The Federal Government’s revenue from Foreign Direct Investment (FDI) experienced a sharp decline in the second quarter of 2024, as highlighted by a report from the National Bureau of Statistics (NBS). This significant drop marks a concerning trend for Nigeria’s economy as the country grapples with declining investments.
Steep Decline in FDI Revenue
The NBS report revealed that Nigeria’s FDI revenue dropped to $29.83 million in Q2 2024, representing a 65.33% decline from the $86.03 million recorded during the same period in 2023. This figure also marks a 74.97% decrease from $119.18 million in the previous quarter (Q1 2024).
This is the lowest level of FDI recorded since 2013, underscoring the challenges facing Nigeria in attracting foreign investments.
Equity Investments: The Main Contributor
Most of the foreign direct investment in Q2 2024 came from equity, which contributed $29.82 million. This marks a steep decline of 74.98% compared to $119.17 million recorded in Q1 2024. Year-on-year, equity investment also saw a significant drop, declining by 65.33% from $86.02 million in Q2 2023.
The diminishing equity investments are a worrying signal of waning confidence in Nigeria’s economic and political landscape.
“Other Capital” Component of FDI
The “Other Capital” segment of FDI saw meager inflows, contributing just $0.0085 million in Q2 2024. This reflects a 33.33% decrease from the $0.01275 million recorded in both Q1 2024 and Q2 2023. These figures further demonstrate the reduced interest of foreign investors in sectors beyond equity.
FDI’s Share of Total Capital Importation
Foreign Direct Investment accounted for only 1.15% of the total capital importation into Nigeria, which amounted to $2.60 billion in Q2 2024. The majority of capital inflows came from foreign currency loans, which contributed $2.55 billion, making up 98.08% of the total.
Decline in Portfolio Investments and Foreign Loans
In addition to the drop in FDI, Nigeria also witnessed significant declines in both portfolio investments and foreign currency loans. Portfolio investments, a major driver of capital inflows in previous quarters, fell drastically to $1.40 billion, a 74.97% decrease from $5.60 billion in Q1 2024. Year-on-year, this represents a 65.33% decline from $4.05 billion in Q2 2023.
Similarly, foreign loans recorded a substantial decline, with inflows of $1.15 billion, a 74.98% decrease from $4.60 billion in Q1 2024.
Total Capital Importation: A Mixed Picture
Despite the drop in FDI and other forms of capital inflows, Nigeria’s overall capital importation showed an increase on a year-on-year basis. The country recorded $2.60 billion in Q2 2024, a 152.81% increase compared to the $1.03 billion recorded in Q2 2023. However, this figure represents a 22.85% decline from the $3.38 billion seen in Q1 2024.
Portfolio Investments Lead Capital Inflows
According to the NBS report, portfolio investments were the primary driver of capital inflows in Q2 2024, contributing $1.40 billion, which accounted for 53.93% of the total capital imported into the country. While this remains the dominant form of investment, the sharp declines indicate that Nigeria must address the underlying factors affecting investor confidence.
The Need for Economic Reforms
The sharp decline in FDI and portfolio investments highlights the urgent need for Nigeria to stabilize its economy and implement investor-friendly reforms. The government must work towards creating an environment conducive to foreign investments to avoid further drops in capital inflows, which are vital for economic growth and development.
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Written By Fortune Davidson