Nigeria’s investment rate lags the average of 23.3 per cent recorded for sub-Saharan African countries, and 28.9 per cent for BRICS (Brazil, Russia, India, China, and South Africa), a report by the PwC titled, ‘Boosting Investment: Nigeria’s Path to Growth’ has revealed.
It said between 2007 and 2016, Nigeria’s investment share of the Gross Domestic Product declined from 18.7 per cent to 12.6 per cent, reaching the lowest level in the past two decades.
The report noted, “Academic literature suggests a strong nexus exists between the level of investment and economic growth, and cites China and India as examples of economies that have successfully attained investment-led growth.
“Growth in Nigeria has been relatively strong at an average of 5.6 per cent per annum over the past decade. However, this has been fuelled by the oil boom and population expansion, rather than investments.”
The report maintained that Nigeria needed investment to restore growth, noting that in 2016, the country’s economy slowed markedly, falling into a recession for the first time since 1991. Real GDP contracted 1.5 per cent year-on-year, a reflection of the two and a half year decline in export earnings, and fall in government revenues which impacted consumer spending and investments.
The PwC report said, “Perhaps the most evident impact of the sharp decline in the oil price was in the currency market, with the naira/dollar depreciating by 35.4 per cent in the official market and 47.3 per cent in the parallel market during the year.
“Aside from the depreciation in the currency, the illiquidity in the foreign exchange market impacted the business and investment environment, with Foreign Direct Investment declining to an 11-year low, and a collapse in investment as a share of the GDP to 12.6 per cent – the lowest level in the past two decades.
“The recent string of economic releases suggests that the economy might have bottomed out, with fragile signs of recovery, driven largely by improved liquidity in the foreign exchange markets and policy measures to improve the business environment. Admittedly, the fiscal narrative is unchanged as lower for longer oil price means that traditional sources of financing for Nigeria’s budgetary needs will remain stretched. Nigeria is projected to be the third largest populated country in the world by 2050 with 399 million people.”
The PwC projects that Nigeria could emerge the 14th largest economy in the world by 2050, with the GDP in Market Exchange Rate terms at $3.3tn. To deliver sustainable growth with per capita gains, Nigeria will need to aggressively boost domestic and foreign investments over the next decade, it advised.