• Monday, June 24, 2024
businessday logo

BusinessDay

Foreign investment in Nigeria drops to $6.7bn in 2021, lowest in 5yrs

Foreign investment to Nigeria drops to $6.7bn in 2021, lowest in 5yrs

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

A breakdown of the recent Capital importation data further shows that in terms of importation type, although Portfolio Investment received the largest share, it fell by 30 percent to $3.4 billion, followed by other investments which also reduced by 25.7 percent to $2.6 billion and Foreign Direct Investment (FDI) declined by 30 percent to $698.8 million

The report also highlighted that in terms of sectors, Banking ( $1.5 billion) , Shares ($1.1 billion) and production ($934.1 million) received the largest share, while United Kingdom, South Africa and Mauritius with $2.3 billion, $1.1 billion and $690.9 million respectively were the countries that had the largest chuck.

Analysts have said that the decline in foreign investments is not surprising due to the combination of the recession coupled with the fact that Foreign Exchange (FX) environment became more hostile, policies from the Central Bank of Nigeria (CBN) in managing the FX, scraping BDCs, and FX rationing scared investors away.

Read also: Remittance inflows surge on naira-4-dollar scheme – CBN

“Clearly, it did not look like Nigeria or the CBN had the stamina to make appropriate policies to stabilize 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, Afrinvest Research & Consulting said.

He adds, “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.”

Similarly, Moses Ojo, a Lagos-based economic analyst noted the uncertainties in the oil sector despite the fact that the Petroleum Industry Bill (PIB) had been put in place but yet to be implemented saw 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.

Foreign investment is important in any economy as it serves as a catalyst of economic growth and of technological development, when domestic savings cannot.

It also helps to create new jobs and more opportunities as investors build new companies in foreign countries leading to an increase in income and more purchasing power to locals, which in turn leads to an overall boost in targeted economies.