Nigeria’s foreign direct investments inflows in continuous decline

Nigeria records N124.77b trade deficit in Q1 2020
Nigeria records N124.77b trade deficit in Q1 2020

Nigeria’s foreign direct investments inflows in continuous decline – Foreign direct investments (FDI) inflow into the country has continued to worsen due to volatile economic indices.

United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report indicated that the economy attracted a total FDI of $2.6 billion last year down from the $3.3 billion attracted the previous year.

The UNCTAD 2020 World Investment Report noted, however, that FDI flows to Nigeria totalled $3.3 billion in 2019, a 48.5 per cent decrease compared to $ 6.4 billion in 2018.

In 2019 alone, Nigeria accounted for a quarter or about $122 million of the total raised by African tech start-ups, beaten only by Kenya with $149 million, according to Disrupt Africa figures. By other estimates from WeeTracker and Partech African, Nigerian start-ups raised between $663 million and $747 million in 2019, making it the largest venture capital market on the continent.

The UNCTAD World Investment Report 2018 maintained that Nigeria’s economy remained depressed as FDI fell 21 per cent to $3.5 billion.

One sector that benefited was agriculture that has attracted its highest level of investments since 2014 on continued government support to the industry.

Data from the National Bureau of Statistics (NBS) capital importation report show that foreign direct investment (FDI) in the agric sector hits $490million (N176.4 billion) in 2019, up 69percent from $290million in 2018.

This notwithstanding, an international economic report, Trading Economics, noted that FDI in Nigeria has averaged $943.13 million from 1990 to last year.

Analysts said Nigeria’s tough outlook was further compounded by risks related to the COVID-19  pandemic, the pace of the rollout of vaccination programmes and economic support packages, and uncertainty about the policy environment for investment.

According to analysts, investment returns were declining across sectors with the steepest decline in manufacturing. Declining investment flows is seen as a major blow for a country battling to eliminate poverty and reducing inequality.

Read also: Dollar inflow to domiciliary accounts falls 69% in Q2 

The analysts said while some sectors such as Fintech have received a positive stimulus, so much has not come in terms of investments on infrastructure, to boost local manufacturing capacity and drive employment.

Meanwhile, analysts expected increase in FDI flows in 2021 from investment in technology and healthcare – two industries affected differently by the pandemic.

Experts expect implementation of the African Continental Free Trade Area Agreement and the possibility of some large announced Greenfield investments materialising to result in higher FDI flows.

In its report On Current State of Nigeria Agriculture and Agribusiness Sector, international multidisciplinary practice, PWC observed that the implementation of AfCFTA would help to support Nigeria’s agri-business, to create markets for farmers, strengthen the agro-value chains and significantly reduce agricultural imports. The company added that Nigeria’s agricultural trade deficit continues to widen amid government’s push for self-sufficiency in the sector.

The President, Association of Micro Entrepreneurs of Nigeria (AMEN), Prince Saviour Iche urged the government to take significant steps to help drive investment, strengthen and create lucrative opportunities for businesses to advance economic growth.

According to him, Nigeria is a large market, not only through its population but also through its opportunities.

However, like most countries around the world, all forms of FDI to Nigeria plummeted to historic lows in 2020.

Analysts are calling on the government to loosen its strict rules on foreign direct investment, long seen as hindering global companies  from exploring the economy.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Financial Watch. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Be the first to comment

Leave a Reply

Your email address will not be published.