Posted Thu, Mar 24, 2022 3:11 PM

NESG 2021 Capital Importation Alert March 2022

Overall investment inflows into Nigeria plunged by 45 percent in 2021

According to National Bureau of Statistics (NBS), foreign investment inflows fell to a 5-year low of US$6.7 billion in 2021 from US$9.7 billion in 2020. Despite the waning impact of the global pandemic, foreign investors showed less appetite for Nigeria’s financial instruments in 2021. The illiquidity of the foreign exchange market and negative real returns on investment largely fuelled negative investors’ sentiment.

Fall in FPI weakened the overall foreign investment inflows

On a disaggregated basis, the decline in total investment inflows was largely driven by a sharp fall in Foreign Portfolio Investments (FPI) to US$3.4 billion in 2021 from US$5.1 billion in 2020. Correspondingly, the share of FPI in the overall foreign investment inflows dropped to 51 percent in 2021 from 53 percent in 2020. In 2021, the contribution of Foreign Direct Investment (FDI) to the overall foreign investment inflows fell slightly to 10 percent, whereas the share of Other investments was higher at 39 percent. This suggests that the uncertainty around repatriation of funds at maturity of investments largely elevated portfolio investors’ risk aversion and doused their confidence in the Nigerian economy, despite the significant improvement in global crude oil prices in 2021.