Nigeria recorded only $1.06 billion in capital importation in the fourth quarter (Q4) of 2022. This brings total capital importation for the 2022 fiscal year to $5.33 billion, the lowest since 2017.
Compared to the total of $6.700 billion recorded at the end of 2021, total capital importation or foreign investments into Nigeria in 2022 fell by 20.47 percent, according to data released by the National Bureau of Statistics (NBS).
As Nigeria gets closer to handing over to a new government, there are concerns about the socio-economic data of the country. More recently, it was revealed that the country’s debt portfolio has risen to N70 trillion or more.
Despite this, the country is failing to attract investors that could help it earn more and boost its revenue generation potential.
According to the data, the total value of capital importation into Nigeria in the last quarter of 2022 was only $1.06 billion. In the previous quarter, the capital importation was $1.16 billion, indicating an 8.53 percent drop on a quarterly basis. On year-on-year, capital importation declined by 51.51 percent.
Capital importation is foreign investments into a nation’s economy and is necessary for economic growth as it enables rapid investment. They are made up of three categories — Portfolio Investment, Foreign Direct Investment (FDI), and Other Investments.
Of the 1.06 billion recorded in Q4 2022, Portfolio Investment accounted for 26.89 percent ($285.26 million) of total capital imported in Q4 2022. Other Investments, which included loans, were $691.23 million, representing 65.17 percent of total capital imported in the quarter under review. FDI, on the other hand, was only $84.23 million (7.94 per cent).
On a quarterly basis, FDI and Other Investments recorded positive growth, while Portfolio Investments reported a 35.47 percent decline. But year on year, all three categories saw a drop in inflows, with FDI recording the highest decline — 76.49 percent.
Out of the 22 sectors listed, only 13 received capital inflows in Q4, while the rest recorded zero receipts. Since 2016, the weaving sector has consistently recorded zero inflow.
Of the 13 sectors with inflows in Q4, the production sector recorded the highest, followed by the banking sector. Brewering, information technology (IT) services, and hotel received the lowest in Q4 2022.
In Q3, banking, financing, and shares took the lead, while consultancy, brewering, and oil and gas received the lowest inflows.
Capital importation by country of origin had the United Kingdom as the highest, with a value of $455.24 million, accounting for 42.92 percent of the total capital import for the quarter. This was followed by the Republic of South Africa and the United Arab Emirates, valued at $119.31 million (11.25 per cent) and $116.82 million (11.01 per cent), respectively.
By destination of investment, Lagos State remained the top destination in Q4 2022 with $600.54 million, accounting for 56.62 percent of total capital investment in Nigeria. This was followed by the Federal Capital Territory (FCT), valued at $424.50 million (40.02 percent). Other states that received investments included Akwa-Ibom, Anambra, Ondo, and Ekiti.
The other 31 states in Nigeria received zero capital investment in the last quarter of 2022.
Speaking generally on the reason for the low capital inflows to Nigeria, a report by Bloomberg faulted the Central Bank of Nigeria’s (CBN) intervention in the country’s foreign exchange market, stating that it was a major hindrance to capital inflows into the country.
For this, Chief Economist at KPMG in Nigeria and former Director-General of the National Bureau of Statistics (NBS), Yemi Kale, advised that Nigeria must develop a clear foreign-exchange policy if it wanted to encourage foreign capital.
The Deputy President of the Lagos Chamber of Commerce and Industry, Mr Gabriel Idahosa, said the unpredictability of Nigeria’s foreign exchange market and devaluation of the naira were major issues affecting investments in the country.
He also flagged the country’s high taxation as a major cog in the wheel of investments.
“Most countries have 15-16 per cent of company income tax, but ours is over 32.5 percent. Most investors are going to places where taxes are low and moving to countries where governments are looking at the number of jobs,” he noted.