Seychelles, Mauritius steal show as Nigeria’s economic weight fails to raise investment appeal 

ONOME AMUGE IN LAGOS, NIGERIA

Nigeria’s economic prowess has been dealt a blow as the country missed out on a coveted position in the top five most attractive investment destinations in Africa. Meanwhile, small island nations like Seychelles and Mauritius have surged to the forefront of the continent’s investment scene, stealing the limelight from the traditional economic heavyweights. While Egypt, South Africa, and Morocco remained competitive, they failed to match the pace of the rapidly-rising island nations, signalling a potential shift in Africa’s investment future.

The RMB’s 2024 ‘Where to Invest in Africa’ report, the source of the investment destination analysis, reveals a pronounced shift in the African investment landscape as Seychelles and Mauritius seize the top spots, a development that highlights the increasing competitiveness of these countries while underlining the challenges faced by larger economies such as Nigeria in luring foreign investors.

The report, compiled by Rand Merchant Bank, a leading financial services holding company operating across the African continent, identifies the continent’s most attractive investment opportunities and investment trends, providing a thorough examination of Africa’s economic prospects for foreign investors.

The RMB report assessed 31 countries spanning a significant portion of Africa’s economic activity and population. Collectively, the countries covered by the report represent 92 percent of Africa’s economic activity and over one billion people, amounting to approximately 75 percent of the continent’s total population.

The report employs a comprehensive model that encompasses 20 different metrics grouped under four fundamental pillars: economic performance and potential, market accessibility and innovation, economic stability and investment climate, and social and human development. Each metric carries a specific weighting, which, when combined, contributes to the overall weight of its respective pillar.

Nigeria, despite its economic and human capital prowess, was ranked ninth out of ten countries in terms of investment attractiveness in Africa. With a score of 0.163 based on the four key pillars assessed, Nigeria lagged behind Seychelles, Mauritius, Egypt, South Africa, Morocco, Ghana, Tunisia, Senegal, and Algeria  in terms of investment potential, market accessibility and innovation, economic stability, and social and human development.

In a surprising twist, the two small island nations of Seychelles and Mauritius emerged as the most attractive investment destinations in Africa, outranking larger economies such as Egypt, South Africa, and Morocco, which secured the third, fourth, and fifth positions, respectively in the rankings.

The ‘Where to Invest in Africa’ report attributed Seychelles’ top ranking to its strong performance across several key indicators. This is as the country boasts high levels of personal freedom, human development, and a stable economic environment, resulting in an appealing investment climate.

The report also indicated that Mauritius, despite its relatively small economic size and growth potential, has earned a strong reputation for innovation, economic freedom, and high GDP per capita. According to the report, these factors, combined with the country’s commitment to stability and a well-regulated environment, have made Mauritius an attractive destination for investors seeking growth opportunities and a safe haven for their capital.

The RMB report highlights Egypt, Africa’s largest economy in 2023, as the third most attractive investment location on the continent. The country’s extensive market, diverse investment opportunities spanning multiple sectors including technology, manufacturing, and services, and its strategic location, coupled with a strong commitment to economic development and growth, earned Egypt the third spot in Africa’s investment landscape, according to RMB’s analysis.

Despite confronting some challenges, South Africa continues to hold a significant position as an investment destination in Africa. The country’s well-established financial sector, diversified economy, and potential for significant infrastructure development make it an essential player in attracting investment on the continent. These strengths, combined with a relatively advanced regulatory and legal system, positioned South Africa as the fourth most investable African country in 2024, according to the analysis in the report.

Morocco, the fifth most attractive investment destination, according to the report, benefits from its strong performance in indicators such as connectedness, innovation, and economic stability. This is also as the country’s strategic location, close to both European and African markets, enhances its appeal for investors seeking to expand into or leverage the African market.

Analysing the investment climate in Nigeria, the report read in part, “Having topped the rankings as Africa’s largest economy by GDP for some time, Nigeria is now third, following a major currency devaluation. However, Nigeria ends up further down the investability scoreboard than its sheer size may suggest, with an overall ranking of ninth on our model.”

The RMB report acknowledged Nigeria’s impressive economic output, with a GDP of $375 billion annually, but also noted the country’s middle-of-the-road ranking in GDP per capita, placing 15th out of 31 African countries analysed in the RMB Where to Invest in Africa model. While Nigeria boasts Africa’s largest population, estimated at 220 million people, this high population density creates a challenge for the country to provide adequate infrastructure and services for its citizens, which has in turn hindered its investment potential compared to its neighbouring countries.

The RMB report also identified economic complexity as a major challenge for Nigeria, reflected in its 29th position in the model for economic complexity, largely due to the country’s heavy dependence on oil exports. This overdependence on oil is emphasised by the fact that petroleum and crude oils represent almost 70 percent of Nigeria’s trade flows, which, in turn, exposes the country’s economy to the volatility of oil prices in the global market.

Adding to the challenges faced by investors in Nigeria, RMB identified the country’s political scene as a significant concern. The report stated that Nigeria’s political landscape, which is characterised by volatility and unpredictability, presents significant risks and uncertainties for potential investors, making the country a politically charged investment destination.

Despite these obstacles, Nigeria was still identified as a ‘Highflyer’ country in the report, suggesting that despite its challenges, it still holds some attractive investment opportunities.

The RMB report classified the Highflyer countries as the larger, more established economies that provide a combination of stability and a variety of investment opportunities, with Nigeria, South Africa, Egypt and Ethiopia being notable examples.

Meanwhile, the ‘Cleared for Take-off’ category is composed of countries with strong potential for economic growth and innovation, thanks to factors such as a youthful population and abundant resources. Senegal and Côte d’Ivoire were among the countries identified as having this potential in the report.

The RMB report also identified ‘’People Potential’’ markets, which are countries that have a young and growing population, providing a large consumer base and potential workforce for future economic development. Kenya, Democratic Republic of Congo (DRC), and Uganda were identified as examples of such countries.

On the other hand, the ‘’Global Connectors’’ category comprises more advanced economies that boast a strong international presence and greater integration into global markets, with Morocco, Mauritius, Tunisia, and Seychelles serving as representative examples.

The RMB report also identified ‘’Low-Base Boomers’’, which are smaller markets with substantial potential for rapid growth but a correspondingly higher level of risk. Countries such as Rwanda, Mozambique, and Benin were identified as examples of these markets. The potential for explosive growth is often accompanied by increased levels of uncertainty and risk, making these markets particularly attractive for investors with a higher tolerance for risk and a long-term perspective.

Commenting on the report, Isaah Mhlanga, chief economist at RMB, noted:  

“Africa is not a country, but a vast, diverse and complex continent with different cultures, economies and investment potential. Our report therefore is not a definitive guide, but rather it is designed to provide insight to uncover the underlying drivers of a country’s performance that inform its ranking. This offers invaluable insights for investors, policymakers, and business leaders looking to navigate Africa’s dynamic economic landscape.”

The ‘Where to Invest in Africa’ report is a collaborative effort between RMB and the Gordon Institute of Business Science (GIBS). The report employs a rigorous and data-driven methodology, designed to assess a country’s progress and investment potential, taking into account a broad range of factors that influence a nation’s development and attractiveness to investors. In order to maintain the relevance and accuracy of the report, the methodology has been updated to incorporate new data sources and reflect emerging trends that shape the African investment landscape.

The report’s findings are also based on publicly available datasets from various global institutions, including the World Bank,  the International Monetary Fund (IMF), the African Development Bank (AfDB), the United Nations (UN), and the International Labour Organisation (ILO), providing a detailed and multifaceted examination of Africa’s economic outlook and investment opportunities.