Nigeria relies heavily on $1.21bn foreign borrowing, as investors shun 28 states
By Sodiq Adelakun
Nigeria has been grappling with a decline in foreign direct investments (FDI) due to ongoing issues such as insecurity and a difficult business environment.
As a result, the country has increasingly turned to foreign borrowing to boost its capital importation.
In the first half of 2023, Nigeria relied on foreign loans amounting to $1.21 billion, as 28 states failed to attract any foreign investments during this period.
According to a report from the National Bureau of Statistics (NBS), Nigeria witnessed a significant drop of 30.42 percent in total capital importation during the first half of 2023.
The figure fell from $3.11 billion in the corresponding period of 2022 to $2.16 billion. This decline highlights the urgent need for Nigeria to address the factors deterring foreign investments.
To compensate for the decline in foreign investments, Nigeria has increasingly turned to foreign loans. In the first half of 2023, foreign investments in the form of loans grew by 17.43 percent, reaching $1.21 billion compared to $1.03 billion in the same period of 2022.
While foreign loans provide a short-term solution to boost capital importation, the long-term implications of increased debt must be carefully considered.
Insecurity and a challenging business environment have been major deterrents for foreign investors in Nigeria. The country has been grappling with issues such as terrorism, banditry, and kidnappings, which have significantly impacted investor confidence.
The NBS report highlights the composition of foreign investments in Nigeria. In the second quarter of 2023, other investments accounted for 81.28 percent ($837.34 million) of total capital importation, followed by portfolio investments at 10.37 percent ($106.85 million), and foreign direct investments at 8.35% ($86.03 million).
This breakdown underscores the need for diversification and the importance of attracting more foreign direct investments to drive economic development.
Nigeria’s reliance on foreign borrowing to boost capital importation raises concerns about the country’s long-term economic stability. While foreign loans provide a temporary solution, addressing the underlying issues that deter foreign investments is crucial.
“The production sector recorded the highest inflow with $605.04m, representing 58.73 per cent of total capital imported in Q2 2023, followed by the banking sector, valued at $194.58m (18.89 per cent), and Shares with $68.63m (6.66 per cent).”
Only Lagos, Abuja, Adamawa, Akwa Ibom, Anambra, Ekiti, Niger, Ogun, and Ondo attracted foreign investors to the country.
Recently, the World Bank stated that foreign direct investment into Nigeria has fallen because of limited forex availability, security concerns, and other structural challenges.
