December 4, 2022
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Cross border investment: Nigeria records $2.5bn major communications sector projects—EY report – Vanguard

  • December 4, 2021
  • 4 min read
Cross border investment: Nigeria records $2.5bn major communications sector projects—EY report – Vanguard

By Peter Egwuatu
 As cross-border investments across Africa gained traction over the last five years with South Africa being the largest investor into the rest of the continent,
 Nigeria recorded two large scale investments worth $2.5 billion.
The Ernst and Young, EY’s 11th Africa Attractiveness Report has revealed that: “In 2020, the country announced two large-scale investment projects in the communication sector, worth $2.5billion.”
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The Report also noted that despite Africa continent recording its worse economic recessions in 50 years with a 50% drop in Foreign Direct Investment (FDI) inflow, the broad services sector, including business services, telecoms, media and technology, financial services and consumer, attracted 72% of Africa’s FDI.
The EY Africa Attractiveness survey provides an in-depth analysis into foreign direct investment and economic progress in Africa.
The extractive sector—mining, oil and gas, on the other hand, accounted for only 4% of FDI inflows in 2020. This, in essence, does not mean that Africa is not still heavily reliant on commodities. This is one of the key findings as reveals in the Report, noting that FDI into Africa last year fell by 50%, the hardest-hit region worldwide.
“This could be ascribed to its still largely resource-export dependent economies, which felt the impact of commodity price declines and rapidly decreasing demand, particularly from China, causing them to fall into recession,” according to Anthony Oputa, EY Regional Managing Partner for West Africa and EY Nigeria Country Leader.
The report further exposes that “Africa’s overall GDP contracted by 2.4% in 2020, but this less than the 3.6% contraction in the overall global GDP. For Anthony, Africa, along with the rest of the world was significantly impacted by the COVID-19 pandemic, causing lots of business disruption across industries and sectors.”
“All hope is not lost, noting despite the drop in FDI, Africa is on the path to multi-speed recovery. While Foreign Direct Investment fell sharply in 2020, this is only half the story. The share of FDI into services sectors is rising rapidly, which will support job creation over time” Anthony stated.
But investment flows are changing, and it is the services sector that is enticing the lion’s share. Environmental concerns are among the factors driving this shift.
“FDI is shifting away from extractive industries as an increased global focus on environmental sustainability requires a step change across the corporate world. This addresses the green energy transition and related concerns that form part of the corporate embrace of ESGs—environmental, social and governance issue,” the report noted.
According to Olufemi Alabi, EY Partner and Strategy and Transaction Lead, who is also the EY Parthenon Leader for West Africa, : “ Africa’s economies have been rapidly transforming through the first two decades of the new millennium, making them less dependent on extractive industries, as they aim to become more sustainable and competitive. Investors are moving away from oil exploration and mining to ‘new age’ sectors, including ICT, retail and business services. This trend is likely to accelerate as energy investors are increasingly compelled to meet stringent zero net carbon emission targets.”
Also, the report states that, across Africa, East Africa was most robust, with Tanzania and Ethiopia growing fastest in 2020. But Southern Africa was greatly affected, with South Africa falling into a deep recession.
In other emerging markets, well as the key mature regions, the Report also reveals that in Europe, it was (-23%) and North America (-19%). Only Asia-Pacific’s decline was close (-43%). According to the Report, Francewas the largest investor into Africa in 2020, followed by US, the UK and China based on FDI project numbers. China had been the largest investor in 2018, but in capital investment, China still leads.
On a FDI score basis, which is a combined measure of number of projects, jobs created, and capital invested, Southern Africa ranked highest with an FDI score of 45.4, followed by North Africa (36.7), West Africa (32.6), indicating that in 2020 Southern Africa was the favoured FDI destinations, while the West region outpaced East Africa.

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