By Yinka Kolawole, with agency report
Foreign Direct Investment (FDI) flows to Nigeria declined by 29 percent in 2010 amidst regulatory concerns in the nation’s oil industry.
This was revealed in the latest annual investment report by the UN Conference on Trade and Development (UNCTAD). According to the World Investment Report 2011 (WIR11) which was released by the UN Office in Geneva, Nigeria however still accounted for more than half of the inflows to the West African sub-region during the period.
The report indicated that flows of FDI to Africa fell by nine per cent in 2010, with inflows to the continent for the year standing at $55 billion or 4.4 percent, down from 5.1 percent in 2009.
It also revealed a slump in the FDI inflows to West African countries, which are recipients of about one fifth ($11 billion) of the continent’s total flows. FDI to the primary sector, especially in the oil industry, continued to dominate FDI flows to the continent.
In West Africa, the report notes that oil accounted for the rise of Ghana as a major host country, as well as for the declines of inflows to Angola and Nigeria.
The report says the emerging oil industry pulled inflows to Ghana and Niger to record levels, at 2.5 billion dollars and 947 million dollars, respectively.
“In Nigeria, uncertainty over the Petroleum Industry Bill, which is perceived as un-favourable for Transnational Companies (TNCs), and the unresolved political problem in the Niger Delta, discouraged foreign investors and allegedly led Shell to sell a number of its onshore licenses.
“As for Ghana, the start of major oil production has attracted the interest of TNCs, some of which are seeking an alternative sub-regional source of oil to Nigeria.”
Among the continent’s sub-regions, the UNCTAD survey notes that FDI inflows to North Africa, which account for roughly one third of the total African FDI, also slumped for the second year running to 17 billion dollars.
For example, the report said inflows to the Libya increased by over 40 per cent in 2010 to 3.8 billion dollars, but this rebound seemed be short-lived, given the current political situation in the country.
In Central Africa and East Africa, inflows of FDI increased in 2010 to reach 8.0 billion dollars and 3.7 billion dollars , respectively. The report notes that the portion going to the larger recipients in Central Africa (Chad, Congo, the Democratic Republic
of the Congo, Equatorial Guinea, and Gabon) were mostly due to oil-related investments. The only significant instance of FDI in non-primary sectors investment was in telecommunications in the Democratic Republic of the Congo. East Africa´s increase was modest (2.5 per cent), as inflows to the sub-region´s largest recipient, Madagascar, fell substantially ( minus 19 per cent).
According to the report, inflows to Southern Africa decreased by 24 per cent to 15 billion dollars, although the sub-region accounted for more than one quarter of the African total.
The second largest recipient in the sub-region, South Africa, saw its inflows fall by over 70 per cent to 1.6 billion dollars, a level amounting to only one sixth of the peak recorded in the country in 2008. The report adds that inflows to the continent´s largest recipient, Angola, also declined substantially.
“One of the problems Angola´s oil industry faces is that its oil production has exceeded the quota allocated by the Organisation of the Petroleum Exporting Countries.”
The report concludes that although the continuing pursuit of natural resources, in particular by Asian TNCs, is likely to sustain FDI flows to sub-Saharan Africa, political uncertainty in North Africa is also likely to make 2011 another challenging year for the continent as a whole.