In a recent release by the National Bureau of Statistics (NBS), Foreign Direct Investment (FDI) into the manufacturing sector has seen a significant decline in the third quarter of 2023.
The sector attracted $279.51 million in FDI, a sharp fall of 53.80 percent from the previous quarter’s robust $605.04 million.
The year-on-year figures are equally concerning, with the sector experiencing a 71.2 percent decrease from the $392.54 million recorded in the third quarter of 2022.
These figures are part of the NBS’s Q3 Foreign Capital Importation report, which has painted a stark picture of the investment landscape. Despite the quarterly downturn, the first nine months of 2023 have seen a silver lining.
The manufacturing sector has received approximately $1.14 billion in foreign capital, marking a notable increase of $415.82 million over the $724.75 million received during the same period last year.However, this increase has not been enough to offset the broader economic trend.
The total capital importation for the third quarter stood at a mere $654.65 million, down by 36.45 percent from the second quarter’s $1.03 billion, signaling a wider economic challenge facing the sector and the economy at large.
Investors and policymakers are closely monitoring these developments as the manufacturing sector is a critical component of economic growth and job creation.
The NBS report is expected to influence future decisions and strategies aimed at revitalising foreign investment inflows into the country.
Every year, foreign capital declined by 43.55 percent from the $1.16 billion recorded in the same quarter of 2022.
The manufacturing sector in the past few years has been faced with a series of problems that have curtailed its growth. These problems include rising foreign exchange rates, high energy costs occasioned by epileptic power supply, multiple taxation, inflation, etc.
A review of the performance of some manufacturing firms listed on the NGX reveals that 8 companies recorded a foreign exchange loss of -N129.811 billion while only three of these companies recorded a foreign exchange gain of just N3.49 billion. This coupled with the difficulty of multinationals in the manufacturing space to repatriate cash has resulted in notable exits in recent times.
A one-time Minister of Finance and also Trade and Investment, Mr. Olusegun Aganga stated in a lecture that Nigeria has been deindustrialising since 2015 due to the reduction in the contribution of the manufacturing sector to the economy.
In Q3, 2023 the contribution of the manufacturing sector to GDP dropped to 8.42 percent from the 8.62 percent growth rate recorded in Q2, 2023.