By AZUBIKE NNADOZIE
The Nigerian Investment Promotion Commission (NIPC) has stated that the country recorded a total investment commitment of $15.15bn in various sectors of the economy between January and June this year.
As much as this has been hailed by many as a welcome development considering the current apathy of investors both foreign and local on the Nigerian economy, experts believe that it is not yet Uhuru for the economy as more investment is needed to properly revive the economy.
The NIPC in its H1 2019 report, which was released recently showed that the $15.15bn proposed investments were made for 43 projects in 12 states and the Federal Capital Territory were announced from investors in 20 countries.
Within the period, the $15.15 billion which it announced, it said, were tracked through the NIPC Intelligence Newsletters, which are issued 6 days a week.
Investments commitments are made by would-be investors in specific sectors of the economy, which the NIPC follows up to ensure its full maturity and benefits to the economy.
According to NIPC, mining and quarrying recorded the highest investment announcements of $12.3bn, which is 81 per cent of the total investment proposals made.
It was followed by manufacturing which recorded $2.2bn worth of investment proposals announced.
Within the review period, finance and insurance recorded $200m investment proposals while information and communication recorded $200m.
However, the proposed investments for the first half of the year, which has been described in some quarters as impressive was 67 per cent less in value than the announcements for the corresponding period of 2018.
“Comparatively, the announcements made in the first half of 2019 were 67 per cent less in value than the announcements in the same period of 2018.
“This was probably due to many investors waiting for the conclusion of national elections and handover in the first half of 2019,” the Commision stated.
The major announcements, it said, were from Royal Dutch Shell Plc with US$10 billion in crude exploration, Moroccan OCP Group’s plan to build a US$1.5 billion ammonia plant in 3 states and the joint venture contract between Malaysian partners and Nigerian oil company, First Exploration & Petroleum Development Company Ltd worth $901.79 million for the exploration of crude oil at the Anyala and Madu oil fields.
Announcements from Netherlands accounted for 66% by value, followed by Morocco at 14%, and Nigeria at 9%. The Report also showed that mining and quarrying sector accounted for 81%, manufacturing sector was 14%, and finance & insurance was 2%.
The major destination was the Niger-Delta region with 77%, followed by Ondo State at 7%, and Lagos State at 4% of the value announced.
According to the United Nations Conference on Trade and Development (UNCTAD) 2019 World Investment Report, Nigeria is the third host economy for FDI in Africa, behind Egypt and Ethiopia. The country is among the most promising pole of growth in Africa and attracts numerous investors in the sectors of hydrocarbon, energy, buildings etc. The country undergoes the effects of the oil counter-shock.
FDI flows to Nigeria totalled USD 1.9 billion in 2018, and showed a decrease compared to last year (USD 3.5 billion in 2017) under the effects of austerity measures. Estimated at USD 99.6 billion in 2018, the total stock of FDI represents 25.1% of the country’s GDP.
According to the Commission, the Report gives a sense of investors’ interest in the Nigerian economy, adding that the NIPC did not independently verify the authenticity of the investment announcements but is working on tracking the announcements as they progress to actual investments.
Renowned Stock Broker and CEO of Lambeth Trust & Investment Company Ltd, Mr. David Adonri, who reacted to the NIPC announcement, told our correspondent that the fact that the Nigerian economy recorded a total investment commitment of $15.15bn in the first half of the year was a positive development, but was really nothing to write home about.
According to him, real economic development requires heavy investment in the economy, both local and foreign. “Investment in the economy is currently at a very low level. We need about $100 billion or more worth of investment over the same period to reignite the economy,” he said.
“But politics and elections in the country have taken their toll on the economy, and the foreign investors who are usually scared when their host countries are going through elections are cautious to know where the economy is headed politically before making investment decisions.
“They are also scared when the host country appears to have no clear cut policy directions. Currently, this country appears to be in a civil war and investors (both local and foreign) are scared to go certain parts of the country for investment.
On the recent nomination and screening of ministerial candidates, Adonri stated, “Although it appears to be coming a bit late, but recent political developments such as the nomination and ongoing screening of candidates for ministerial positions in the country is a step in the right direction to eventually jumpstart the economy. In the midst of all this, the investor can only wait and watch. The economy is usually the victim when the political situation is not conducive.
Also reacting to the latest NIPC report on investment, eminent Economist and Public Policy expert, Professor Akpan Hogan Ekpo, told The Point that the sector that received the lion’s share of $12.3bn, which is 81 per cent the investment (Mining and Quarrying), may not make much impact, considering the present state of the Nigerian economy.
“Investment of such amount in the mining and quarrying sector, like in the oil and gas sector, is really insignificant considering how large the Nigerian economy is. If it had been in manufacturing, it would have made a better impact” he added.
“Again, the oil and gas sector, we call them the mundane sectors; they don’t generate much employment and might not make much impact on the economy.
“What we need are investors who would come to Nigeria and build factories and employ many people. One of the greatest problems of the economy right now is massive unemployment. A country with a very large population of the unemployed could not be said to be doing very well economically.
Professor Ekpo explained why he would have preferred such investment in the manufacturing sector. According to him, “If much of the investment is in the manufacturing sector, for instance, a lot of people would gain, because it would add more value as more people would be employed and it would put money in many more pockets.
Asked how much he thinks the economy has lost so far as the government, which is the biggest influence on the economy is yet to constitute its cabinet for President Muhammadu Buhari’s second term in office, he stated that it would be difficult to quantify the extent of loss or how much the economy has lost due to the delay by the presidency to constitute a cabinet and assign portfolios to the ministers. “It has been an environment of uncertainty. The situation has engendered an environment of uncertainty, not only for the foreign investors but also for the domestic investors. Even portfolio investors are sceptical about investing in the economy.”
According to a CEIC Insights Report, Nigeria’s Foreign Direct Investment (FDI) increased by $1.2bn in March 2019, compared with an increase of $314.4mn in the previous quarter. Nigeria’s Foreign Direct Investment: USD mn net flows data is updated quarterly, available from March 2008 to March 2019. The data reached an all-time high of $3.1bn in December 2012 and a record low of $314.4mn in December 2018.
In the latest reports of Nigeria, Current Account recorded a deficit of $1.1bn in March 2019. Nigeria’s Direct Investment Abroad expanded by $363.2mn in March 2019. Its Foreign Portfolio Investment increased by $7.1bn in Mar 2019. The country’s Nominal GDP was reported at $103.8bn in March 2019.
