Foreign investment inflow from South Africa into Nigeria has fallen by over 80% in the last 4 years

In the years following a return to democracy, Africa’s most advanced economy has for years seen investment in Africa’s largest economy, Nigeria as a strategic investment destination.

Nigeria’s status as Africa’s largest market from the point of view of population and age had for years made it a destination for South African businesses in search of growth outside its shores.

However, the recent exit of some major South African businesses from Nigeria suggests the boom years of capital outflow into Nigeria are slowing.

A cursory analysis of four years of data reveals capital importation from South Africa has gone from about $2.3 billion in 2019 to $428 million in 2022 representing an 81% drop in the last 4 years.

This year (2023) capital importation from South Africa registered just $228 million which when annualized is around $456 million.

Why are South African businesses leaving Nigeria?

Nigeria, with its large population and growing economy, has long been seen as an attractive destination for foreign investors, especially from South Africa.

• However, in recent years, several major South African companies have exited or reduced their presence in Nigeria, citing various challenges and difficulties.
• Some of the factors that have contributed to this trend include

Regulatory uncertainty and disputes: Several South African businesses have faced regulatory hurdles and fines in Nigeria, such as MTN, which had to pay a $1.7 billion penalty for failing to disconnect unregistered SIM cards in 2015.

• Sun International, a hotel and gaming group, also left Nigeria in 2016 after facing legal issues with its local partner and the Economic and Financial Crimes Commission.
• Shoprite, Africa’s largest retailer, announced its intention to sell its Nigerian operations in 2020, following several closures of its outlets due to protests and court orders.