Foreign Direct Investment (FDI) inflows into Africa’s biggest economy turned negative in 2022 as a result of equity divestment, a report by United Nations Conferences on Trade and Development (UNCTAD) showed.

Nigeria’s FDI flows came in at -$187 million in 2022, compared to the $3.3 billion recorded the year before, the World Investment Report 2023 published late on Wednesday showed.

Nigeria's FDI decline was the most significant among the key economies on the continent. Some analysts said its official and parallel foreign exchange markets was a reason behind the drop.

Its new President Bola Tinubu has pledged to expand the economy by at least 6% per year, partly by removing investment barriers and establishing a common foreign exchange rate.

"Have you ever wondered why Nigeria has recently struggled to attract FDI? One major reason is the uncertainties surrounding the FOREX market due to multiple exchange rate regimes," VIISAUS, a Nigerian consulting firm, said on Twitter.

"But here's the exciting part! The Nigerian government is responding to these challenges through policy reforms, including fuel subsidy removal and the introduction of a uniform exchange rate."

Africa, greenfield projects

FDI flows to Africa declined to $45 billion in 2022 from the record $80 billion set in 2021. They accounted for 3.5% of global FDI. 

International project finance deals targeting Africa showed a decline of 47% in value, the report showed.

However, there was positive news on greenfield projects.

"The number of greenfield project announcements rose by 39% to 766, while six of the top 15 greenfield investment megaprojects worth more than $10 billion announced in 2022 were in Africa," the report said.   

The biggest increase in announced greenfield projects was in energy and gas supply - to $120 billion from $24 billion in 2021 - the report showed.  

FDI in South Africa was $9 billion – well below the 2021 level but double the average of the last decade. Egypt saw FDI more than double to $11 billion as a result of increased cross-border merger and acquisition (M&A) sales.

"Over the past five years, FDI inflows have risen in four of the regional economic groupings on the continent," the report by (UNCTAD), which promotes inclusive and sustainable development through trade, investment, finance, and technology showed.

FDI in the Common Market for Eastern and Southern Africa grew by 14% to $22 billion last year. 

Flows rose also in the Southern African Development Community - quadrupling, to $10 billion. In the West African Economic and Monetary Union, flows doubled to $5.2 billion and the East African Community saw a rise of 9% to $3.8 billion.

"European investors remain, by far, the largest holders of FDI stock in Africa, led by the United Kingdom ($60 billion), France ($54 billion) and the Netherlands ($54 billion)," UNCTAD said in its World Investment Report, which provides analysis and insights into global investment trends and polices.

(Editing by Seban Scaria seban.scaria@lseg.com)