February 19, 2024/CSL Research
According to data from the Nigerian Bureau of Statistics (NBS), Nigeria experienced a marginal increase in total capital importation in Q4 2023, reaching US$1.09 billion. This marks a 2.62% rise from the US$1.06 billion recorded in Q4 2022. Quarter-on-quarter, there was a substantial increase of 66.27%, reaching US$1.09 billion, up from US$654.65 million in Q3 2023. Notably, the capital importation in Q3 2023 was the lowest in a quarter over the past decade. Capital importation encompasses the total foreign inflow a country receives and is categorized into three main segments: foreign direct investment (FDI), portfolio investment (FPI), and other investments (FOI). The predominant contributor to capital importation in Q4 2023 was Other Investment, primarily foreign loans, constituting 54.64% (US$594.75 million) of the total. Following closely, Portfolio Investment accounted for 28.46% (US$309.76 million), while Foreign Direct Investment (FDI) made up 16.90% (US$183.97 million).
In Q4 2023, the production/manufacturing sector had the highest inflow of foreign capital at US$450.11 million, constituting 41.35% of the total capital imported. Following closely, the banking sector secured the second position with a value of US$283.30 million (26.03%), and financing activities accounted for US$135.59 million (12.46%). The United Kingdom played a significant role as the leading source of foreign capital, contributing US$267.24 million or 24.55% of the total inflow. Mauritius followed suit with US$226.18 million (20.78%), and the Netherlands contributed US$149.93 million (13.77%). Remarkably, 33 states in Nigeria did not attract any foreign investment in Q4 2023. Lagos state emerged as the top destination for foreign investments, attracting US$711.68 million, representing an impressive 65.38% of the total capital imported. Abuja (FCT) secured the second position with US$370.80 million (34.07%), while Rivers state attracted US$6 million (0.55%).
Over recent years, historical data indicates a notable decline in foreign investments flowing into the country. The total capital importation in 2023 was US$3.91 billion, marking a significant 26.7% decrease compared to US$5.33 billion in 2022. This decline is even more pronounced (83.72%) when contrasted with the pre-COVID level of US$23.99 billion in 2019. Several factors such as poor institutional development, property rights concerns, policy inconsistencies, multiple exchange rates, scarcity of forex, security concerns, and structural challenges have dimmed investor confidence and hampered inflow of foreign investments into the country. To the extent that many of these concerns remain unaddressed, we do not expect to see an increase in FDIs and FPIs in the short to medium term.
Click here to read full PDF copy of report
