Foreign Direct Investment (FDI) inflows into Nigeria will likely remain low if decisive steps are not taken to tackle the country’s structural and infrastructural challenges, analysts at Coronation Merchant Bank said in a report released at the weekend.
The analysts, who stated this while commenting on the National Bureau of Statistics (NBS’) recently released report on capital importation for Q3’21, noted that although the total value of capital imported in Q3‘21 was estimated at $1.7 billion, representing an increase of 98 per cent q/q and 18 per cent y/y, FDI inflow accounted for just six per cent of total capital importation during the period.
Noting that portfolio investment accounted for the largest share – 70 per cent – of total capital importation in Q3’21, with money market instruments accounting for 65 per cent of total portfolio investments, the analysts pointed out that demand for equities was low during the period as the asset class accounted for just five per cent ($57 million) of total portfolio investments.
The analysts stated: “The challenging macroeconomic landscape impacted the performance of the equities market, as the Nigerian Exchange Group All Share Index (NGX-ASI) posted a negative return of -5.9 per cent in H1 ‘21.
Foreign direct investment (FDI) inflow grew by 38 per cent y/y to $108 million, but posted a q/q decline of -74 per cent y/y. “FDI inflow accounted for just six per cent of total capital importation in Q3‘21. Until definitive steps are taken to address Nigeria’s structural and infrastructural challenges, FDI inflow will likely remain relatively low.”