The UK, USA, and three more nations make up 79% of Nigeria’s capital imports

The United Kingdom (UK), the United States of America (USA), the Republic of South Africa (RSA), Singapore, and the United Arab Emirates (UAE) collectively accounted for a significant 79% of Nigeria’s capital imports between 2019 and the first half of 2023.

However, these major contributors have experienced substantial reductions in their investment volumes. The UK saw the most significant decline, plummeting by a staggering 85.49% from $11 billion in 2019 to an estimated annualized value of $1.61 billion in 2023.

Similarly, the USA followed suit with an 84.4% drop, going from $4.69 billion to an expected annualized figure of $734.6 million in 2023. RSA, Singapore, and UAE also joined this downward trend, with each experiencing an 80.6% decrease, resulting in figures of $456.2 million, $494.56 million, and $418.82 million, respectively, when considering H1 2023 annualized data.

Notable contributors with inflows exceeding $1 billion during this period include the Netherlands, which saw a decline of 78.3% from $607 million to an annualized value of $131.75 million in 2023, and Mauritius, which dropped by 79.9% from $644.60 million to an annualized projection of $129.58 million for 2023.

This concerning trend highlights the challenges faced by Nigeria in attracting and retaining foreign investments from its key partner countries.

A detailed analysis of the data reveals a consistent decline in foreign investment inflows from the United Kingdom (UK), the United States of America (USA), the Republic of South Africa (RSA), Singapore, and the United Arab Emirates (UAE) over the years.

The UK, as Europe’s financial hub, stands as Nigeria’s top trading partner for foreign investments. In 2019, it recorded significant inflows of $11.01 billion. However, this figure has seen substantial declines over the years. Between 2020 and 2021, inflows decreased by 65.1% and 45.1%, respectively, with a modest increase of 20.8% in 2022. Current projections suggest a further decline of 41.7% when H1 2023 data is annualized.

The USA, RSA, Singapore, and UAE have all experienced notable reductions in their investment inflows. The USA witnessed an 84.2% drop from its 2019 figure of $4.69 billion, while RSA saw a 62.8% decrease from $2.35 billion. Singapore’s inflows dipped by 47% from $1.02 billion, with UAE showing a growth of 13.7% from $790.74 million between 2019 and 2020.

The trend persisted in 2021 and 2022, with the USA experiencing consecutive declines of 8.7% and 57.7%, Singapore declining by 13.9% and 9.4%, and UAE’s inflows falling by 60.3% and 21.2%. RSA saw a brief increase of 20.4% in 2021 before facing a further decline of 59.3% in 2022.

Despite these overall declines, there is a glimmer of hope on the horizon. Excluding the UK, current H1 2023 data, when annualized for 2023 and compared to 2022’s total inflows, projects increased foreign investment inflows from the other four countries.

The USA is expected to experience a remarkable 156% increase, rising from $286.92 million to approximately $734.55 million, while RSA is projected to grow marginally by 6.4% from $428.73 million to $456.18 million. Singapore anticipates a 17.5% increase from $420.97 million to $494.56 million, and the UAE foresees a 48.6% rise from $281.78 million to $418.82 million.

Mauritius, known for its tax haven status, contributed a total inflow of $1.98 billion between 2019 and 2022, ranking as the second-highest African country and seventh globally for foreign investment inflows into Nigeria.

However, when examining H1 2023 annualized inflows, foreign investment is projected to peak at $129.58 million, down from a peak of $690.91 million in 2021, indicating a shift in investment dynamics in the Nigerian economy.

Several factors contribute to this decline, including the global economic slowdown caused by the COVID-19 pandemic, which led to worldwide lockdowns in 2020. Nigeria also faced its second recession in five years in 2020, with modest real GDP growth of 0.11% only emerging in Q4 of that year.

Additional challenges include the business environment, capital controls, recurring budget deficits, falling oil prices, insecurity, and corruption. These issues resulted in the worst performance in attracting foreign investments over an eight-year period (2015 to 2022). During this time, a total of $37.97 billion was invested from these pivotal countries between 2019 and 2022.

Foreign investors also faced difficulties in repatriating their funds from Nigeria, with the UAE suspending travel flights to and from Nigeria and outstanding debt repayments of approximately $10 billion.

These challenges present significant obstacles to Nigeria’s efforts to attract foreign investments and strengthen its economic stability. Nevertheless, there is a more optimistic outlook for 2023 based on H1 2023 annualized inflows from the USA, RSA, Singapore, UAE, and Mauritius.

US Deputy Treasury Secretary Mr. Adeyemo reaffirmed the USA’s commitment to invest in Nigeria, highlighting the importance of a stable currency and a robust macroeconomic framework in attracting foreign investment. He stressed the need for Nigeria to improve its macroeconomic policies to become a more attractive destination for foreign direct investments (FDI).