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Foreign investment in Nigeria hits five-year low

Foreign investment in Nigeria hits five-year low

The total value of capital importation into Nigeria declined year-on-year by 31 percent to $6.7 billion in 2021, the lowest in five years, according to the National Bureau of Statistics (NBS).

A breakdown of the latest capital importation data shows that in terms of importation type, portfolio investment had the largest share (although it fell by 30 percent to $3.4 billion), followed by other investments and foreign direct investment, which dropped by 25.7 percent and 30 percent to $2.6 billion and $698.8 million respectively.

By sectors, banking received the largest share ($1.5 billion), followed by shares ($1.1 billion) and production ($934.1 million).

The United Kingdom, South Africa and Mauritius were the countries from which the most investments came into Nigeria, with $2.3 billion, $1.1 billion and $690.9 million respectively.

Analysts said the decline in foreign investments was not surprising, attributing it to the recession of last year, the challenges in the foreign exchange market, and policies from the Central Bank of Nigeria in managing foreign exchange.

“Clearly, it did not look like Nigeria or the CBN had the stamina to make appropriate policies to stabilise the FX market. How can you make such a policy when your biggest FX-earning commodity (crude oil) has suffered a massive clash in price?” Abiodun Keripe, managing director at Afrinvest Research & Consulting, said.

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“Also, the capital market was down, economic activities too were dwindling due to the pandemic-led recession; so there were not many activities to attract foreign investors here,” he added.

Moses Ojo, a Lagos-based economic analyst, noted the uncertainties in the oil sector, saying although the Petroleum Industry Bill had been passed into law, its non-implementation has led to a reduction in investments in the oil sector.

“We are also seeing capital flight in that sector into other African countries that have legislative, governance framework in place and conducive business environment,” Ojo added.

Meanwhile, the Value Added Tax (VAT) revenue for the fourth quarter of 2021 rose by 12.63 percent to N563.72 billion from the N500.49 billion recorded in Q3 2021, according to a new report by the NBS on Friday.

The NBS data showed that local payments recorded were N333.29 billion in Q4 2021, while foreign VAT payments contributed N103.52 billion.

On a year-on-year basis, VAT collections in Q4 2021 increased by 23.98 percent from Q4 2020.

The sectors that contributed the most to VAT revenue in Q4 manufacturing (30.86 percent), information and communication (18.72 percent) and mining and quarrying (9.91 percent).

The statistics office said, “On a quarter-on-quarter basis, the activities of extraterritorial organisations and bodies recorded the highest growth rate with 150.16 percent, followed by agriculture, forestry and fishing with 92.48 percent.

“On the other hand, arts, entertainment and recreation had the lowest growth rate with -7.07 percent, followed by education with -5.69 percent.”