Revelations from a presentation by Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, have shed light on a concerning trend in the country’s foreign direct investment (FDI).
According to Edun’s presentation, FDI in Nigeria has seen a significant decline, plummeting from $22.7 billion in 2014 to a mere $3.7 billion in 2023. This staggering $19 billion drop over the span of a decade underscores the challenges facing Nigeria’s investment climate and economic stability.
This was revealed during a presentation made by Edun to top business leaders in Lagos, at the prestigious Lagos Business School Breakfast Club. The club, renowned for providing valuable insights into the business environment, offers a platform for C-suite executives to engage with key economic issues and government policies.
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At the presentation, Edun spoke about the key issues confronting the economy and what the government was doing about it. He emphasized the kernel of the Federal Government’s economic reforms, which aims to boost forex supply through increased FDI and Foreign Portfolio Investments.
In his presentation, Edun highlighted the significant fluctuations in Foreign Direct Investments (FDI) in Nigeria over recent years. In 2014, FDI stood at $22.7 billion but decreased sharply to $14.4 billion the following year and further declined to $10.4 billion in 2016. Subsequently, FDI continued its downward trend, dropping to $9.8 billion in 2017.
Although there was a slight increase to $11.9 billion in 2018, FDI fell once again to $9.2 billion in 2019. These fluctuations underscore the challenges faced by Nigeria in attracting and retaining foreign investment, reflecting both internal and external economic factors impacting investor confidence and decision-making.
According to Edun’s breakdown, FDI in Nigeria has been on a downward trend over the past decade. In 2014, FDI stood at $22.7 billion, but it witnessed a steady decline in subsequent years, dropping to $3.7 billion in 2023. This decline paints a grim picture of Nigeria’s attractiveness to foreign investors and underscores the urgent need for comprehensive economic reforms.
In addressing the challenges, Edun announced plans by the Federal Government to issue domestic bonds denominated in foreign currency in the second quarter of 2024. This move, aimed at attracting additional foreign exchange inflows to stabilize the country’s currency, underscores the government’s commitment to revitalizing the economy.
However, challenges persist in attracting foreign investors to Nigeria. Edun noted that rising inflation in Western countries and the need to keep interest rates high have dampened investor appetite for FDI. Consequently, the government may turn to domestic resource mobilization and the corporate sector for solutions and investments.
“Because of lack of faith in the currency, many have decided to try to hold and save in dollars,” he said.
“All the funds in the diaspora, we are targeting them. There are all these funds that you have brought into your (local foreign currency) accounts, we are targeting them”
Edun’s presentation was part of the monthly sessions organized by the Lagos Business School Breakfast Club, which provides an avenue for C-suite executives to gain access to high-quality intelligence about the operating business environment. These sessions offer valuable insights into current economic issues and government policies, facilitating informed decision-making among business leaders.
Despite the grim outlook, recent announcements by the Minister of Trade, Industry and Investment, Doris Uzoka-Anite, offer a glimmer of hope. Uzoka-Anite revealed that Nigeria secured investment commitments worth $30 billion within President Bola Tinubu’s first eight months in office.
“The Federal Government has secured an investment commitment of $30bn since we came into power eight months ago. It means the investors are going to bring in the money or a promise to bring in the investment. So the money, investment proposal, and every other thing is done,” Anite said during a press briefing organized by the Ministry of Information.
“Some have already started building and the investments will come in over five to eight years. Some of the monies will come in the form of equipment, and direct investments into manufacturing and the facilities. So that fund is here already.”
While these commitments represent promises from investors rather than immediate cash injections, they signal confidence in Nigeria’s economic potential. Anite further explained that the actual financial inflow from these investments would be spread out over five to eight years.
Additionally, she detailed that the investments would manifest in various forms, including investments in equipment and direct investments in manufacturing facilities. This suggests a long-term commitment from investors and underscores the potential for sustained economic impact from these investments beyond the initial influx of funds.
However, the sharp decline in FDI over the past decade is noted to underline the urgent need for comprehensive reforms to revitalize Nigeria’s investment climate. Against this backdrop, the government’s efforts to attract foreign investors and stimulate economic growth are critical for job creation, poverty reduction, and sustainable development.