…inflows lowest in 10 years
The naira float policy of the Federal Government of Nigeria, which was implemented immediately after President Tinubu was sworn in, failed to attract foreign investments as the total foreign direct investments into Africa’s largest economy fell to $3.7 billion in 2023.
It should be noted that with the naira float policy implemented by the Tinubu-led FG, the nation’s currency, the naira, depreciated against major international currencies such as the US dollar, falling from about N460/$ in May 2023 and gradually to about N1000/$ by December 2023, making investing in Nigerian cheaper and more attractive to investors.
Notwithstanding, this competitiveness was not reflected in the FDI inflows into the country in 2023.
According to Olawale Edun, Minister of Finance and Coordinating Minister for the Economy, the 2023 FDI inflow was the lowest since 2014. He made the remark at the Lagos Business School Breakfast Club where he stated that in 2014, Nigeria attracted $22.7 billion as FDIs into the country.
The FDIs into the country in 2015 fell by 37 percent to $14.4 billion. It further fell by 28 percent to $10.4 billion in 2016. With another decline of 6 percent, FDIs into the country fell to $9.8 billion in 2017.
There was a respite in 2018, when FDIs into the country rose by 21 percent to $11.9 billion. However, that trend was not sustainable as it further fell to $9.2 billion in 2019.
Surprisingly, in 2020, the year of Covid 19, where major economies were on lockdown for about six months, Nigeria’s FDI inflows rose by 11 percent to $10.2 billion.
In 2021, it declined by 32 percent to $6.9 billion. FDIs into Nigeria recorded another decline of 33 percent in 2022 to $4.6 billion, and with additional decline of 20 percent, FDI inflows into Nigeria recorded its lowest point in a decade as it declined to $3.7 billion in 2023.
The consistent fall in FDI into Nigeria may not be unconnected with the structure of the Nigerian economy, which is dominated by agriculture and services.
According to the World Bank, in 2022, the five largest investment projects were announced in semiconductors, as a response to shortages of semiconductors in 2021 and 2022.
“The 2022 decline in FDI flows was driven mostly by financial transactions of multinational enterprises (MNEs) in developed economies, where FDI fell by 37 per cent to $378 billion. The number of actual greenfield and project finance announcements increased by 5 per cent.
“The FDI increase in developing countries was unevenly shared. Much of the growth was concentrated in a few large emerging economies. FDI in Africa fell back to the 2019 level of $45 billion after anomalously high levels in 2021 caused by a single financial transaction.
“Greenfield project announcements increased by 39 per cent, and international project finance deals by 15 per cent. The energy sector, both extractives and energy generation, saw the biggest increase,” the World Bank stated.
The World Bank added that three of the five largest investment projects were announced in semiconductors, in response to global chip shortages. Investment in digital economy sectors slowed after the boom in 2020 and 2021.
