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Why Nigeria must accelerate efforts in attracting FDIs

As the Nigerian economy gradually recovers from recession and the effects of COVID-19 pandemic, the federal government has made several policies geared towards diversifying the…

As the Nigerian economy gradually recovers from recession and the effects of COVID-19 pandemic, the federal government has made several policies geared towards diversifying the economy and boosting growth. 

However, one of the critical areas of note according to analysts is the need to intensify efforts in attracting Foreign Direct Investments (FDIs) into Nigeria as it plays a key role in driving economic growth.

Although recent statistics showed that FDIs into Nigeria recorded positive growth in the second quarter of 2022 compared to the figures recorded in 2021, the statistics showed that it declined quarter on quarter, indicating a need for improvement.

According to the National Bureau of Statistics, foreign funds invested into the Nigerian economy in the second quarter (Q2) of 2022 amounted to $1.535 billion, a 75.34 per cent increase from $875 million in the second quarter of 2021.

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However, on a quarterly basis, foreign investments in the country were down by 2.40 per cent from $1.573 billion in the first quarter of 2022.

The NBS revealed that states that the largest amount of capital received was through portfolio investment, which accounted for 49.33 percent ($757.32 million).

This was followed by other investments with 41.09 per cent ($630.87 million) and FDI accounting for 9.58 per cent ($147.16 million) of total capital imported in Q2 2022.

“Disaggregated by sectors, capital importation into banking had the highest inflow of $646.36 million, accounting for 42.10 per cent of the total capital import.

“Capital imported into the production sector was next at $233.99 million (15.24 per cent), and the financing sector followed with $197.31 million (12.85 per cent).

“By destination of investment, Lagos State remained the top destination in Q2 2022 with US$1,054.18 million, accounting for 68.66 per cent of total capital investment into Nigeria.

“This was followed by investment into Abuja (FCT), valued at $453.95 million (29.57 per cent),” the NBS report said.

With a quarter on quarter drop, analysts on different fora are cautioning that heightened insecurity especially in the North West and South East parts of Nigeria as well as the increased monetary policy rates may worsen the situation in the coming days.

NIPC approach 

However the Nigerian Investment Promotion Commission (NIPC) is flaying those fears, saying Nigeria has numerous prospects of attracting FDIs especially in 2023.

Executive Secretary and Chief Executive Officer of NIPC, Hajiya Saratu Umar, at a recent stakeholders’ engagement for the ministries, departments and agencies, said the commission has already identified a strategy that has been integrated into Nigeria’s investment master plan.

She said the master plan is crucial because Nigeria has huge potential yet untapped.

She noted that with over 200 million people, making it the most populous nation in Africa, Nigeria is blessed with natural resources, including arid land, crude oil and solid minerals, admitting that more can be used to exploit the potential.

She said, “This potential has not been fully harnessed. Hence the situation we find ourselves in today.”

She said the reality was that the level of resource mobilisation was insufficient for inclusive growth, noting that this was why investment promotion was needed to attract FDIs and mobilise local direct investments to fully harness the potential of the Nigerian economy.

“Global FDI market over the last decade has become very competitive and versatile where the investment promotion thrust of successful jurisdictions that are attracting the largest global market share of FDI inflows are driven by effective, efficient and performance-driven Investment Promotion Agencies.

“In 2021, a UN report noted that FDI inflow into Africa grew by 147 per cent. This accentuated the race by African economies to showcase their investment climate reforms and business-friendly policies, facilitated by very competitive IPAs that are aggressively vying for a greater share of the inbound investment.

“The emergence of the AfCTA as well as shifts in the ECOWAS Investment Protocol and the development of the national development plan, the Nigerian integrated infrastructure master plan and others require that the central and strategic role of the NIPC in the coordination of all investment promotion should be activated. 

“This is to ensure Nigeria’s investment promotion drive is given traction to onboard investments into the different sectors of the economy in a bid to facilitate economic growth and national development including job creation, import substitution, foreign exchange generation and reduction of our reliance on debt among others,” the NIPC boss said.

Saratu said with over 170 investment promotion agencies worldwide competing to channel FDI to their different countries, the NIPC was positioned to cut its slice of global investments.

“Consequently, it has become necessary for all stakeholders in the investment promotion ecosystem to work in synergy and complement our mandate and competencies to collectively drive a national investment promotion campaign,” she said.

The NIPC boss stressed the need to maximise Nigeria’s domestic and foreign investment potential, especially with the coming of the African Continental Free trade Area.

Expert reacts 

In a chat with Daily Trust, a finance expert, Prof. Uche Uwaleke, said for Nigeria to achieve its needed investment drive, there must be a synergy between the fiscal and monetary authorities 

He said, “Investment promotion cannot be left to only the agency in charge. It involves all the stakeholders involved in the economy, including the Central Bank of Nigeria, the Ministry of Finance and the Ministry of Industry, among others.”

He added that Nigeria must also tackle the macroeconomic headwinds of high inflation and currency volatility while addressing and importantly improving production.