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Nigeria Needs N20tr Investment to Drive Growth, Says Report

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Nigeria investment
  • Nigeria Needs N20tr Investment to Drive Growth

Nigeria requires at least an investment of 20 per cent of the Gross Domestic Product (GDP) per annum, far above the investment level of 12.6 per cent of GDP this year, to drive growth. This translates to an investment of $55 billion, or N20 trillion, reflecting that the country would have to nearly double its current investment level.

These findings are contained in an economic paper recently released by PwC Nigeria, titled: Boosting Investments: Nigeria’s Path to Growth, which estimated the size of investment needed to drive growth. It was authored by PwC’s Partner & Chief Economist Dr. Andrew S Nevin, and its Senior Manager & Economist, Adedayo Akinbiyi.

To reach its conclusions, the paper conducted an extensive review of economic literature, and analysed a panel data of 13 emerging economies between 1991 and 2016. The analysis revealed that investment is the most fundamental driver of growth.

According to PwC, growth in Nigeria has been relatively strong at an average of 5.6 per cent per annum over the past decade. It however, said that this has been fuelled by the oil boom and population expansion, rather than investments.

Nigeria is projected to be third largest populated country in the world by 2050, with 399 million people. But PwC projected that Nigeria could emerge the 14th largest economy in the world by 2050, with GDP in Market Exchange Rate (MER) terms at $3.3 trillion.

“To deliver sustainable growth with per capita gains, Nigeria will need to aggressively boost domestic and foreign investments over the next decade,” the report, which was made available to The Nation, said.

The report observed that at moment, Nigeria’s investment rate ranks below peers. For instance, between 2007 and 2016, Nigeria’s investment share of GDP declined from 18.7 per cent to 12.6 per cent, reaching the lowest level in the past two decades.

“In comparison to peers, Nigeria’s investment rate lags the average of 23.3 per cent recorded for sub Saharan African countries, and 28.9 per cent for the BRICS (Brazil, Russia, India, China, and South Africa),” PwC said.

PwC Nigeria, which delivers quality in assurance, advisory and tax services, added that academic literature suggested a strong nexus exists between the level of investment and economic growth, citing China and India as examples of economies that have successfully attained investment-led growth.

The firm noted that the foreign exchange regime remained key to stimulating investment and restoring growth. It stated, for instance, that if Nigeria’s N2.2 trillion capital budget for 2017 is channeled towards investments, it would only meet 11 per cent of the estimated funding to bring investment as a share of GDP to 20 per cent.

The report said: “In Nigeria’s Economic Recovery and Growth Plan (ERGP), which aims to attain important infrastructure targets within the next three years, the government acknowledges its limits and emphasises the need for private investment to drive infrastructure development.

Our report, which examined the ERGP, identified two critical factors for unlocking private investment namely, improving the business environment, and having a sustainable foreign exchange regime.

“We note that the country has made some progress towards improving the business environment through several reforms, including a 60-day action plan implemented over the past six months.

“However, more needs to be done, in particular, with respect to paying taxes, getting access to electricity and other infrastructure, which are critical to bolster investment.”

While also noting that foreign exchange liquidity has improved in recent times as the Central Bank of Nigeria (CBN) allowed for more flexibility in the foreign exchange market, PwC however, argued that the existence of multiple exchange rates with significant variances posed a risk to investment.

“In our view, a market-determined exchange rate, where all rates are harmonised, is fundamental to boosting domestic and foreign investments,” the report emphasised.

In 2016, the economy slowed markedly, falling into a recession for the first time since 1991. Real GDP contracted 1.5%y/y, a reflection of the two-and-a-half year decline in export earnings, and fall in government’s revenues, which impacted consumer spending and investments.

Perhaps, the most evident impact of the sharp decline in the oil price was in the currency market, with the NGN/USD depreciating 35.4 per cent in the official market and 47 .3 per cent in the parallel market during the year.

Aside the depreciation of the currency, the illiquidity in the foreign exchange market impacted the business and investment environment, with Foreign Direct Investment (FDI) declining to an 11-year low, and a collapse in investment as a share of GDP to 12.6 per cent – the lowest level in the past two decades.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Investment

Afreximbank, AAAM to Drive Automotive Investment

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Afreximbank

Afreximbank, AAAM to Drive Automotive Investment

The African Export-Import Bank (Afreximbank) and the African Association of Automotive Manufacturers (AAAM) have entered into a Memorandum of Understanding (MoU) for the financing and promotion of the automotive industry in Africa.

President of Afreximbank, Prof. Benedict Oramah and President of AAAM/Managing Director of Nissan Africa, Mike Whitfield, signed the MoU in early February, according to a statement yesterday.

The deal formalised the basis for a partnership aimed at boosting regional automotive value chains and financing for the automotive industry while supporting the development of enabling policies, technical assistance, and capacity building initiatives.

Oramah, said, “the strategic partnership with AAAM will facilitate the implementation of the Bank’s Automotive programme which aims to catalyze the development of the automotive industry in Africa as the continent commences trade under the African Continental Free Trade Area (AfCFTA).”

