Nigeria attracted Foreign Direct Investment (FDI) valued at less than one per cent of the country’s gross domestic product (GDP) in 2014, the World Bank has said.
The bank blamed the abysmal performance on what it called ‘structural constraints’ that affect the business environment.
This, as the Group Chief Economist of Afreximbank Group, Dr. Yemi Kale called on Africans to shift their focus from foreign direct investments to investments in Africa by Africans.
In the first quarter of 2024, FDI stood at $119.18 million, accounting for 3.53 per cent of the total capital importation of $3.376 billion. By Q2 2024, FDI dropped to $29.83 million, marking the lowest level ever recorded based on available data up to 2013.
This decline is attributed to factors such as naira devaluation, unstable foreign exchange markets, and high costs of doing business in Nigeria. However, by the third quarter, FDI increased to $103.82 million.
The World Bank in its recent report on Nigeria said recent reforms by the Central Bank of Nigeria (CBN), increased foreign exchange inflows into the country which it said was mainly driven by foreign portfolio investments (FPI) – attracted by relatively high yields and potential revaluation gains.
According to the bank, the surge in foreign portfolio investment (FPI) which grew by 110 per cent in 2024 to $13 billion, contributed to a stronger financial account position. It said though FPI is helpful as a source of forex, debt financing, and external adjustment, FPI flows are volatile, especially when they are short-term as is predominantly the case for Nigeria at present.
Nigeria has faced serious economic challenges exacerbated by high interest rates, hyperinflation, unstable foreign exchange markets, insecurity and high energy costs all of which combine to make the business environment unfriendly.
This situation saw the exit of many multinational companies including Unilever Nigeria PLC, Procter & Gamble Nigeria, GlaxoSmithKline Consumer Nigeria Ltd, ShopRite Nigeria, Sanofi-Aventis Nigeria Ltd, Equinox Nigeria, Bolt Food and Jumia Food Nigeria from the country.
In his address at the African Direct Investment (ADI) sensitisation workshop in Cairo, Egypt, recently, Kale, redefined the future of African investment, placing African capital at the centre of the continent’s growth story.
Speaking on the sidelines of the Focus Africa Trade and Investment Forum, Kale unveiled key findings from the inaugural ADI Baseline Report, which reveals that between 2017 and 2020, over $44 billion in investment flowed within Africa—by Africans, for Africa. “This isn’t just capital,” he said, “It’s a catalyst, a vote of confidence by Africans in Africa.”
He said for too long, the African Investment discourse has been framed almost exclusively through the lens of foreign direct investment (FDI)—with the continent cast as a passive recipient of flows from Europe, North America, Asia, and more recently, the Middle East.
