Foreign Direct Investment inflows to Nigeria fell by 21.21 percent in 2020 to $2.6billion, the lowest since 2005, according to data published by the United Nations Conferences on Trade and Development (UNCTAD).
UNCTAD cited lower crude oil prices and the closure of oil development sites at the start of COVID-19 pandemic, as the reasons for the decline in 2020.
Nigeria has struggled to attract foreign direct investment since the collapse in oil prices in 2016.
The consistent decline in FDI has stifled job creation in Africa’s biggest oil producer and worsened the growth prospects of an economy wallowing in its second recession in five years.
Damilola Adewale, a Lagos-based economic analyst noted that the subdued FDI inflows will translate to low FX supplies.
“When you match this with the huge FX demand, it means the economy will continue to face FX pressure,” Adewale said.
“This weak investor confidence is expected to persist in 2021 because of lack of clarity around the country’s FX management framework,” Adewale said.
Globally, FDI flows fell by as much as 42 percent in 2020 from about $1.5 trillion to an estimated $859 billion.
Africa recorded a total FDI of $38 billion in 2020 representing a drop of 18 percent from $46 billion recorded in 2019.
Egypt recorded the highest influx of FDI among African countries with a total inflow of $5.5 billion representing a whopping 38 percent drop. Despite the drop, Egypt remains the top investment destination in Africa. South Africa, a major competitor for FDI inflows in Sub Saharan Africa attracted less with $2.5 billion.
“This weak investor confidence is expected to persist in 2021 because of lack of clarity around the country’s FX management framework,” Adewale said.
