Foreign investments in Nigeria’s manufacturing sector witnessed a significant drop of 35% from $392.5 million in Q4 2022 to $256 million in Q1 2023, according to the National Bureau of Statistics’ capital importation report. This decrease reflects a challenging business environment characterized by high energy costs, limited access to funding, multiple taxation, and other factors that have deterred investments in the sector.
The capital importation report for Q1 2023 revealed a total capital inflow of $1.1 billion into Nigeria, representing a decline of 28% compared to the same period last year. Despite the overall decrease, the manufacturing sector accounted for the second-highest share of investments with 22%, while the banking sector recorded the highest inflow of $304.5 million, comprising 26.89% of total capital imported during the quarter.
The Manufacturers Association of Nigeria (MAN) has warned about the adverse impact of the challenging business environment on the manufacturing sector. The association’s Bi-Annual Economic Review showed a decline in manufacturing investment, reaching N145.59 billion in the second half of 2022 compared to N160.88 billion in the corresponding period of 2021, indicating a 10% decrease. MAN attributes this decline to government debt issues, high borrowing and energy expenses, and weak consumption.
The President of the Manufacturers Association of Nigeria expressed concerns over the potential departure of more international manufacturing companies due to the planned tariff hike by power distributors. He highlighted that some international firms have already exited the country due to the ongoing power crisis and the volatility of the foreign exchange rate. Manufacturers face significant costs in providing their own infrastructure, including water, power, and security, making the overall cost of doing business prohibitively high.
Opinion: The decline in foreign investments in Nigeria’s manufacturing sector is a concerning trend that demands attention from policymakers and stakeholders. The challenges faced by manufacturers, such as high energy costs and limited access to funding, create barriers to growth and hinder economic development. To attract more investments, it is crucial for the Nigerian government to address these issues by implementing supportive policies, improving infrastructure, and ensuring a stable business environment. Fostering a favorable investment climate will not only benefit the manufacturing sector but also contribute to job creation and overall economic prosperity.