Analysts predict FGN-Saudi Arabia FDI deals to attract $5bn in 2025

AS Nigeria continues to strengthen its economic ties with Saudi Arabia, analysts are optimistic that the forthcoming Foreign Direct Investment (FDI) deals between the Federal Government of Nigeria (FGN) and the Kingdom of Saudi Arabia will yield significant dividends, with projections indicating that the agreements could attract an amount estimated to be above US$5 billion in investments in 2025. This figure will come from FG’s initial US$5 billion agreement and Saudi Agricultural and Livestock Investment Company (SALIC) estimated $3.5 billion investment into Plan.

In November 2024, the FGN announced a significant bilateral trade agreement with Saudi Arabia, proposing a $5 billion trade facility between the two nations. This agreement aims to boost investments in Nigeria’s agricultural sector and enhance food security, a key priority for both countries.

The deal emerged from discussions that began during a high-level delegation visit to Saudi Arabia in May 2024, which included engagements between President Bola Tinubu and Saudi Crown Prince, Mohammed bin Salman Al Saud. The meetings, held on the sidelines of the Saudi-African Summit and the Extraordinary Arab and Islamic Summit, focused on fostering strategic partnerships in agriculture and other sectors.

However, mixed reactions followed the announcement, primarily due to the conflation of the bilateral agreement with an unrelated proposal from the Saudi Agricultural and Livestock Investment Company to increase its equity stake in OLAM Agri Pte.

SALIC, a key player in Saudi Arabia’s food security strategy, has proposed acquiring the remaining 64.6 percent equity in OLAM Agri Pte, a Singapore-based agribusiness giant. Currently, SALIC holds a 35.43 percent stake in OLAM and plans to increase its ownership to 100 percent through an estimated $3.5 billion investment.

The acquisition would allow SALIC to take full control of OLAM Agri’s commodity portfolio, which includes products such as cocoa, coffee, cashew, sesame, rice, wheat, and grains. Analysts estimate the total cost of the acquisition could reach $4 billion, reflecting SALIC’s strategic interest in securing global food supply chains and leveraging OLAM’s extensive operations in 65 countries, including Nigeria.

SALIC’s plans to expand its investment in OLAM align with Saudi Arabia’s broader goal of achieving food security and sustainability. The acquisition would provide SALIC with access to strategic assets like Russia’s Azov Grain Terminal, which handles 1.4 million tonnes of grain annually, further strengthening its global footprint.

The overlap in timing between the FGN’s bilateral agreement and SALIC’s acquisition proposal has led to confusion. While both initiatives involve Saudi Arabia and Nigeria’s agricultural sector, they are distinct. Analysts from Proshare’s Economic & Market Intelligence (EMI) Unit have emphasized the importance of distinguishing between the two agreements.

Speaking on December 29, 2024, Nigeria’s Minister of Finance and Coordinating Minister of the Economy (CME), Mr. Olawale Edun, stated, “What we have brought back is investment. What we have brought back is foreign exchange. What we have brought back is jobs for Nigerians.”

Edun’s remarks underscore the significance of the bilateral agreement, which focuses on building Nigeria’s agricultural capacity, creating jobs, and boosting foreign exchange reserves.

Despite the optimism surrounding these agreements, challenges remain. Critics in the private sector have pointed out potential miscommunication and misrepresentation of the deals, which could affect investor confidence.

Analysts suggest that clearer communication and binding agreements are necessary to manage public expectations and ensure market stability.

Additionally, SALIC’s acquisition of Olam Agri raises questions about the implications for Nigeria’s local agricultural sector. If completed, the acquisition could enhance Nigeria’s position within OLAM’s global supply chain. However, it will require careful coordination to align SALIC’s strategic objectives with Nigeria’s food security goals.

The $5 billion bilateral agreement between FGN and Saudi Arabia represents a substantial opportunity for Nigeria to address its agricultural challenges. By leveraging investments in mechanization, irrigation, and value chain development, the country could significantly boost food production and reduce dependency on imports.

SALIC’s interest in OLAM Agri complements these efforts by potentially channeling additional investments into Nigeria’s agricultural sector. OLAM’s existing operations in Nigeria span various commodities, offering a platform to scale up production and export capacity.

Proshare analysts have noted that while SALIC’s offer to acquire OLAM Agri is still at the exploratory stage, it represents a significant opportunity for both parties. Although the Singapore-based agribusiness giant Olam Group has confirmed receiving an offer from the Saudi Agricultural and Livestock Investment Company (SALIC) to buy out the remaining stake in Olam Agri., a recent statement by OLAM Group stated, “There is no certainty that a sale of the company’s stake in the OLAM Agribusiness will proceed or materialize.”

For Nigeria, the challenge lies in effectively managing its relationships with sovereign-backed entities like SALIC while ensuring that FDI projects align with national priorities. The FGN’s recent engagements with Saudi Arabia provide a blueprint for leveraging bilateral agreements to attract investments in critical sectors.

Analysts expect that as the FGN fine-tunes its approach to FDI, it will adopt a more nuanced strategy that emphasizes binding agreements, clear communication, and alignment with market realities. This will be particularly crucial as Nigeria seeks to attract additional investments in 2025.

The FGN-Saudi Arabia agreements represent a significant step toward addressing Nigeria’s food security challenges and boosting economic growth. By attracting up to $8.5 billion in FDI, these deals could create jobs, enhance foreign exchange earnings, and position Nigeria as a key player in global agricultural supply chains.

However, realising these benefits will require meticulous planning, transparent communication, and strong governance. As Nigeria moves forward, it must learn from past experiences to ensure that FDI projects deliver sustainable and inclusive growth.

With the right policies and partnerships, Nigeria is well-positioned to unlock the full potential of its agricultural sector and strengthen its economic ties with Saudi Arabia, creating a win-win scenario for both nations.

Chima Nwokoji