The Central Bank of Nigeria has revealed that foreign firms repatriated $5.86 billion from the Nigerian economy during the period between October 2022 and March 2023.
This disclosure comes from the bank’s latest ‘Economic Report, First Quarter 2023.’
The majority of these repatriated funds, approximately $5.13 billion, took the form of dividends paid to foreign investors.
However, this surge in dividend payments to non-residents has led to an expansion of the deficit in the primary income account, which reached $2.69 billion in Q1 2023, up from $2.26 billion in Q4 2022, according to the report.
The primary income account encompasses the compensation of employees and investment income. As the Quarterly Statistical Bulletin (Volume 11, Number 3, September 2022) explains, investment income includes profits, interest, dividends, royalties, and other income received by or paid to both direct and portfolio investors.
It can also comprise interest and commitment charges on loans (Other Investment Income).
Breaking down these figures, the Central Bank stated that the primary income account deficit expanded by 18.7%, largely due to a 34.9% increase in investment income payments to $3.09 billion, up from $2.77 billion in 2022Q4.
Direct investment income in the form of dividends saw a 12.1% increase to $2.71 billion, compared to $2.42 billion in the previous quarter.
Similarly, interest payments on portfolio investments rose to $0.09 billion, up from $0.05 billion in 2022Q4, while interest earnings on reserve assets increased by 35.7% to $0.20 billion, up from $0.15 billion in 2022Q4.
In contrast, interest payments on loans declined slightly by 0.7% to $0.30 billion.
The compensation of employees’ account, on the other hand, remained in a surplus position, rising by 6.2% to $0.06 billion in comparison to the previous quarter.
A 2019 report titled ‘Current Account Balance and Economic Growth in Nigeria: An Empirical Investigation’ highlights that the primary income account has consistently shown a deficit due to increased debt service payments and repatriation of dividends, income, and profits by foreign-owned companies.
This outflow of funds has been a hindrance to the development of the Nigerian economy, diverting foreign exchange resources that could be used for growth and development.
The report notes that profits that should be reinvested for economic growth are being sent overseas by foreign-owned companies operating in Nigeria.
In recent years, there has been a reduction in the net deficit in the income account due to lower outpayments of dividends and distributed branch profit and other interest payments.
A recent report highlighted that foreign airlines managed to repatriate $4.66 billion from Nigeria through ticket sales over 15 months.
However, these airlines still faced challenges in accessing their funds due to the scarcity of foreign exchange supply in the country.
President Bola Tinubu, in his inaugural address, pledged to address these issues, stating, “I have a message for our investors, local and foreign: our government shall review all their complaints about multiple taxation and various anti-investment inhibitions. We shall ensure that investors and foreign businesses repatriate their hard-earned dividends and profits home.”
