‎Nigeria’s Capital Inflow Plummets 51.9% in Q3 2023 Despite Year-on-Year Growth, NBS Reports

By Emmanuel Kwada

‎Nigeria’s capital importation took a sharp downturn in the third quarter of 2024, dropping by 51.90% to $1.25 billion from $2.60 billion in Q2 2024, according to the latest report from the National Bureau of Statistics (NBS).

‎Despite this quarterly decline, the $1,252.66 million recorded in Q3 2024 reflects a robust 91.35% increase compared to $654.65 million in Q3 2023, signaling a complex interplay of growth and contraction in Nigeria’s investment landscape. This marks the lowest capital inflow of 2024, raising concerns about the nation’s ability to sustain foreign investor confidence amid economic challenges.

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Credit: NBS

‎The NBS report highlights that portfolio investments, encompassing equities, bonds, and other financial instruments, dominated capital inflows, contributing $899.31 million or 71.79% of the total. This underscores foreign investors’ preference for Nigeria’s financial markets, despite macroeconomic headwinds such as inflation and foreign exchange volatility.

‎Other investments, including loans and trade credits, followed with $249.53 million (19.92%), while Foreign Direct Investment (FDI), a key indicator of long-term investor commitment, lagged significantly at $103.82 million, accounting for just 8.29%. The low FDI share reflects ongoing concerns about Nigeria’s business environment, with divestments by major multinationals like Shell and GlaxoSmithKline in 2023 signaling structural challenges.

‎The banking sector emerged as the largest recipient of foreign capital, attracting $579.48 million, or 46.26% of total inflows, reinforcing its position as a relatively stable and profitable avenue for investment.

‎Capital inflows in Q3 2024 were predominantly sourced from the United Kingdom

‎The financing sector followed, securing $294.55 million (23.51%), driven by investments in lending, leasing, and insurance activities. The production and manufacturing sector, critical for industrial growth, received $189.22 million (15.11%), indicating moderate but insufficient interest in Nigeria’s industrial base amid challenges like energy costs and infrastructure deficits.

‎Capital inflows in Q3 2024 were predominantly sourced from the United Kingdom, which contributed $502.60 million, or 40.12% of the total, underscoring strong bilateral investment ties.

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Credit: NBS

‎The Republic of South Africa followed with $185.03 million (14.77%), while the United States accounted for $163.86 million (13.08%). These figures highlight the reliance on a few key economies for foreign capital, with the UK’s dominance consistent with its historical investment patterns in Nigeria’s financial and energy sectors.

‎Geographically, Lagos State solidified its status as Nigeria’s economic powerhouse, attracting $650.41 million, or 51.92% of total capital inflows, driven by its vibrant financial markets and commercial ecosystem. Abuja, the Federal Capital Territory, followed closely with $600.02 million (47.90%), reflecting its growing appeal for investments in real estate and infrastructure.

‎Lagos State solidified its status as Nigeria’s economic powerhouse, attracting $650.41 million

‎In stark contrast, Kaduna State recorded a modest $1.95 million (0.16%), while Enugu and Ekiti States reported negligible inflows of $184,229 and $96,600, respectively. Notably, states like Zamfara, Bayelsa, and others have not attracted FDI in the past six years, highlighting a stark regional imbalance in investment distribution.

‎Among financial institutions, Standard Chartered Bank Nigeria Limited led with $385.62 million (30.78%) in capital inflows, closely followed by Stanbic IBTC Bank Plc with $382.08 million (30.50%). Citibank Nigeria Limited secured $192.88 million (15.40%), reinforcing the pivotal role of these banks in channeling foreign capital.

‎However, seven banks, including Globus Bank and Unity Bank Plc, reported no inflows, signaling uneven participation in Nigeria’s investment ecosystem.

‎The sharp quarterly decline in capital importation follows a high of $3.38 billion in Q1 2024, driven by monetary tightening and high returns on government securities. However, the 51.90% drop in Q3 suggests waning investor confidence, exacerbated by a 35.98% decline in portfolio investments from $1.4 billion in Q2 and a 78.67% plunge in other investments.

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Credit: NBS

‎Nigeria’s economic challenges, including a 28.9% inflation rate in December 2023 and a poverty rate affecting 46% of the population, continue to deter long-term investments like FDI. Additionally, the exit of multinationals and a challenging business environment, as evidenced by Nigeria’s 140th ranking on the 2024 Corruption Perception Index, pose significant hurdles.

‎While the year-on-year growth of 91.35% offers some optimism, the quarterly slump underscores the need for structural reforms to enhance Nigeria’s investment climate.

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