By Jeph Ajobaju, Chief Copy Editor
Lagos received $1.58 billion to top foreign capital investment in the first quarter of 2021 (Q1 2021) when 29 other states were out in the cold as the pandemic still took its toll amid underlying negative factors such as harsh policies and high inflation.
Abuja came second with $318.4 million, followed by Anambra ($4.1 million), Kano ($2.4 million), Delta ($1 million), Ogun ($757,187), Akwa Ibom ($737,505), and Kwara ($229,015), according to latest data from the Central Bank of Nigeria (CBN).
Worldwide economic slide caused by coronavirus reduced Nigeria’s foreign capital inflow to $9.7 billion in 2020, down from $24 billion in 2019, a 59.7 per cent slash and the lowest in four years.
Only 11 states got foreign investment in 2020; just eight did in half year 2021 (H1 2021). States are not likely to see major improvement in capital importation if insecurity is not tackled, per Nairametrics.
President Muhammadu Buhari reiterated in his interview with Arise Television on June 10 that insecurity and violent protests discourage investment in Nigeria.
Insecurity under Buhari’s watch has got worse in recent months with cries of self-determination in different sections of the country.
Banditry, herdsmen and farmer clashes have also led to increase in kidnappings, lootings, and killings, further deterring foreign investors.
Another major issue is foreign exchange (forex) challenges which have resulted in a wide disparity between official I&E window and parallel market rates.
According to Nairametrics, the difference, which is as high as N90/$1, is a major hinderance to foreign investors flocking back into Nigeria even with oil prices rebounding.
Foreign portfolio investors are wary of returning in the current situation.
Fixing macroeconomic failures
A lecturer and consultant at Covenant University, Jeremiah Ejemeyovwi, insisted that more international investment is needed to solve core macroeconomic vulnerabilities.
“Foreign investment reflects the foreign sector’s assessment of a country’s economic health. Nobody wants to make foreign investments in a country that lacks currency stability, is unpredictable, and has a high risk of losing money owing to inflationary consequences,” he told Nairametrics.
“Therefore, currency stability, inflation, and security (rule of law) are what would make Nigeria an enticing investment destination for foreign investors.”
Udegbunam Dumebi, a fixed income trader at UBA, agreed that fixing basic macroeconomic failures are important, but even with that, Nigeria should entice more foreign direct investment when seeking foreign inflows because hot money may not be sustainable.
He told Nairametrics: “To entice foreign investment, we must enable a free flow of currency, improve security, and increase the ease of doing business in Nigeria. We have many restrictive rules and inadequate infrastructure that dissuade investors, such as high power or transportation costs.
“Raising interest rates in the NTB, bond market, and even the MPR will not make a difference in addressing sustainable growth.
“This is due to the fact that foreign portfolio investments (Hot Money) rarely invest in the core Nigerian economy, preferring to invest in stocks and fixed income instead.
“As a result, it would be more advantageous for Nigeria to seek more foreign direct investment in order to increase foreign inflows.”