Capital inflows to Nigeria, others to rise to US$86bn in 2015-World Bank

Posted: February 6, 2013 in general

The World Bank has projected total Net capital inflows to Nigeria and the rest of the sub-Saharan Africa to almost double from $43.4bn in 2008 to $86.1bn in 2015‚ in its Global Economic Prospects report released Wednesday.

The twice-yearly report examines growth trends for the global economy and how they affect developing countries.

The report stated that despite the global credit crunch which trailed events of September 2008‚ net capital inflows into the region have risen every year since 2008 and were estimated at $65bn last year from $64.2bn in 2011‚ $61.1bn in 2010 and $47bn in 2009.

“The bulk of these inflows are foreign direct investment‚ which tend to be less volatile than portfolio flows.

They also tend to promote infrastructure development as the new investments require services such as water‚ sanitation‚ electricity and roads. This promotes job creation‚ as well as in the provision of services and construction of new infrastructure.

“Foreign direct investment flows to the region increased to $37.7bn in 2012 from $35.7bn in 2011.

“The resilience of foreign direct investment flows in the region in 2012 reflects‚ inter alia‚ the longer time horizon of investment decisions in the extractive industries sector‚ and is therefore less sensitive to short-term shifts in market sentiment.

On investment incentives, the World Bank noted that they remain elevated due to continued high levels of commodity prices last year‚ the wealth of natural resources across the region‚ and the relatively high rates of returns on investment in sub-Saharan Africa.

“In 2012‚ several mines were expanded or new ones built across countries in the region‚ prospecting yielded major gas discoveries along the east coast of Africa‚ new commercially viable oil wells were drilled in West Africa and East Africa and a number of countries across West‚ Central and Southern Africa found new mineral deposits.

“While the extractive industry sector dominates in terms of the value of overall foreign direct investment flows‚ the relative importance of the primary sector in greenfield investments is declining‚ reflecting increasing investments in the services sector‚ notably among infrastructure-related projects in construction‚ transportation‚ electricity‚ telecommunication and water‚” the World Bank report said.

The World Bank forecast that gross domestic product (GDP) growth in sub-Saharan African (excluding SA) would rise to 6.1% in 2013 from 5.8% in 2012 and 5.3 per cent in 2011.

The World Bank report also rated one-third of countries in the region as seeing growth by at least 6 per cent in 2013 with Gambia and Sierra Leone achieving double-digit growth.

The World Bank also said that with a few notable exceptions‚ central banks in the region reacted to weakening inflation pressures and slower growth by easing monetary policy.

While noting that interest rate cuts outnumbered hikes by 3:1 last year, the report said: “Robust domestic demand‚ steady remittance flows‚ still high commodity prices‚ and increased export volumes were supportive of the region’s growth in 2012.

“Risks to the outlook remain tilted to the downside‚ as weaker growth in China‚ ongoing fiscal consolidation in the eurozone and the United States could potentially derail the region’s growth prospects. Further‚ a number of domestic concerns could be a drag on growth in the region‚” it said.

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