Nigeria’s economy is suffering from multiple stress points, including low industrial output, rising inflation, reduced crude oil earnings, mounting indebtedness and insecurity. This is aggravated by declining Foreign Direct Investment, with a new report revealing that FDI fell by $470 million in the past five years. That is a recipe for economic peril and the Bola Tinubu administration must do all it can to reverse the trend.

Between April and June 2023, FDI inflow into Nigeria stood at $86.03 million, an improvement in the figure of $47.6 million on the first quarter, Statista says. In Q3 2023, the National Bureau of Statistics reported total capital importation into the country at $654.65 million, lower than $1.15 billion recorded in the same period in 2022. This is a decline of 43.55 per cent. In comparison to the preceding quarter, capital importation fell by 36.45 per cent from $1.03 billion in Q2 2023.On a year-on-year basis, there was a substantial 69 per cent decrease.

According to Statista, FDI inflows into Nigeria registered a decrease of around $190 million in 2022, compared to a surplus of $3.31 billion in the preceding year. In 2011, a peak of $8.84 billion was achieved, indicating a steady decline since then.

In the past, FDI inflow to Nigeria was encouraging. However, in recent years, the inflow has declined, falling constantly since Q4 2021. This coincides with repeated insecurity, energy issues, election uncertainties and poor ease-of-doing business climate.

In Q4 2014, Nigeria experienced an FDI inflow of $491 million. Since then, the pattern has been characterised by fluctuations. There has been a steady decline in the FDI inflow to the country, with the Q1 2023 figure the lowest in nine years. Bloomberg attributed the decline to multiple exchange rates and the central bank’s rationing of dollars, among others. The IMF highlighted the complex exchange rate policy and multiple exchange rates as some factors affecting the inflow of FDI to the country.

But President Bola Tinubu, through the CBN, merged the naira exchange rates in June, shortly after assuming office.

Nigeria’s FDI registered a growth equal to 0.6 per cent of the country’s nominal GDP in December 2022, compared with a growth equal to 0.4 per cent in the previous quarter.

Data from the USDA and Economic Research Service calculations using the World Bank Group Harmonised Bilateral FDI Database (2021) stated that among the top 30 African destinations for FDI, the countries with the largest average annual FDI stock values were Mauritius, South Africa, Nigeria, and Egypt. On the back of reforms, Ghana’s FDI was $3.3 billion in 2018, compared to Nigeria’s $2.2 billion, per UNCTAD.

All these indicate that investors perceive Nigeria’s economic conditions as unattractive due largely to widespread corruption, political instability, lack of transparency, insecurity, import restrictions and shabby infrastructure. In the past three years, 15 multinational companies have quit Nigeria, citing mainly the depreciation of the naira and an unfriendly business environment, the Nigerian Employers’ Consultative Association said.

The United States ($388 million), China ($180 million), Singapore ($140 million), Hong Kong ($120 million) and France ($105 million) were the top five global FDI recipients in 2022, per Vancouver-based Venture Capital.

FDI makes significant contributions to the host country’s development process, especially through easing the constraints of low levels of domestic savings and investment, as well as foreign exchange shortages. It increases the gross domestic product and generates a stream of real income in the host country.

For Nigeria to attract more FDI, the Tinubu administration must halt the current drift of many multinationals leaving Nigeria, solve the foreign exchange rates conundrum, tackle inflation, restore the economy and decisively solve the problem of insecurity ravaging many parts of the country.

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