Insecurity, unattractive business environment, failure to improve its FDI and poor ranking among 190 economies in the ease of doing business were responsible for Nigeria’s lowest ever foreign direct investments (FDIs) of $698.78 million in 2021.
Added to this is the effect of COVID 19 pandemic that led to restrictions which resulted in a contraction of the economy and contingents of downturns on the macro level.
This is according to data from the Central Bank of Nigeria (CBN).
Nigeria is ranked 131 among countries with the ease of doing business.
A year-on-year comparison shows that FDIs into Nigeria dipped by 32 per cent in 2021 to $698.8 million compared to the $1.03 billion recorded in the previous year. This also represented the fourth time Nigeria has recorded foreign direct investment below $1 billion in the past 15 years.
The first time was in 2010, following the backdrop of the 2008 global financial crisis, which saw Nigeria’s direct investment inflow drop from $3.33 billion recorded in 2009 to $728.9 million in 2010. It also fell below the $1 billion mark in 2017, 2019, and now 2021.
The recent drop in FDIs could be attributed to the ripple effect of the covid-19 pandemic on the Nigerian economy, Foreign direct investment is related to purchases made by a company or an investor from another country in a Nigerian company. According to the Organisation of Economic Co-operation and Development (OECD), FDI is an integral part of an open and effective international economic system and a major catalyst to a country’s development.
Nigeria has been suffering from dwindling foreign inflows in recent years, piling significant pressure on the country’s FX liquidity, as surging demand for dollar in the economy ensured recurrent negative balance of payments for 10 quarters.
