The latest capital importation report reveals a decline in the number of Nigerian states attracting foreign investments to a three-year low in Q4 2023, with only four states receiving foreign capital, highlighting challenges including rising inflation, foreign exchange crises, and insecurity.
BusinessDay’s data analysis reveals a decline in the number of Nigerian states attracting foreign investments in the fourth quarter of 2023, reaching the lowest point in almost three years.
The National Bureau of Statistics (NBS) latest capital importation report indicates that only four out of the 36 states in the country received foreign capital in Q4, down from six in the previous quarter. This number had peaked at nine in Q1 before dropping to five in Q2.
Lagos, Abuja, Ekiti, and Rivers collectively attracted $1.09 billion in the final quarter of the year, according to NBS figures.
Damilare Asimiyu, a macroeconomic strategist and head of investment research at Afrinvest West Africa Limited, expressed concern over the shrinking number of states attracting investments, attributing it to the perceived risk level of the market.
He remarked, “Foreign investors are opting for economically viable states with lower insecurity and higher average citizen per capita income.”
Okafor Tochukwu, a lecturer at Global Banking School, Stratford, London, attributed the reduction in foreign investments to rising inflation, foreign exchange challenges, and insecurity, noting a decrease in investments even in Abuja due to security concerns.
The NBS report detailed that total foreign investments in states in Q4 amounted to $1.08 billion, marking a 67.7% increase from $654.6 million in the previous quarter.
Other components of capital importation included $627.4 million from other equity, $474.1 million from bonds, $428.9 million from money market instruments, $65.9 million from other claims, $1.91 million through currency deposits, and $51,000 from other capitals.
“The production/manufacturing sector recorded the highest inflow with $450.1 million, representing 41.4% of total capital imported in Q4, followed by the banking sector, valued at $283.3 million (26.0%), and financing with $135.6 million (12.5%),” the report stated.
Investments from the United Kingdom led the capital inflows, contributing $267.2 million (24.55% of the total), followed by Mauritius with $226.18 million (20.78%), and the Netherlands with $149.93 million (13.77%).
Stanbic IBTC Bank Plc received the highest capital importation into Nigeria of $499.5 million, followed by Citibank Nigeria Limited ($229.1 million) and Rand Merchant Bank Plc ($85.9 million).
Israel Odubola, a Lagos-based research analyst, highlighted the economic viability decline of states not attracting investments and the weaker confidence in the overall economy.
Uchenna Uzo, a professor of marketing at the Lagos Business School, suggested that states not attracting investments should learn from those that did, emphasizing the need for partnerships and creating a more enabling environment to attract investments.
President Bola Tinubu’s actions, including the removal of petrol subsidy and foreign exchange reforms, initially stoked foreign investors’ interest. However, these reforms have worsened inflation, currently in double-digits, and the rising inflationary pressures have weakened consumer purchasing power and increased operating costs for businesses.
CSL Research analysts noted that concerns such as poor institutional development, property rights issues, policy inconsistencies, multiple exchange rates, forex scarcity, security concerns, and structural challenges have dimmed investor confidence, hindering foreign investments inflow. They do not anticipate an increase in FDIs and FPIs in the short to medium term.
FAAC data shared last week showed a total of N16.04 trillion allocated to the three tiers of government in 2023, a 37.3% increase from N11.7 trillion in the previous year.
