Nigeria status as Africa’s largest economy is receiving confirmation as she emerged the number one frontier-market economy in terms of attracting the most attention from European and American multinationals, a report titled ‘Frontier Market Sentiment Index’ by Wall Street Journal (WSJ) Frontiers has revealed.
“We collect data about which countries the companies are watching for potential future investment. Over time, that gives us a clear picture of their market priorities—which countries are they including in their future plans and which they are dropping,” said Matt Lasov, global head of advisory and analytics of Frontiers Strategy Group (FSG), the US-based advisory firm that created the index for WSJ.
Countries in sub-Saharan Africa dominate the list, with nine from the region making part of the 11 from Africa in the list of 20 countries.
Kenya ranked 5th on the list, making it the second African country with 23.17 percent corporate sentiment rate, following Nigeria’s 29.57 percent. Rising insurgency in both countries apparently has not discouraged multinationals from venturing into business dealings as opportunities in the countries probably outweigh security risk.
Angola followed at 21.9 percent and Ghana at 18.73 percent.
The top three African countries’ rating may not come as a surprise to many. Firstly, Nigeria is Africa’s largest economy and is still growing; Kenya is East Africa’s largest economy; Angola’s oil wealth had in recent times made its economy bigger, with crisis-hit Portugal seem to be relying on the Southern African country as it seeks foreign investments to put its economy back on track.
“The corporate world’s fascination with Africa shows through clearly in the rates of change of sentiment,” the report said.
The report presented four sub-Saharan African countries out of the five with the highest positive change in sentiment; these countries also made up seven of the top 10.
Kenya’s sentiment change from 2013 to June 2014 was 4.18 percent; Nigeria 4.06 percent; Ethiopia 3.58 percent; Tanzania 3.73 percent; Cote d’Ivoire 3.09 percent; Angola 2.31 percent and Zambia 2.02 percent.
The report however said Nigeria remains the clear leader out of the African countries with twice the number of companies in the index considering investing in the West African country. “Nearly three in 10 companies have Nigeria on their watch list.”
Other frontier markets that multinational corporations are most interested in include Argentina and Vietnam, which followed Nigeria as 2nd and 3rd globally.
The report show bias of the multinationals towards frontier markets, although 56 out of the 70 countries considered have seen sentiments towards them decline since 2013. FSG’s global head of advisory and analytics, Lasov, however believes the reduction is because interests in the developed world have been revived.
“In the past few years, there has been a rebound in developed markets, which has attracted companies’ attention,” Lasov says, adding that while this is happening, companies considered frontier markets and realized that many of them have tiny populations, which may not make building a business in such smaller markets be worthwhile.
Frontier markets like Nigeria, with a population of about 170 million is therefore expected to continue its corporate appeal; same as others like Kenya, as sub-Saharan Africa as a whole continue favourable economic growth, with GDP growth projected to be 4.7 percent in 2014.