BY Onome Amuge.
Capital inflow in the form of foreign investments into Nigeria declined 17.46 percent to $1.57 billion in the first quarter of 2022 from $1.91 billion recorded in the corresponding quarter of 2021, resulting in a $34 million loss year-on-year.
The National Bureau of Statistics (NBS) made the disclosure in its recently released quarterly capital inflow report titled ‘Nigerian Capital Importation’.
The state-funded statistical bureau reported that capital inflow into Nigeria’s economy has been on a downward trend since 2019. It fell 31.01 percent from $8.49bn in Q1 2019 to $5.85bn in Q1 2020, dropped 67.45 percent to $1.91bn in Q1 2021, and declined further by 17.46 percent to $1.57bn in Q1 2022.
The report, which segmented foreign investment into three main investment categories – foreign direct investment (FDI), portfolio investment, and other investments – further disclosed that the largest amount of capital imported into Nigeria in Q1 2019 was through portfolio investment, which is the ownership of a stock, bond and other financial asset by foreigners.
It also showed that the banking sector dominated inflows into Nigeria, with Qatar and the United Kingdom responsible for most of the inflows into the country’s economy.
‘‘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 investment,” the report noted.
Foreign investment, according to Corporate Finance Institute, an online training platform for finance and investment professionals, is when the purchase or ownership of an asset by an investor in a foreign country involves cash flows moving from one country to another to execute the transaction.
Finance analysts assert that an increase in foreign investment is an integral part of an open and effective international economic system which promotes transfer of technology, creates and improves the purchasing power of Nigerians through job creation by foreigners, and consequently contributes to an overall boost in targeted industries and the economy as a whole.
However, the decline in foreign investment into Nigeria has been attributed to the spate of insecurity in the country, naira volatility, characterised by a wobbly foreign exchange market. In the same vein, analysts said the recent political climate relating to the forthcoming presidential election has made many foreign investors withdraw investments in the short run due to political uncertainty.