FDI remains  stable due to oil-related investments 

FDI inflows have been boosted by oil-related investments, recovering from Covid-19 slowed growth. Photo / File  

What you need to know:

  • Bank of Uganda says oil-related investments boosted FDI but could have peaked, thus the unchanged position 

Bank of Uganda has indicated that Foreign Direct Investment (FDI) stood at $2.9b in the 12 months to January 2024, which is almost the same compared to the same period in 2023.

Responding to a question about the performance of FDI, Dr Adam Mugume, the Bank of Uganda executive director research, said oil-related investments had boosted FDI but this, he noted, could have peaked, thus the unchanged position. 

“FDI to the oil sector could have peaked since most of the oil-related infrastructure has been set up and the bulk of FDI is oil-related. Perhaps more than half of FDI is oil-related,” he said.  

FDI remains key in the recovery of investment confidence in Uganda, which suffered a drastic decline in 2020 following the effects of Covid-19.  

It is an important source of private external financing and is different from other major types of external private capital flows that are motivated largely by investors’ long-term prospects for making profits in production activities that they directly control.

Finance Minister Matia Kasija last year said Uganda’s FDI reduced sharply from $1.3b in 2019 to $874m in 2020 but had recovered to $1.5b in 2022. 

“I am happy to report that Uganda is one of the 10 top African countries in FDI inflows for calendar year 2022 and the number one in East Africa due to growth in the minerals sector, and oil and gas which recorded increased activity after the Final Investment Decision in February 2022,” he said.

FDI recovery 

The recovery has largely been attributed to activities in the oil and gas sector as the country moves towards the production stage by 2025. 

In January, Energy Minister Ruth Nankabirwa, said in a policy brief that the oil and gas sector had significantly contributed to the country’s GDP, amounting to $8.6b in the form of FDI, noting that the National Oil and Gas Policy for Uganda and the National Content Policy for the Petroleum subsector, had helped Ugandans to participate, thus increasing the value, and knowledge retention of local companies. 

“Many contracts have been awarded to Ugandan companies, and employment in the sector is predominantly comprised of Ugandans,” she said, noting that in terms of employment, Ugandans dominate the oil and gas sector with at least 13,821, which translates to 93 percent employed in the sector. 

“This is a testament to our efforts to support more Ugandans to find employment in the sector. We continue to maintain a National Talent Register where all employable Ugandans are registered,” she said.