Nigeria, Africa’s most populous nation, experienced a significant setback as capital inflows recorded a notable decline of 28% in the first quarter of 2023 to $1.1 billion, according to the latest data released by the National Bureau of Statistics.
The largest share of capital importation came from portfolio investors, constituting 57.3% of the total. “Other investment” accounted for 38.31% while foreign direct investment made up only 4.2%.
The report shows that the United Kingdom is the mean source of capital inflows and contributed 59.5% of the total capital imported in the quarter. The United Arab Emirates and the United States followed with 9.6% and 8.4%, respectively.
The decline in foreign investment inflows reflects the persisting challenges faced by Nigeria over the past years as factors such as strict capital controls, rising insecurity, and inadequate infrastructure have deterred external investors from entering the market.
However, a glimmer of hope emerges as the new government, led by Bola Tinubu, takes proactive measures to revive the economy and boost capital inflows.
Tinubu’s administration has made significant strides by eliminating the fuel subsidy that gulped about $10 billion last year and immediately replaced the controversial central bank governor while foreign-exchange controls have been relaxed, and an extensive overhaul of the nation’s chronically inadequate power industry has been initiated.
These recent government initiatives aim to create a more favorable investment climate and reignite investor confidence in Nigeria. While the first-quarter decline in capital inflows is concerning, the government’s proactive approach and efforts to address longstanding issues are expected to yield positive results in the long run.
