Nigeria sinks down in top investment destination in Africa

Nigeria has given in its number five spot to Kenya as it slipped to number six in the list of top 10 investment destinations in Africa.

Nigeria had held her current position (6th) in 2011, according to the sixth edition of Rand Merchant Bank’s (RMB’s) annual report.

The latest RMB report blamed current recession for Nigeria’s slip, noting that the economy has been weighed down by a dismal economic growth outlook and weak operating environment. Nigeria is going through its first recession in over 20 years, triggered by low oil prices.

Inflation rose to an 11-year high of 17.6 per cent last August. Naira has traded at a record low of N436 to the dollar on the parallel market since last week.

However, despite the country’s many challenges, the report said that the Nigeria, being the West African giant, is still regarded as a viable long-term investment destination, but will be forced to endure painful structural adjustments over the next few years to safeguard its prospects.

Entitled: “Where to Invest in Africa – A Guide to Corporate Investment report,”, the top 10 countries investment destinations in Africa as rated by the RMB analysts included South Africa, Egypt, Morocco, Ghana, Kenya, Nigeria, Ethiopia, Côte d’Ivoire/Ivory Coast, Tanzania and Algeria. Kenya came fifth in the new rating, having steadily progressed up the ranks, surpassing both Ethiopia and Tanzania.

“Investors are attracted by Kenya’s relatively diverse economy, pro-market policies and brisk growth in consumer spending,” the report said.

Commenting, RMB Africa analyst and co-author of RMB’s sixth edition of its annual report, Nema Ramkhelawan-Bhana, stated that governments have been gradually coming to the realisation that diversification has become necessary to foster meaningful growth, noting that transformation cannot be achieved in isolation.

He said: “Structural reforms and greater private sector participation are crucial to unlocking Africa’s potential. Our analysis of sectoral developments – specifically in the spheres of finance, infrastructure, resources and retail – strongly support this point of view.”

The analysis of Africa’s development in RMB’s latest report plots the evolution of African economies using the RMB Investment Attractiveness Index and focuses on the theme “Back to the Future.” Some surprising investment opportunities in Africa emerge, while former investment favourites lose their allure.

“Rather than evaluating the continent at a point in time, we sought to highlight its evolution over the last decade,” RMB Africa analyst and co-author of the report ,Celeste Fauconnier, said. “We compare current realities to past occurrences to better understand aspects that will shape future events,” he added.

The study predicted that Ethiopia might well surpass Nigeria in 2017 as scores of foreign investors seek to benefit from the country’s young and vibrant population, low unit labour costs and thriving manufacturing sector.

“Notwithstanding the regulatory challenges in establishing operations locally, the opportunity to participate in this budding economy cannot be overlooked,” it stated.

The RMB report noted that Africa’s feverish growth has decelerated in recent years and many countries have buckled under the pressure of falling resource prices, security disruptions, fiscal imprudence and adverse weather conditions.

However, it pointed out that most investors still believe Africa offers a treasure trove of opportunities, particularly in those countries, which commit to structural reforms.