Nigeria’s capital importation in the second quarter of 2024 fell by 22.85%, from $3.37 billion in the first quarter to $2.60 billion, belying President Bola Tinubu’s claim that his administration attracted $30 billion in foreign investments in its first year.
This assertion was a central part of Tinubu’s Independence Day address, where he boasted about the positive impact his administration has had on the economy and foreign investment inflows.
However, the National Bureau of Statistics (NBS) Capital Importation report for Q2 2024 paints a different picture, highlighting challenges in sustaining investment growth. The NBS report indicates that the capital inflows recorded in Q2 2024 tell a more nuanced story that includes the lackluster performance of FDIs, which contrasts sharply with Tinubu’s narrative of a $30 billion foreign investment influx.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
Year-on-Year Improvement but Quarterly Decline
Although capital importation in Q2 2024 rose by 152.8% year-on-year, from $1.03 billion in the same period in 2023 to $2.60 billion, the 22.85% drop compared to Q1 of 2024 suggests that sustaining momentum is proving difficult.
In terms of the composition of capital imports, Portfolio Investment was the leading category in Q2 2024, contributing $1.40 billion or 53.93% of the total inflows. This is followed by Other Investments, which accounted for $1.17 billion or 44.92%. Meanwhile, Foreign Direct Investment (FDI), which is considered a more stable and long-term form of capital, remained low at $29.83 million, representing just 1.15% of total capital importation.
The dominance of Portfolio Investments highlights the fact that investors continue to prioritize short-term, lower-risk financial instruments, such as money market securities and bonds, over long-term commitments to the Nigerian economy. This trend raises concerns about the sustainability of foreign capital inflows and the real economic impact of these investments.
Breakdown of Portfolio Investments
Money market instruments attracted the largest share of Portfolio Investments in Q2 2024, with inflows of $1.07 billion, accounting for 76.6% of the total portfolio investments. Equities received just $149.93 million, making up 10.67% of the total. Investments in bonds contributed $177.79 million or 12.6% of the total.
However, the report also highlights a quarter-on-quarter decline in capital imports into both bonds and money market instruments. Foreign capital inflows into bonds decreased by 57.75%, while investments in money market instruments dropped by 32.92% compared to Q1 2024. This decline reflects the cautious approach that investors have adopted, likely in response to market volatility and concerns about the macroeconomic environment.
FDIs have struggled in recent quarters due to Nigeria’s elevated Monetary Policy Rate (MPR), which has siphoned capital into safer, short-term financial instruments, rather than promoting investment in the real economy.
Analysts describe the low FDI figures as ‘particularly concerning,’ as this form of investment is crucial for long-term economic growth and job creation. FDI tends to be more stable and reflects a commitment to building physical assets, such as factories or infrastructure, which have lasting benefits for the economy.
Capital Importation by Sector
In Q2 2024, the banking sector recorded the highest capital importation, attracting $1.12 billion or 43.15% of total inflows. The sector has consistently led in foreign capital inflows in recent quarters, as investors have shown confidence in Nigeria’s financial institutions.
The Production/Manufacturing sector followed with $624.71 million or 23.99% of total capital importation, while the Trading sector attracted $569.22 million or 21.86%. These sectors reflect areas where foreign investors still see potential despite the broader economic challenges facing Nigeria.
Sources of Foreign Capital
The United Kingdom remained the largest source of capital imports into Nigeria in Q2 2024, contributing $1.12 billion or 43.01% of total inflows. This was followed by the Netherlands with $577.82 million or 22.19%, and South Africa with $255.98 million or 9.83%. The dominance of the UK and the Netherlands underscores Nigeria’s strong investment ties with European countries, particularly in sectors such as banking and manufacturing.
A Reality Check for Tinubu’s Economic Claims
During his Independence Day speech on October 1, 2024, President Tinubu praised his administration for attracting $30 billion in foreign investments within one year. He pointed to policy reforms, including the unification of exchange rates, subsidy removal, and incentives for foreign investors as key reasons for this surge.
While Tinubu’s reforms may have contributed to some level of investor confidence, the substantial drop in FDI for the period under review indicates that the economic environment remains volatile.
The modest year-on-year increase in capital importation is overshadowed by the quarterly drop, suggesting that the administration’s policies have not yet translated into a sustained influx of foreign capital. Analysts say that investors are being cautious, particularly with concerns about inflation, interest rates, and Nigeria’s broader economic stability.