African Export–Import Bank (Afreximbank) has identified multiple currencies, weak infrastructure, poor financing and lack of critical information as factors responsible for poor returns don cross boarder investments by Nigerians.
The Pan-African multilateral financial institution also identified lack of investment guarantees, among others as impediments.
Nigerian companies have consistently recorded low returns from cross border investments in the last one decade, reports by investment agencies indicate.
President of the Bank, Prof. Benedict Oramah, reported that until these challenges were cleared Nigerian companies engaged in cross border would not make progress.
Oramah spoke recently at the 4th Annual Bullion lecture in Lagos.
He said that financing challenges for cross border investment could be ameliorated if the Africa Finance Corporation ( AFC) and Nigeria Sovereign Investment Authority (NSIA) were encouraged and resourced to support such investments by Nigerian companies.
“It is recognised that cross-border investments promote trade. Countries with companies investing outside their territories are also high export performers, e.g., China, the USA, Europe, South Korea, etc.
“Those investments create supply chains back to the home country of the investors. As intra-Africa trade grows, intra-African investments are also rising.”
“Nigerian firms are investing across borders but only to a limited extent. Lack of appropriate financing, including investment guarantees has been blamed. Some also say Nigerian embassies are not properly resourced to support Nigerian investors investing across borders.
“Our view is that the financing challenges for cross border investment can be ameliorated if the AFC and NSIA are encouraged and resourced to support such investments by Nigerians,” he said.
He said that access to appropriate financing was a critical success factor in intra-regional investment.
In order to support the sector, the bank is implementing a number of programmes including intra-African Investment Financial Facility and intra-African Investment Guarantee Facility.
Oramah said domestically, the size of investments to bring infrastructure to acceptable standards is quite beyond current resources.
Africa-wide estimates indicate investments in aggregate of over US$1 trillion over 10 years, an amount that may be in excess of the combined budget of all African economies at current prices over the same period.
“In the light of the foregoing, it is important that private sector be encouraged to invest in trade enabling infrastructure.
“But the private sector can only do so if they see opportunity for returns, adding that it is the African Continental Free Trade Agreement (AfCFTA) that can contribute in making Africa look like a market which can then attract these investors.
“Until policy regimes and infrastructure improve, the use of Industrial Parks and Export Processing Zones which can provide the needed efficient infrastructure within a limited area presents a good alternative,” he said,
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