Nigeria’s Foreign Investment Plummet By 81% Amid Interest Rate Rise

The National Bureau of Statistics disclosed in a recent publication that capital importation into Nigeria plummeted by 81.46 per cent ($6.91bn) from $8.49bn in the first quarter of 2019 to $1.57bn in the corresponding quarter of 2022.

Based on the data, the country’s capital importation for the first quarters of 2019, 2020, 2021, and 2022 showed a steady fall in capital inflows into Nigeria.

NBS said the capital importation data which is obtained from the Central Bank of Nigeria showed that total capital inflow fell by 31.01 per cent from $8.49bn in Q1 2019 to $5.85bn in Q1 2020.

It revealed also a fall of 67.45 per cent to $1.91bn in Q1 2021 and further declined by 17.46 per cent to $1.57bn in Q1 2022.

Naija News understands that the reported figures were derived from capital inflow which includes imported physical capital, such as equipment, and financial capital importation.

The report explained that foreign investment is divided into three main investment categories: foreign direct investment, portfolio investment, and other investments.

The NBS reports say: “In Q1, 2019, the largest amount of capital imported into the nation was through portfolio investment. The banking sector dominated inflows that quarter and the United Kingdom was responsible for most of the inflows. In Q1 2020, portfolio investments continued to dominate inflows while banking and the UK also retained their respective leadership positions.

In Q1 2021 and Q1 2022, portfolio investments were responsible for most of the capital inflows into the nation, while banking raked in the highest and the UK provided the most.”

Meanwhile, the Governor of the Central Bank of Nigeria, Godwin Emefiele disclosed earlier during a recent Monetary Policy Committee that an unconducive domestic investment climate is impacting capital inflows into the nation.

He said “The net FDI has been very low while there was a substantial reversal of FPI flows from the country in the fourth quarter of 2021.

“This poor trend is apparently due to the unconducive domestic investment climate which appears to be worsening. In February 2022, such inflows stood at $17.6bn compared with $66.4bn in February 2021, the highest since December 2020.

“The risk factors include increased uncertainty surrounding the inflation outlook in the advanced economies, uncertainty over tapering plans by the US Fed, the regulatory developments in China and its real estate market-related systemic risk, and uncertainty regarding the Russia-Ukraine war and the resulting sanctions imposed on Russia. These factors have weighed down investor sentiment.”

In its recent, ‘Nigeria Development Update (June 2022): The Continuing Urgency of Business Unusual’ report, the world bank revealed that rising global interest rates is going to lead to more net portfolio outflows in 2022, leading to a decline in overall capital importation.

It said, “With rising global interest rates, Nigeria will likely experience net portfolio outflows in 2022. FPI inflows grew significantly in 2021, exceeding $6bn (1.4 per cent of GDP).

“This followed a significant decline in 2020 in the wake of the COVID-19 pandemic when net outflows reached $3.6bn (0.8 per cent of GDP). However, with the continued hiking of interest rates in the US and other advanced economies due to rising inflation, net portfolio inflows to Nigeria are expected to drop under 1 per cent of GDP in 2022. The pre-election environment is also likely to add to the hesitance of portfolio investors, keeping net inflows low.”

This article was originally published on Naija News