National Bureau of Statistics, NBS, has reported a drop in the foreign direct investment in the country by 48% in just two years.
The Foreign Direct Investment (FDI) in Nigeria slid by $325.82m in two –year. The NBS attributed it to unfavourable government policies and the unstable exchange rate.
According to capital importation reports by the NBS, in the first nine months of 2019, the FDI contributed a total of $666.33m to aggregate capital inflow.
However, when compared to the same period in 2021, it was observed that the FDI fell to $340.52m, representing a decrease of 48.9 per cent.
The FDI refers to an investment in the form of controlling ownership in a business in one country by an entity based in another country.
It is one of the major channels of generating capital inflows into Nigeria alongside Foreign Portfolio Investment.
A breakdown of the FDI in 2019 shows that in the first quarter of the year, the FDI stood at $243.3bn but began to fall in subsequent quarters, $22.89m in Q2 and $200.08m in Q3.
While the FDI fell in 2021, a close look at foreign investment flows in 2020 shows that despite the heavy impacts of the COVID-19 pandemic during 2020, the FDI rose to $777.63m at the end of the first three quarters of the year.
However, in the first quarter of 2021, the FDI fell to $154.76m and tumbled further to $77.97m in Q2, the lowest in about 11 years.
In Q3 2021, the FDI remained below $200, rising marginally to $107.8m.
Speaking on drop in FDI into the country, an economist, Muda Yusuf, linked the decline to foreign exchange instability and unfavorable policies.
He explained that several sectors of the economy failed to attract FDI due to the lack of essential infrastructure required for production.
He said, “The first issue is the foreign exchange policy because if you have a country where bringing in your money is an issue because of disparity in the value of the exchange rate, you won’t be encouraged to invest.
“Also, the investors consider the challenge associated with taking their profits out of the country after they have invested. Sometimes they need to import some raw materials and at such points go through so much difficulty, adding that, if there are too many hurdles and uncertainties around the forex area, it will definitely affect FDI”