Capital inflows dip 23% versus H2 2021
By Jeph Ajobaju, Chief Copy Editor
Capital importation through portfolio investment, foreign direct investment (FDI), and other investments have declined 23 per cent, as gleaned from data compiled by the National Bureau of Statistics (NBS).
NBS figures show capital inflow into Nigeria amounted to $3.1 billion in the first quarter (Q1) and second quarter of this year (Q2 2022), less than $3.9 billion in Q3 2021 and Q4 2021.
This is an $810.5 million or 23 per cent decline in foreign investment in the first half of 2022 (H1 2022).
FDI – substantial investment beyond portfolio investments (stock market investments) and other investments like trade credits – was $760 million, only 10 per cent of $7 billion capital inflow in the period, according to The PUNCH.
Sheriffdeen Tella, a Professor of economics at Olabisi Onabanjo University (OOU), Ago Iwoye, Ogun State said poor economic policies and several problems in the manufacturing sector contributed to the decline.
“It means the economy is shrinking. The manufacturing sector is not doing well. So, the government has to look at its policies again,” he stressed.
“When capital inflow is reducing, there is a need for government to start seeing how it can change policies to encourage production. Part of the problem has to do with the exchange rate. The exchange rate is very high.
“Investors don’t have much confidence in the economy anymore. We have to change policies.
“That confidence in our economy is not there. There are also other variables which are obvious, like insecurity. The issue of repatriating their profits is also part of it.”
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Reason for portfolio investment
The percentage of portfolio investment “shows you that our stock exchange is performing very well – number four globally.
“People have more confidence in bringing in their money and investing portfolio and then withdraw it at the earliest opportunity,” Tella added, per The PUNCH.
Jonathan Aremu, a Professor of international economic relations at Covenant University, Otta, Ogun State argued that capital market investments are not a strong metric of foreign investment.
“Until they (foreign investors) come into the country and mount their machines here, then that is when we can say we are attracting Foreign Direct Investment. Portfolio investments are investments in the capital market.
“When the conditions are unfavourable the investor can pull out his money and leave anytime,” he said.