Nigeria, Africa’s largest economy, received a total of $5.97 billion in foreign investments in the first six months of 2024, according to a recent report by the National Bureau of Statistics (NBS).
However, while the overall inflows for the first half of the year are noteworthy, the second quarter saw a sharp decline compared to the first quarter.
The NBS report highlighted that capital importation in the second quarter of 2024 stood at $2.6 billion.
This is a drop of 22.85% from the $3.38 billion recorded in the first quarter of the year.
The decline in Q2 inflows signals some challenges Nigeria is facing in attracting steady foreign investments, especially as businesses grapple with the country’s economic uncertainties.
Despite the quarter-on-quarter decline, when compared to the same period last year, capital importation showed significant improvement.
The $2.6 billion recorded in Q2 2024 was a remarkable 152.81% increase from the $1.03 billion that came into the country in Q2 2023.
This year-on-year growth reflects some investor confidence in Nigeria’s long-term potential, even though the country is facing economic hurdles.
Economic experts say that while the Q2 inflow decline is concerning, the Nigerian government still needs to implement more investor-friendly policies.
“Nigeria has great potential, but foreign investors are being cautious because of the country’s unpredictable currency, high inflation, and rising cost of energy,” said a Lagos-based economist.
To attract more foreign investments, the Central Bank of Nigeria (CBN) has been implementing aggressive monetary policies.
One of the CBN’s key strategies has been to raise the benchmark interest rate, which now stands at 27.25%.
This move, while aimed at stabilizing the economy and making Nigerian assets more attractive to foreign investors, has also placed a strain on local businesses.
“The high interest rates are a double-edged sword,” noted another financial analyst. “While it might bring in short-term portfolio investments, it is making it harder for Nigerian companies to access affordable loans and expand their operations.”
The report by the NBS provided a detailed breakdown of the types of foreign investments that came into the country in Q2 2024.
Portfolio investments topped the list, with $1.4 billion, making up 53.93% of total inflows.
This form of investment, which is typically short-term, involves foreign investors buying stocks, bonds, and other financial assets in Nigeria.
Other investments, including loans and other financial transactions, followed closely, recording $1.1 billion, which accounted for 44.92% of the total inflows.
Foreign Direct Investment (FDI), which represents long-term investment in the form of physical assets and businesses, lagged significantly behind.
In Q2, Nigeria attracted only $29.83 million in FDI, which represented a mere 1.15% of the total capital importation for the period.
Many businesses in Nigeria, particularly in sectors such as manufacturing and agriculture, are in need of significant capital to expand and create jobs.
However, the current economic environment has made it difficult for the country to attract substantial foreign investors looking for long-term opportunities.
The NBS report also highlighted which sectors of the Nigerian economy attracted the most foreign investments during the second quarter of 2024.
The banking sector led the way, receiving $1.12 billion, which represented 43.15% of the total capital importation.
This was followed by the production and manufacturing sector, which attracted $624.71 million in foreign inflows.
The trading sector also performed well, recording $569.22 million in foreign investments.
These figures underscore the importance of the financial, manufacturing, and trading sectors to Nigeria’s overall economy.
However, experts have called for more attention to be given to other critical sectors like agriculture and infrastructure, which can drive more inclusive growth and development.
