BusinessDay

FDI: UNCTAD’s data contradict NBS

United Nations Conferences on Trade and Development (UNCTAD) data on Nigeria’s Foreign Direct Investment (FDI) inflows vary from the data reported by the National Bureau of Statistics (NBS). According to BusinessDay analysis, UNCTAD reported an increase of 100 percent in FDI to $4.8 billion in 2021, the highest in eight years, while NBS reported a […]

United Nations Conferences on Trade and Development (UNCTAD) data on Nigeria’s Foreign Direct Investment (FDI) inflows vary from the data reported by the National Bureau of Statistics (NBS).

According to BusinessDay analysis, UNCTAD reported an increase of 100 percent in FDI to $4.8 billion in 2021, the highest in eight years, while NBS reported a decline of 56.2 percent to $340.4 million in the first nine months, the lowest in six years.

Damilola Adewale, a Lagos-based economic analyst, says the contradiction may be as a result of the different methodologies that both institutions use for capturing FDI.

“NBS may not have a comprehensive investment tracker compared to UNCTAD. So, I think they need to improve on their reporting of FDI by telling us the key investments that drove those figures, who the core investors are, where they are coming from and other necessary information,” Adewale notes.

In an emailed response to BusinessDay questions, Astrit Sulstarova, chief, trends and data section at UNCTAD, states, “The increase of FDI flows to Nigeria was mainly due to the rise in equity flows from $1.7 billion to $4.2 billion.”

Sulstarova could not provide more information on the sectors responsible for the growth as it would be made available in the 2022 World Investment Report planned to be published in June.

The difference in UNCTAD and NBS’ FDI reports could be that the former accounts for investments in the technology sector.

When analysing the previous year’s report, UNCTAD predicted that although the overall value of planned project finance and greenfield investments fell considerably, a few large deals announced in 2020 signalled that foreign investors were engaged despite the unfavourable investment climate.

“For example, MTN Group (South Africa) announced it would invest $1.6 billion to strengthen its 4G network services in Nigeria,” the report states.

FDI is regarded as one of the most important contributors to economic growth. It is critical for developing and emerging markets as it creates new jobs and more opportunities, as investors build new companies in foreign countries.

Analysts say the recovery in FDI is a positive development for the economy. “Throughout last year, there were a lot of fintech investments. However, we are not seeing those investments in critical sectors that will grow the economy,” Ayodeji Ebo, head, retail investment, Chapel Hill Denham, says.

Similarly, Gbolahan Ologunro, a senior research analyst at Cordros Securities, notes that the country is getting more stable and long-term inflows that would probably not put pressure on the currency when there is a shock in oil prices.

“There was high liquidity in the global market last year as a result of loose monetary stimulus from global central banks. So, these funds have to find economies with strong long-term growth prospects,” Ologunro notes.

According to data compiled by BusinessDay, Nigerian fintechs raised record amounts of money in 2021, raising $799.1 million by 19 fintech companies.

Apart from Nigeria, there was also international growth in FDI as it recorded a strong rebound, up 77 percent to an estimated $1.65 trillion from $929 billion in 2020, surpassing its pre-COVID-19 level.

For Africa, FDI rose by 142.5 percent to $97 billion as most recipients across the continent saw a moderate rise in FDI; inflated by a single intra-firm financial transaction in South Africa ($41bn) in the second half of 2021.

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FDI inflows into developing economies increased by 30 percent to nearly $870 billion, with a growth acceleration in East and South-East Asia (+20%), a recovery to near pre-pandemic levels in Latin America and the Caribbean, and an uptick in West Asia.

Developed economies saw the biggest rise by far, with FDI reaching an estimated $777 billion in 2021 – three times the exceptionally low level in 2020.

In Europe, more than 80 percent of the increase in flows was due to large swings in conduit economies. Inflows in the United States more than doubled, with the increase entirely accounted for by a surge in cross-border mergers and acquisitions (M&As).

“Investor confidence is strong in infrastructure sectors, supported by favourable long-term financing conditions, recovery stimulus packages, and overseas investment programmes,” UNCTAD states in its recent investment trend monitor report.

It concluded that though the outlook for global FDI in 2022 is positive, the rebound growth rate in 2021 is unlikely to be repeated.

“The 2021 rebound growth rate is unlikely to be repeated. The underlying trend – net of conduit flows, one-off transactions, and intra-firm financial flows – will remain relatively muted, as in 2021,” the report states.

It also adds that international project finance in infrastructure sectors will continue to provide growth momentum.

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