Insecurity and lingering foreign exchange crisis have forced the capital importation into Nigeria to decline further by 23 per cent,
Capital Importation measures the aggregate of foreign investments into an economic entity within a given period. It is divided into portfolio investments, other investments and Foreign Direct Investments.
According to data collated from separate reports by the National Bureau of Statistics, capital inflows into Nigeria in the first and second quarters of 2022 stood at $3.1bn, while the sum of $3.9bn came into the country by way of Capital Importation in the third and fourth quarters of 2021.
This represents an $810.5m decline in foreign investments, and a 23 per cent decline of inflow recorded within the past year.
Also, findings by our correspondent showed that FDI, which refers to substantial investments in an economy beyond portfolio investments (stock market investments) and other investments like trade credits stood at $760m, only 10 per cent of the capital inflow ($7bn) in the period in review.
Speaking exclusively on the factors that have led to the decline in capital importation into the country, a professor of Economics at Onabisi Onabanjo University, Sheriffdeen Tella, said poor economic policies and the several problems bedeviling the manufacturing sector had contributed primarily to the decline.
He said, “It means the economy is shrinking. The manufacturing sector is not doing well. So, the government has to look at its policies again. 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.”
He further stated that other factors such as the heightening insecurity crisis in the country had dissuaded potential investors from coming into the country.
On the percentage of capital recorded in portfolio investments, Tella said, “That 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.”
Also speaking in an earlier interview with a Professor of International Economic Relations at Covenant University, Jonathan Aremu, said capital market investments did not constitute a strong metric to measure foreign investments.
“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,” Aremu said.
