Foreign Direct Investment (FDI) and Economic Growth: The Africa and Nigeria Outlook
In recent years, the economic growth of Nigeria has not been proportional to the population growth, leading to a decline in per capita incomes while increasing unemployment rates and poverty in the nation. Data from World Bank shows that in 2019, Nigeria’s GDP per capita was only US$ 2,216 with a population of 202 million.
Did you know that more than 60% of the Nigerian population live below the poverty line with about two third of the populace living on less than 1 USD per day? This happens to be so because the economic growth of the Nigeria has not yet cut out poverty thus, there is a high need to shun over-dependence on just one sector which the crude oil export and diversify. Also, development and internet access should be doubled up so as to attract foreign investors to the nation.
It is now widely acknowledged that Foreign Direct Investment (FDI) is an important aspect of the recent wave of globalization and a major catalyst of national development. Studies show that FDI aids in technology transfer, human capital enhancement, enterprise development and market competition boosting. However, the inflows of FDI into Nigeria and Africa generally have been low and inadequate. Nigeria is among those countries finding hard to attract foreign direct investments.
As reported by UNCTAD, despite the global FDI boom, increasing from US$1,271 billion in 2000 to US$1.39 trillion in 2019, Africa has failed to attract FDI due to its low market size, low technology and poor infrastructures. In 2004, the combined FDI inflow into Africa was a meager US$13 billion and less than 1% of total FDI inflows worldwide, if oil producing nations like Nigeria and Angola were excluded. OECD also shows that in 2014, Africa hosted only 5% of global FDI but in 2019, it recorded US$49 billion.
From 2010 – 2013, Nigeria attracted over US$27 billion in FDI but in 2016, it hosted only US$5.12 billion. Ever since the 2016 recession, FDI inflows into Nigeria experienced a downward trend coupled with other factors like terrorism, corruption, decline in oil price, instability in market liquidity and poor infrastructures.
Hence, it is necessary for measures such as privatization, foreign exchange and the Nigerian Enterprises promotion decree to be taken towards gaining increased FDI inflows.
Hankering for more? Vist: OECD , UNCTAD, World Bank
