Insecurity, Others Cut Nigeria’s Foreign Investments To $875m, Lowest In 5 Years
The spate of security crises, a tough business climate, and policy inconsistency are among the factors that cut Nigeria’s Foreign Direct Investment (FDI) to $875 million in the second quarter of this year, the lowest since 2016.
This was contained in a presentation by the Chairman, Presidential Advisory Committee on the Economy, Prof. Doyin Salami, for the Nigeria Economy Summit Group (NESG).
The report said total foreign investment inflows into Nigeria remain low as “investment inflows were $875 million in 2021 Q2 (second quarter) – the lowest quarterly inflow since 2016 Q1.
“FDI inflow into Nigeria has revolved around $1.0 billion in the last five years. FDI inflow in 2021 Q2 was $78m, even lower than 2020 Q2,” Salami said.
The report highlighted the hurdles facing the country’s investment climate to include macroeconomic instability, policy inconsistency, inadequate infrastructure, insecurity, and a tough business climate.
Analysis of the report showed that total investments inflow dropped from $1.99bn to $0.88bn in Q1 and Q2 of this year. The FDI also began a steep drop from the third quarter of last year after it rose $414.8m; it dropped to $251.3m in Q4 2020, further to $154.8m in Q1 2021, and was at an all-time low of $78m in Q2 2021.
Nigeria is also facing issues of a deficit balance of trade, the presidential committee report noted. “There was a significant improvement in Nigeria’s trade deficit position in 2021 Q2. The deficit narrowed to N1.87 trillion. While the value of imports declined by 1.5% year on year, exports value increased by 75% with crude oil dominating export items at 80%.
On the current foreign exchange rate crisis, it said the market is witnessing a supply shortage to meet its demand with the gap expanding. “From N92 in June to N99 in July, as CBN stopped the sale of forex to BDC operators; as of July 2021, interbank and parallel forex rates had depreciated by 6.27% and 6.67% year to date,” it noted.
Dr. Salami’s report said the forex pressure may continue till year-end “owing to limited inflows from both crude and non-oil sources, rising imports and a backlog of foreign currency demand.”
Borrowing by the government was another concern in the report, which noted that FG’s Expenditure keeps increasing at a faster pace than revenue growth. From January to May this year, it said the actual fiscal deficit was N3.01tr, which is 53.8% of the total budgeted deficit for 2021.
On inflation, the report said the increase in food prices is mainly driven by insecurity.
The report then proffered five action points to help the economy rebound for strong growth. They include sectoral reforms by strategically repositioning sectors for growth, job creation, and poverty reduction; quick intervention and resolution of security crises; enhancing policy consistency by reducing policy reversal and somersaults that tend to be hostile to sectoral growth.
It also recommended more human capital development which would involve massive investment in research and development (R&D), digitization of health and education, and empowering the youthful population with productive skills.
– Daily Trust