount of foreign direct investment (FDI) projects in Nigeria eased by 3.8 per cent in 2016 to 51, compared with the 53 projects that were executed inÂ the country in 2015.
It attributed this to the economic recession which the nation slipped into last year. With the plunge in crude prices, Africaâ€™s largest oil exporter has been hit by a scarcity of foreign exchange, impacting businesses that were already grappling with issues, including insufficient power supply and complexity in paying taxes.
According to the report, Nigeriaâ€™sbusiness environment presently needs urgent improvement, considering the countryâ€™s 169th ranking on the World Bankâ€™s Ease of Doing Business Index 2017. The EY Africa Attractive Index (AAI) 2017 measures the FDI attractiveness of 46 African countries (with the entry of 3 new countries), constructed on the basis of six broad pillars that act as key determinants for choosing a location to invest.
â€œOn a more positive note, the sheer size of the Nigerian market, and its diversification initiatives have led to a significant shift in the nature of FDI to the country. Should progress be made on various dimensions of the AAI, notably business enablement, governance and human development, Nigeria remains well- placed to become the largest FDI market in Africa over the next decade,â€ it added.
But the report pointed out that while foreign investors still favour the key hub economies in Africa, a new set of FDI destinations were emerging with some of the Francophone and East African markets of particular interest to us.
Furthermore, it pointed out that in a context of uncertainty, the opportunities for growth and investment were a lot more uneven than they used to be, stating that as such, making investment choices on the basis of fact-based analysis were more important than ever.
â€œLooking at Africa, 2016 marked the worst year for economic growth across sub-Saharan Africa in over 20 years. However, this overall slowdown in growth masks a significant variance in economic performance across different African economies. Even as SSAâ€™s three largest economies – Nigeria, South Africa and Angola – Â saw sharp downward revisions in growth forecasts, a diverse group of the second- tier economies in Africa â€” including Cote dâ€™Ivoire, Senegal, Ethiopia, Kenya, Tanzania, Mozambique and Egypt – are expected to sustain high growth rates over the next five years.
â€œLow growth was largely driven by external factors, particularly oil prices, which meant two of the largest three economies in SSA, i.e. Nigeria and Angola, had to accept lower receipts for their exports. As a result, both economies fell into recession, with Nigeria hit particularly hard, as the nation dealt not only with reduced terms of trade, but with lower production levels as a result of domestic insurgency.
â€œAt the other end of the spectrum, Cote dâ€™Ivoire remains one of the fastest growing countries globally, although once again, highly dependent on commodity (cocoa) prices, and its ability to manage internal conflict. Staying in West Africa, Ghanaâ€™s prospects are also looking increasingly promising, with a newly elected administration promising to manage the public purse of CÃ´te dâ€™Ivoireâ€
According to the report, â€œHowever, there are a number of risks that need to be managed. Countries with high and rising twin fiscal and trade deficits remain at risk of currency devaluation. This becomes all the more evident where national debt levels are either rising too rapidly or are already at high levels.
â€œMozambique is the most notable example, although this has not impacted its growth outlook. Africa remains on track to be a US$3 trillion economy. To achieve that will require accelerating diversification initiatives thereby boosting resilience to external shocks,â€ it added.