Investment surge or risk ahead? Uganda’s FDI boom triggers regulator warning
KAMPALA,UGANDA. Uganda’s economic upswing is illuminating new possibilities — but also raising red flags. The Bank of Uganda’s deputy governor, Augustus Nuwagaba, has publicly cautioned that the influx of foreign capital must be handled with care, as large inflows can distort exchange rates and undermine export competitiveness.
According to recent data, Uganda’s foreign direct investment (FDI) jumped about 12.5% in 2024 to USD 3.365 billion, driven heavily by oil sector-related activity. At the same time, Uganda posted a real GDP growth of 5.7% in 2024, surpassing regional heavyweight Kenya (4.7%) and South Sudan (4.2%).
But Nuwagaba warns the flip side: “Large capital inflows bring considerable economic benefits … but we must understand these dynamics to make informed decisions.” The core concern is that rapid inflows could lead to an over‑valued Ugandan shilling, hurting export performance and making local industries less competitive.
For Kampala-based firms, urban infrastructure providers and real‑estate developers, the surge in investment is a boon—but it also sets the stage for heightened competition, inflation in asset prices and potential vulnerability if global investor sentiment shifts. The challenge for policymakers is to channel this capital into productive, broad‑based sectors rather than speculative bubbles.
Why it matters
Uganda’s position as a rising economic hub in East Africa depends on balancing growth with stability; unchecked investment inflows can destabilise currency and export sectors.
For businesses in Kampala, understanding how macro‑economic shifts influence costs, labour and currency exposure is crucial.
For urban development, rapid investment can strain infrastructure (roads, utilities, housing) if not matched by planning.
The warning signals show that Uganda’s policymakers are aware of risks — governance and policy‑frameworks now become critical.
What to watch
Whether the Bank of Uganda implements new tools (capital controls, macro‑prudential measures) to temper excessive inflows.
How the shilling behaves — does it strengthen too far, and what happens to Uganda’s exports?
Whether investment flows diversify beyond oil and resource‑sectors into manufacturing, services and urban infrastructure.
Impact on Kampala: will real‑estate, construction and urban housing see bubble‑like behaviour, or will growth remain sustainable?
