Capital Importation: What’s The Scarecrow For FDIs?

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Recently, the NBS published the FY-17 data on capital importation into Nigeria. Capital inflow surged138.7%y/y driven by FPIs which rose 304.3%y/y and accounted for 59.9% of total inflow compared to FDIs which declined 6.0%y/y in the same period and accounted for 8.0%.

The concern is, therefore, the alarming decline in FDIs which tumbled 56.9% from $2.3bn in 2014 to $0.9mn as at 2017. The reasons are not farfetched
as patient FDIs seems to have fled the country amid political uncertainties, security concerns, harsh operating environment and currency market crisis which damped investor confidence. Policy volatility is, however, a more critical factor, as agreements reached with one government are terminated by another government, since FDIs are patient capital targeted at long-term projects, especially in telecoms, real estate, refineries, transportation and oil exploration. Investors are, thus, wary of investing in countries with shabby records of keeping to long-term agreements.

Though in Q4-17, FDI inflows rose to $378.4mn, the highest since Q3-15, the outlook is foggy as the 2019 election approaches. The importance of FDIs in sustaining our ailing economy and solving unemployment problems cannot be overemphasized hence the need to forestall further decline through deliberate, sustainable
and bold policies that will transcend political regimes.

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