Under the terms of the MoU, Afreximbank and AAAM will work together to foster the emergence of regional value chains with a focus on value-added manufacturing created through partnerships between global Original Equipment Manufacturers (OEM), suppliers, and local partners.

The two organisations plan to undertake comprehensive studies to map potential regional automotive value chains on the continent in regional economic clusters, in order to enable the manufacture of automotive components for supply to hub assemblers.

“To support the emergence of the African automotive industry, they will collaborate to provide financing to industry players along the whole automotive value chain. The potential interventions include lines of credit, direct financing, project financing, supply chain financing, guarantees, and equity financing, amongst others.

“The MoU also provides for them to support, in conjunction with the African Union Commission and the AfCFTA Secretariat, the development of coherent national, regional and continental automotive policies, and strategies.

“With an integrated market under the AfCFTA, abundant and cheap labour, natural resource wealth, and a growing middle class, African countries are increasingly turning their attention to support the emergence of their automotive industries.

“Therefore, the collaboration between Afreximbank and AAAM will be an opportunity to empower the aspirations of African countries towards re-focusing their economies on industrialisation and export manufacturing and fostering the emergence of regional value chains,” the statement added.

“The signing of the MoU with Afreximbank is an exciting milestone for the development of the automotive industry in Africa. At the 2020 digital Africa Auto Forum, the lack of affordable financing available for the automotive sector was identified as one of the key inhibiters for the growth and development of the automotive industry in Africa and having Afreximbank on board is a game changer and a hugely positive development,” CEO of AAAM, David Coffey said.

“It is wonderful to have a partner that is as committed as the AAAM to driving the development and growth of our sector on the continent; this collaboration will ensure genuine progress for our industry in Africa,” Coffey added.

Other areas covered by the MoU include working with the African Union and the African Organisation for Standardisation to harmonise automotive standards across the continent and developing an automotive focused training program for both the public and private sector.

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Investment

FG Warns Foreign Investors Against Enslaving Nigerians

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Immigration

FG Warns Foreign Investors Against Enslaving Nigerians

The Federal Government on Monday warned foreign investors against subjecting Nigerians working in their companies to industrial slavery.

The government said the warning became necessary following several complaints against foreign companies maltreating some of their staff.

The Chief Commissioner, Public Complaints Commission, Chile Igbawua, issued the warning during a courtesy call on him by a delegation of Pan Africa United Youth Developments Network who came to lay complaint against some foreign companies allegedly maltreating Nigerians working under them.

The PCC said that it would not allow only its state commissioners to handle the issues due to their magnitude as there had been so many complaints about the ways some of the foreign companies were treating their staff.

At the event, the leader of the delegation, Habib Muhammed, expressed concern over alleged injustice and irregularities perpetrated by some company on Nigeria youths whom they engaged as factory workers.

He called on the Federal Government to look into the alleged slavery and injustice meted on Nigerian youths.

While calling on the foreigners to obey the labour laws of Nigeria, Igbawua said, “Our resources cannot be used to enslave us again.”

He said, “We have labour laws in Nigeria for goodness sake and we also have industrial standards; people working in various industries are entitled to good working conditions and minimum conditions of service.”

He added that the law was clear on the issue of casualisation and should be implemented.

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Investment

Foreign Direct Investments into China Shot Up by 9% in 2020 to $163 Billion Against 49% US Decline

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growth

Foreign Direct Investments into China Shot Up by 9% in 2020 to $163 Billion Against 49% US Decline

China had the highest inflow of Foreign Direct Investments (FDI) globally in 2020, surpassing the US which took the lead in 2019.

According to the research data analyzed and published by Comprar Acciones, China’s inflow shot up by 9% to $163 billion up from $140 billion the previous year. Meanwhile, the US had a 49% drop from $251 billion in 2019 to $134 billion.

Based on data from the National Bureau of Statistics, China reported a 2.3% growth in GDP in 2020. It was the only major economy to record a positive growth rate during the year.

Chinese Stock Market Saw 18 Million New Investors in 2020

Global FDI took a hit in 2020, falling by 42% year-over-year (YoY) from $1.49 trillion in 2019 to $859 billion. The figure was 30% lower than the one reported during the 2009 financial crisis.

Developed countries saw the worst performance, sinking by a cumulative 69% YoY to $229 billion. For developing economies, there was a 12% decline of $616 billion. By the end of 2020, developing countries accounted for a 72% share of global FDI, the highest on record. India had the highest growth among top-rated economies, shooting up by 13%.

China bore the brunt of the pandemic much better than its peers, posting a 6.5% GDP growth in Q4 2020. During the year, there were 18.02 million new investors in its mainland stock market, raising the total to 177.77 million. Driving the surge in interest was the stellar performance of Chinese stocks in 2020.

The Shenzen Component grew by 38.7% in 2020, and the CSI 300 increased by 27.2%, compared to the S&P 500’s 16.26% growth. IPO activity also soared, with China and Hong Kong accounting for 40% of global IPO volume in 2020 according to Ernst & Young.

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