(6 minutes read)
· Global foreign direct investment (FDI) declined sharply in 2020, falling 42% from US$1.5 trillion in 2019 to an estimated $859 billion, the UNCTAD Investment Trends Monitor revealed
· According to the UN report, FDI flows to Africa declined by 18% to an estimated US$38 billion, from US$46 billion in 2019. Greenfield project announcements, an indication of future FDI trends, fell 63% to US$28 billion, from US$77 billion in 2019
· The pandemic’s negative impact on FDI was amplified by low prices of and low demand for commodities
Global foreign direct investment (FDI) declined sharply in 2020, falling 42% from US$1.5 trillion in 2019 to an estimated $859 billion, the UNCTAD Investment Trends Monitor revealed. Of that, Nigeria’s share was US$2.6 billion. There is only one parallel to this low cross country flow and that was in the 1990s, when investments plummeted. The tally of 2020 was 30% below the investment in 2008-2009 during the global financial crises.
According to the UN report, FDI flows to Africa declined by 18% to an estimated US$38 billion, from US$46 billion in 2019. Greenfield project announcements, an indication of future FDI trends, fell 63% to US$28 billion, from US$77 billion in 2019. The pandemic’s negative impact on FDI was amplified by low prices of and low demand for commodities.
In terms of individual nations, China was the world’s largest FDI recipient, with flows to the Asian giant rising by 4% to US$163
billion. High-tech industries saw an increase of 11% in 2020, and cross-border M&As rose by 54%, mostly in ICT and pharmaceutical industries.
UNCTAD expects FDI flows to remain weak due to uncertainty over the evolution of the COVID-19 pandemic. The international body has projected a 5-10% FDI slide in 2021 in last year’s World Investment Report taking cognizance of the impact of pandemic. UNCTAD feels that effects of the pandemic on cross country investment flows would linger, since Investors are likely to remain cautious in committing capital to new overseas productive assets.
The decline in FDI was concentrated in developed countries, where flows plummeted by 69% to an estimated US$229 billion.
Nigeria, Africa’s largest economy attracted a total FDI of US$2.6 billion in 2020 down from the US$3.3 billion in last year. South
Africa’s FDI inflows was attracted less with US$2.5 billion. The total value of capital importation into Nigeria stood at US$1.46
billion in the third quarter (Q3) of 2020, recording an increase of 12.86% compared to Q2 2020, and -74.03% fell from Q3 2019.
The largest amount of capital importation in Nigeria was under the head “Other Investment”, which accounted for 43.75% (US$639.44million) of total capital importation, followed by FDI, 28.38% (US$414.79million), and Portfolio Investment 27.87% (US$407.25million) of total capital imported in Q3 2020. Egypt recorded the highest influx of FDI among African countries with a total inflow of US$5.5 billion representing a drop of 38% drop. Yet, Egypt remains the top investment destination in Africa.
Flows to North America fell by 46% to US$166 billion, with cross-border mergers and acquisitions (M&As) dropping by 43%.
Greenfield investment projects dropped 29% and project finance deals dropped by 2%.The United States recorded a 49% drop in FDI, falling to an estimated US$134 billion. The decline took place in wholesale trade, financial services and manufacturing. Cross-border M&A sales of US assets to foreign investors fell by 41%, mostly in the primary sector. Investment in Europe dried up; fell by two-thirds to -US$4 billion. In the United Kingdom, FDI fell to zero, and declines were recorded in other major recipients. However, in Europe a few countries bucked the trend. For instance, Sweden saw flows double from US$12 billion to US$29 billion. FDI to Spain also rose 52%, thanks to several acquisitions, such as private equities from the United States Cinven, KKR and Providence acquiring 86% of Masmovil.
