The Nigerian economy recorded a total decline of $11.68bn (N2.3tn) in investment inflow in the last three years, investigations have revealed.
It was learnt that since 2013, the country had been experiencing persistent decline in the value of direct and portfolio investments.
For instance, figures obtained by the National Bureau of Statistics stated that as of 2013, the country had a total investment inflow of $21.32bn (N4.2tn).
Cumulatively, between January 2013 and December 2015, the country recorded total investment inflow of $51.7bn (N10.18tn).
The report showed that all the three major components of investment such as Foreign Direct Investment, portfolio investment and other investments all recorded a huge decline within the three-year period.
For instance, in terms of FDI inflow, the report showed that the economy attracted the sum of $1.28bn in 2013. The inflow rose to $2.27bn in 2014 before dropping again to $1.44bn in 2015.
A further breakdown of the FDI inflow, which is made up of equity investments and other capital, showed that investments in equities accounted for a huge chunk of the capital brought into the country.
It attracted the sum of $1.25bn, $2.26bn and $1.44bn in the 2013, 2014 and 2015 fiscal periods.
In terms of portfolio investment, which is made up of equity, bonds and money market instruments, the report stated that the sum of $17.37bn was invested in 2013. The figure dropped to $14.92bn and $6.01bn in 2014 and 2015, respectively.
The report also indicated that from the $17.37bn portfolio investment in 2013, investment in equities, with $15.12bn, accounted for the highest amount; while investment in bonds, with $1.21bn, and money market instruments, with $1.04bn, followed.
For 2014, the sum of $11,45bn was invested in shares, while the bond market attracted $2.44bn and $1.03bn in 2014 and 2015, respectively.
The report added that for the 2015 fiscal period, the country recorded $4.66m investment in equities, while $776.28m and $571.59m were invested in bond and money market instruments in that order.
It stated, “In the final quarter of 2015, portfolio investment reverted to being the latest component of imported capital, accounting for 61.18 per cent. This large change relative to the third quarter emphasises the volatile nature of capital inflows.
“Within portfolio investments, equity accounted for 83.16 per cent, slightly less than in the third quarter. This was mainly due to a quarterly decline of 9.98 per cent in equity and a quarterly increase of 47.12 per cent in the value of money market instruments.”
The NBS attributed the decline in investment to the harsh economic climate in the country.
For instance, it said the removal of Nigeria from the JPMorgan Bond Index in 2014 affected the level of investors’ confidence in the economy.
It said that while the country had between 2012 and 2014 experienced high increase in the level of investment inflows owing to its inclusion in the JPMorgan Bond Index, such could not be achieved in 2015.
Nigeria was removed from the index in 2014 due to what was described as the lack of liquidity in the market for foreign investors as a result of scarcity of foreign exchange.
The NBS said, “The level of capital imported between 2012 and 2014 was markedly higher than in the preceding years.
“This may have been a result of external factors, such as the inclusion of Nigeria in the JPMorgan EM Bond index, and globally low interest rates, triggering a search for higher yields from investors over this period.
“The drop in 2015 may be partly a result of these factors unwinding, as well as the tougher economic environment in Nigeria resulting from the effect the lower oil price has had on export earnings.
“Furthermore, the widely anticipated decision to raise interest rates in the United States may have played a part in the drop of capital inflows in the final quarter.”
Commenting on the drop in investment inflow into the country, financial analysts said except the government put in place adequate fiscal and one-tray policies, Nigeria might witness a further decline in investment inflows.
For instance, the President, Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, told our correspondent that a lot of investors would continue to adopt what he described as a “wait and see attitude” as a result of the tough economic environment in the country.
He said the tough operating environment had led to the closure of so many companies in the country, adding that there was a need for the government to address the structural challenges, which had made the operating environment hostile.
Ejinkeonye listed some of the areas that were scaring away investors to include uncertainty in the foreign exchange market, hostile business climate, infrastructure deficit and the absence of adequate incentives to attract investors into key sectors of the economy.
He told our correspondent that what the country needed was for the government to implement a well-articulated industrial plan and an enterprise development agenda aimed at bringing in a new era of industrial development.
He said, “The Abuja Chamber of Commerce and Industry has made it known to the government that the issue of power and energy must be urgently addressed in order to promote industry, boost productivity, attract both foreign and local direct investment.”
Ejinkeonye said that the nation’s economic growth rate, which had fallen from an average of five per cent two years ago to about three per cent, was as a result of the problems facing the economy.
On what the chamber is doing to attract investors into the country, he said the ACCI was working with embassies to identify areas of investments in the country.
He said that ACCI’s trade facilitation endeavours and investment drive were in line with the current government’s policies of promoting trade and investment in the country.
The Director-General, Securities and Exchange Commission, Mr. Mounir Gwarzo, said SEC was putting in place strategies to attract more retail investors into the Nigerian capital market in its determination to deepen and develop the market.
He said unlike countries such as South Africa and Malaysia, Nigeria had a low rate of retail investor penetration.