Foreign capital inflows into Nigeria plummeted by 57.22 per cent to $770 million in April 2024, highlighting the country’s ongoing struggle to attract foreign investment. This figure is a significant drop compared to the same period last year.
According to the Central Bank of Nigeria’s April 2024 Monthly Economic Report, this represents a sharp decline from the $1.80 billion recorded in March 2024.
Factors such as political uncertainty and economic instability have contributed to this downtrend. The Central Bank’s tight monetary policy and the recent multiple exchange rate systems have also undermined investor confidence in entering the Nigerian market.
“A lower foreign capital inflow was recorded in the review period, occasioned by lower investments in money market instruments. Capital inflow into the economy fell to US$0.77 billion, compared with US$1.80 billion in March 2024,” the statement read.
This decline in capital inflows negatively affects the country’s ability to attract much-needed foreign direct investment, which is crucial for long-term economic development.
The significant drop in investor purchases of money market instruments was the primary reason for the decline in portfolio investment inflows, which fell to $330 million from $1.16 billion in March. Similarly, there was a reduction in other types of investment, particularly loans, with inflows dropping to $430 million from $620 million the previous month.
Foreign investment is essential for encouraging economic activity, providing job opportunities, and stabilising the foreign exchange market. Without an increase in foreign capital, Nigeria will face challenges in financing its budget deficit, completing infrastructure projects, and stabilising its currency.
Foreign direct investment (FDI) also saw a decline, plummeting from $20 million in March to $10 million in April, mainly due to reduced equity investments.
By composition, portfolio investments accounted for 42.71 per cent of the total inflows, direct investments made up a meagre 1.45 per cent, and other investments comprised a substantial 55.84 per cent.
A sectoral analysis of capital importation reveals that the banking industry attracted the largest share, accounting for 70.46 per cent of all inflows. The next most significant sectors were trade, with 12.89 per cent; manufacturing and production, at 5.77 per cent; telecommunications, at 4.94 per cent; and shares, at 4.35 per cent. The remaining investments were spread across other sectors.
Geographically, Lagos State received the majority of capital inflows, representing 83.13 per cent of the total, with the remainder directed towards the Federal Capital Territory.
Regarding the sources of capital inflows, the United Kingdom topped the list, accounting for 54.59 per cent of the total. This was followed by South Africa (13.22 per cent), Mauritius (9.22 per cent), the Netherlands (6.57 per cent), the United Arab Emirates (5.77 per cent), and the United States (3.44 per cent).
Given the declining foreign capital inflows, Nigeria must address both domestic and external challenges to attract more investment and ensure economic stability.
