Nigeria’s Foreign Direct Investment (FDI) for the second quarter of 2024 has dropped to $29.83 million, marking the lowest level recorded based on available data up to 2013. This is according to data from the latest capital importation report by the National Bureau of Statistics (NBS). The FDI figure represents a steep decline of 65.33% compared to the $86.03 million recorded in Q2 2023. It also shows a significant reduction of 74.97% from the $119.18 million reported in the preceding quarter, Q1 2024. Nigeria’s FDI includes equity and other capital. The majority of the FDI in Q2 2024 came from equity investment, amounting to $29.82 million. This represents a sharp decrease of 74.98% compared to $119.17 million recorded in Q1 2024. On a year-on-year basis, equity investment declined by 65.33% from $86.02m in Q2 2023. The other component of FDI, classified as “Other Capital,” recorded a minimal inflow of $0.0085 million in Q2 2024. This is down by 33.33% from $0.01275 million in both Q1 2024 and Q2 2023. Although this category traditionally accounts for a very small fraction of FDI, the decline indicates a further reduction in this already limited source of capital.
The decline in FDI highlights the challenges Nigeria faces in attracting long-term investment amid a challenging global economic environment and domestic issues. Despite the downturn in FDI, other forms of capital importation remained significant, with foreign currency loans accounting for a substantial portion. In Q2 2024, Nigeria recorded a total capital importation of $2.60 billion, of foreign currency loans, which include portfolio investments and direct loans, contributed $2.55 billion, representing 98.08% of the total inflows. This preference for loans over equity investments reflects investor caution, with foreign investors opting for safer financial instruments rather than committing to long-term projects. The reliance on foreign currency loans highlights the ongoing trend where short-term investments and debt instruments dominate Nigeria’s capital importation landscape.
While these inflows can provide immediate liquidity to the economy, they do not offer the same level of stability or growth potential as direct investments into physical assets or infrastructure. In Q2 2024, Nigeria experienced a significant decrease in both portfolio investments and foreign currency loans. Portfolio investments for Q2 2024 stood at $1.40 billion, marking a sharp decline of 74.97% from $5.60 billion recorded in the preceding quarter, Q1 2024, and a 65.33% drop compared to the $4.05 billion reported in Q2 2023. Similarly, foreign currency loans, which constitute a substantial portion of Nigeria’s capital importation, experienced a considerable downturn. The loans category recorded an inflow of $1.15 billion in Q2 2024, reflecting a 74.98% decrease from $4.60 billion in Q1 2024. When compared to the same period in the previous year, where loans amounted to $3.32 billion in Q2 2023, the decline was 65.33%. The decline in FDI presents a concern for Nigeria’s long-term economic prospects, especially as the country continues efforts to diversify its economy beyond oil and gas. FDI is often viewed as a stable source of capital that can drive job creation and infrastructure development.
The current figures, however, suggest that foreign investors remain wary of Nigeria’s investment climate due to policy uncertainty, security challenges, and shifting global economic trends. The Nigerian government has introduced various reforms to improve the ease of doing business, aiming to attract more foreign investment. Yet, the latest data suggests that these efforts have not yet translated into increased long-term capital inflows. Earlier this year, President Bola Tinubu revealed that within the first nine months of his term, his administration has successfully drawn $30 billion in Foreign Direct Investment (FDI) commitments, bolstering the Nigerian economy. Represented by the Minister of Information and National Orientation, Mohammed Idris, President Tinubu conveyed that, despite facing challenging times, the Nigerian economy is far from being in distress. However, so far, available data does not support the claim by the Nigerian president.
