Foreign direct investment (FDI) in Nigeria (2024)

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Nigeria: Investing in Nigeria

Foreign direct investmentInvestment framework and opportunities

FDI in Figures

Nigeria is the third host economy for FDI in Africa, behind Egypt and Ethiopia. The country is among the most promising poles of growth in the continent and attracts numerous investors in the sector of hydrocarbon, energy, construction, etc. According to UNCTAD’s World Investment Report 2023, FDI flows to Nigeria were negative by USD 187 million in 2022 (compared to USD 3.3 billion the previous year), primarily due to equity divestments. Nevertheless, the value of announced greenfield projects surged by 24%. Notable projects include Airtel Nigeria, a subsidiary of Bharti Group (India), announcing a USD 731 million data center in Lekki. Additionally, Sun Africa (United States) and the Niger Delta Power Holding (Nigeria) announced the construction of a 936 MW solar power plant and 443 MW-hour battery storage facility, with a total investment of USD 1.8 billion. At the end of the same period, the total stock of FDI was estimated at USD 88.2 billion, around 18.5% of the country’s GDP. The main sectors attracting FDI inflows into Nigeria include oil and gas (by far the largest recipient), telecommunications, manufacturing, real estate, and agriculture. The UK has a long history of trade and investment with Nigeria and remains one of the largest investors in the country. China has become an increasingly important investor in Nigeria in recent years, particularly in infrastructure projects such as roads, railways, and power plants; while the U.S. is also a significant investor in the country, particularly in the oil and gas sector. Data from the Bank of Nigeria show that FDI were slow in the first three quarters of 2023 due to political risks and elevated production costs and foreign-owned subsidiaries, including Nestle, Guinness, Airtel Africa, and MTN Nigeria, have lost over around NGN 900 billion to currency devaluation. Yet, the adoption of pro-market reforms, including the removal of fuel subsidies and exchange rate harmonization, reversed this trend in the fourth quarter of 2023, leading to a rise in capital importation to USD 1.1 billion.

Nigeria intends to diversify its economy away from oil by building a competitive manufacturing sector, which should facilitate integration into global value chains and boost productivity. The merging of trade, industry and investment under the ambit of the Federal Ministry of Industry, Trade and Investment reflects Nigeria's intention to effectively coordinate between these three key areas to improve its trading and investment environment. Some of the country's main advantages are a partially privatized economy, an advantageous taxation system, significant natural resources and a low cost of labour. On the other hand, widespread corruption, political instability, lack of transparency, security issues, import restrictions and poor quality of infrastructure are limiting the country's FDI potential. Intense bureaucracy also curbs foreign investment and the country’s underdeveloped power sector forces most businesses to generate a significant portion of their own electricity. Foreigners can have full ownership in most sectors, but are barred from investing in industries listed in the "negative list", encompassing the production of arms and ammunition, narcotic drugs and psychotropic substances, as well as military and paramilitary apparel and accessories. Although ownership of all mineral resources is retained by the federal government, full ownership of firms is permitted in the oil and gas sector. The Nigerian Investment Promotion Commission (NIPC) serves as a one-stop investment centre and is empowered to negotiate special incentives for substantial and/or strategic investments. Overall, Nigeria ranks 145th out of 180 economies on the 2023 Corruption Perception Index, 109th among the 132 economies on the Global Innovation Index 2023 and 125th out of 184 countries on the latest Index of Economic Freedom.

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	2,385	3,313	-187
FDI Stock (million USD)	87,013	87,525	88,202
Number of Greenfield Investments*	54	44	50
Value of Greenfield Investments (million USD)	6,143	1,636	2,027

Source: UNCTAD,Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors	Nigeria	Sub-Saharan Africa	United States	Germany
Index of Transaction Transparency*	7.0	5.5	7.0	5.0
Index of Manager’s Responsibility**	7.0	3.5	9.0	5.0
Index of Shareholders’ Power***	7.0	5.5	9.0	5.0

Source: Doing Business,Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

What to consider if you invest in Nigeria

Strong Points: Nigeria's strong points in terms of attracting FDI include :
- important size of its domestic market (Africa's most populous country)
- Africa’s highest GDP;
- important hydrocarbon resources and high agricultural potential;
- relatively low public and external debt;
- the Nigerian Government's policy of economic liberalisation, promoting public-private partnerships and strategic alliances with foreign companies.
Weak Points: There are a number of obstacles to FDI in Nigeria:
- Poorly developed transport and energy infrastructure (lack of electricity), which result in high operating costs;
- An inefficient judicial system and unreliable dispute settlement mechanisms;
- A high tax burden;
- With oil and gas accounting for over 90% of export revenues, the economy is vulnerable to volatility on global markets and to large swings in energy prices;
- The federal government is hampered by the strength of state and tribal authorities. Deep ethnic, religious and regional divisions provide risks to political stability;
- An increasing lack of security, especially in connection with the extremist group Boko Haram operating in the north-east of the country.
Government Measures to Motivate or Restrict FDI: In 1995, the Nigerian Investment Promotion Commission Act dismantled years of controls and limits on foreign direct investment (FDI), opening nearly all sectors to foreign investment, allowing for 100 percent foreign ownership in all sectors (with the exception of the petroleum sector, where FDI is limited to joint ventures or production sharing contracts), and creating the Nigerian Investment Promotion Commission (NIPC) with a mandate to encourage and assist investment in Nigeria. The NIPC features a One-Stop Investment Center that nominally includes participation of 27 governmental and parastatal agencies (not all of which are physically present at the OSIC, however) in order to consolidate and streamline administrative procedures for new businesses and investments. Foreign investors receive largely the same treatment as domestic investors in Nigeria, including tax incentives. However, without strong political and policy support, and because of the unresolved challenges to investment and business in Nigeria, the ability of the NIPC to attract new investment has been limited.
The Nigerian Government has introduced many programmes to boost FDI, notably in agriculture, exploitation and mining, oil and gas extraction, as well as in the export sectors. Tax incentives are granted to pioneering industries deemed beneficial for the economic development of the country and employment of its workforce (such as clothing); allowances facilitating capital investments and the deduction of interest on loans for gas companies are also planned. The list of inventives can be found here.
Bilateral investment conventions signed by Nigeria: Nigeria has signed bilateral investment agreements with Algeria, Bulgaria, China, Egypt, France, Finland, Germany, Italy, Jamaica, Montenegro, Netherlands, North Korea, Romania, Serbia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Turkey, Uganda and United Kingdom. Only four treaties (France, Netherlands, South Korea and United Kingdom) have been ratified by both parties, the ratification process has been hesitant and poorly organised. The government has expressed an interest in negotiating a bilateral investment treaty with the United States.

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