The $1.088.48 million Nigeria’s capital importation for the 4th quarter of 2023 has been described as a drop in the ocean by economic analysts.
This is even as the International Monetary Fund (IMF) has warned that Nigeria’s inflation rate could soar to an unprecedented 44 percent if the Central Bank of Nigeria (CBN) fails to tighten its monetary policy significantly.
The National Bureau of Statistics (NBS) had yesterday in its fourth quarter 2023 Nigeria’s Capital Importation report said the nation was able to attract $1,088.48 million in the fourth quarter of 2023. This figure is 2.62 percent higher than the $1,060.73 million recorded in Q4 2022 and 66.27 percent higher than the $654.65 million in the third quarter (Q3) 2023.
Capital importation is foreign investments in a country’s economy and is made up of Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), and other investments like trade credits, loans, and currency deposits.
The report shows that other Investment ranked top accounting for 54.64 percent ($594.74 million) of total capital importation in Q4 2023, followed by Portfolio Investment with 28.46 percent ($309.76 million) and Foreign Direct Investment (FDI) with 16.90 percent ($183.97 million).
According to the report, the production/manufacturing sector recorded the highest inflow with $450.11 million, representing 41.35 percent of total capital imported in Q4 2023, followed by the banking sector, valued at $283.30 million (26.03 percent), and financing with $135.59 million (12.46 percent).
“Capital Importation during the reference period originated largely from the United Kingdom with $267.24 million, and recorded 24.55 percent share. This was followed by Mauritius with $226.18 million (20.78 percent) and the Netherlands with $149.93 million (13.77 percent).
Lagos state as usual maintained its position as the top destination in Q4 2023 with $771.68 million, accounting for 65.38 percent of total capital importation, followed by Abuja (FCT) with $370.80 million (34.07 percent) and Rivers state with $6.00 million (0.55 percent).
However, the Chief Executive Officers of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf said for a country that it’s monthly forex demand is close to $2 billion, the $1.088 billion generated in a quarter is like a drop in the ocean.
In his words, “The capital inflows is still a drop in the ocean given the type of economy we have, that is why it is not reflecting. Our monthly forex consumption is close to $2 billion. So that $1.088 billion is peanuts, it cannot reflect on the economy.”
He said the country can do better by investing more in production so that it can export and earn more forex. “Again we also need to make the business environment more friendly to attract investors,” he said, adding that it is not surprising that Lagos State is leading other states as the top investment destination because Lagos is the headquarters of the services sector.
On his part, Mr. Eze Onyekpere, a fiscal governance expert, said It is not about how much the President spends or how many trips he makes overseas begging people to come and invest in Nigeria.
“It is about the macro-economic fundamentals and dynamics which information is available to every businessman in Europe, America or Asia,” he said.
“What we need is to improve the fundamentals and improve the security situation. They all have embassies here in Nigeria which give them reports of what is going on here. It is a waste of resources going about looking for investors when those here are closing shops.”
He also said it is false information to say that Lagos State has been the most attractive to investors. According to him, “What is Lagos State doing differently to attract investors that other states are not doing. The only reason is that Lagos haven been a former capital of Nigeria, is also home to the head offices of most banks and even the Nigerian Stock Exchange where portfolio investors go.
“When capital importation comes to the banks, it goes to their head office, and most of them are in Lagos. It is the same thing with the Federal Capital Territory ( FCT), when Nigeria secures a loan and it is drawn down, it is recorded as capital importation, it comes to FCT.”
Meanwhile, in its recent post-financing assessment report concerning Nigeria, the International Monetary Fund (IMF) has painted a grim picture of the nation’s economic future, predicting a 44 percent rise in inflation.
This alarming inflation rate is projected under a scenario where the naira continues to face severe pressures, compounded by the potential impact of a climate shock hitting the country early in 2024.
The report outlines a concerning sequence of events where the combined effects of insufficient monetary tightening, persistent pressure on the naira, and adverse climate conditions could severely disrupt Nigeria’s economic stability.
The IMF forecasts a possible 35 percent depreciation of the naira in 2024, further exacerbating the inflationary pressures.