Nigeria attracts $3.73b FDI in five years despite huge spending on roadshows

•Teriba sees end to double-digit inflation with $50b inflow

To underscore the severity of the economic challenges Nigeria is going through, the country attracted $3.73 billion in foreign direct investment (FDI) from 2020 to the third quarter of 2024.

FDI is an investment from a party in one country into a business or corporation in another country to establish a lasting interest. Sustained interest is what differentiates FDI from foreign portfolio investments (FPI), where investors passively hold securities in a foreign country.

An analysis of FDI contributions to the country’s capital importation over the period as published by the National Bureau of Statistics (NBS) shows that the figure is 41.99 per cent lower than the $6.43 billion received in the preceding five years –2015 to 2019.

According to the figures, in 2020, the total FDI was valued at $1.29 billion. The figure rose to $1.42 billion in 2021, only to slump to $386.2 million in 2022 and further down to $377.77 million in 2023.

FDI hit the rock in the three quarters of 2024, attracting only $252.82 million.In 2015, the total value of FDI that came into the country was $1.25 billion. It, however, dropped to $1.04 billion in 2016 and further down to $981.78 million in 2017, it jumped to $2.23 billion in 2018 but slumped in 2019 to $929.58 million.

Nigeria has faced decade-long economic challenges aggravated by the drop in crude oil prices and the COVID-19 pandemic leading to the devaluation of the naira at different points and high inflation that has maintained a steady upward trend for close to three years. It hit 34.6 in November 2024.

Nigeria is currently facing what could be described as its worst cost-of-living crisis in decades, brought about by the twin reform initiatives of fuel subsidy removal and foreign exchange rate reform.

The country is also facing serious security challenges, which have either scared off intending foreign investors from the country or forced those who have already invested to exit the country.

In the last three years, for instance, reports said over 16 multinational companies left the country, worsening the country’s revenue generation efforts as well as unemployment challenges. Among the companies that have divested from Nigeria are

Diageo, which sold off its stake in Guinness Nigeria to Tolaram, Kimberly-Clark, manufacturers of Huggies and Kotex brands of diapers, the U.S.-based Procter and Gamble (P&G), GlaxoSmithKline (GSK), Sanofi-Aventi Nigeria as well as Unilever Nigeria, which announced its exit from the home care and skin cleansing markets in Nigeria in November 2023, saying it did so “to find a more sustainable and profitable business model”.

Reasons given by the companies include high energy costs, currency depreciation, insecurity, policy inconsistency and falling purchasing power. It may not be surprising that foreign investors are showing apathy. Nigeria’s business environment is often characterised by uncertainty, corruption and regulatory challenges, deterring foreign investors, according to experts.

The country’s infrastructure deficits, including inadequate power supply, transportation and logistics failure have been linked to the reason the cost of doing business is high in the country, a major reason even local investors are closing shop.

Nigeria’s bureaucratic processes can be slow and cumbersome, making it also difficult for foreign investors to navigate the system and obtain necessary permits and approvals when needed.

There is also a lack of transparency in government policies and regulations, which creates uncertainty and deter foreign investors. There are also frequent changes in economic policies and regulations, which creates uncertainty.

Experts have advised that rather than wasting taxpayers’ money on foreign trips in search of investors, efforts should be invested in putting the house to make the country attractive to investors.

To show how desperately Nigeria needs foreign investors, the country has spent billions of taxpayers’ money to fund roadshows with ex-President Muhammadu Buhari visiting 43 countries just as his successor, Bola Tinubu embarked on about 30 foreign trips in search of investors.

According to data from GovSpend, a portal documenting the Presidential Villa’s expenditure, the country spent over N2.3 billion in just six months, from February to July 2024, to fund the President’s foreign trips. An analysis reveals that President Tinubu made 29 trips to 16 countries, spending over 124 days outside Nigeria within the period.

However, despite the intensive efforts, data from the National Bureau of Statistics (NBS) indicates that Nigeria recorded no foreign capital inflow from 11 of the visited countries during the first half of 2024.

To address the worsening economic challenges and attract more FDI, Prof. Godwin Oyedokun of Lead City University said the government must improve the business environment, invest in critical infrastructure, promote transparency and accountability, simplify bureaucratic processes, provide investment incentives, enhance security and stability, improve access to finance and build a skilled and qualified workforce.

“The authorities need to work towards ensuring political will and reducing corruption, as these factors significantly influence investment decisions.”
He said Nigeria should not over-depend on foreign portfolio investment (FPI) because it is often more volatile than FDI, leading to sudden capital flight during economic downturns or political instability, which can destabilise the local economy.

Renowned economist and CEO of Economic Associates (EA), Dr Ayo Teriba, said Nigeria’s inflation rate can be driven down to five per cent by 2025 if the government successfully attracts $50 in the next year from foreign direct investment (FDI).

Teriba said this while speaking on Arise TV’s Good Morning Show at the weekend. He emphasized that such an inflow of investment would strengthen the naira, stabilise exchange rates and positively influence the country’s macroeconomic indices, which currently exacerbate its inflation woes.The economist argued that bold reforms aimed at attracting substantial FDI would be transformative.

“Five per cent inflation is possible next year. Look at what happened in Argentina. Economists don’t prophesy but make conditional statements. If the President can complement the efforts on tax and finance reforms with an Investment Act to attract $50 billion FDI within the next year, exchange rates will stabilise and inflation will drop to single digits,” Teriba explained.

Teriba noted that the existing economic policies, particularly those focused on debt servicing, undermine the government’s ability to achieve this target. He pointed out that borrowing to pay off previous debt is counterproductive and fails to address Nigeria’s underlying economic challenges.

“The interest rates offered to Nigeria by international creditors are among the highest globally, primarily due to the country’s poor credit rating. This makes borrowing inefficient and unsustainable as a long-term strategy,” he said.

Teriba criticized the government’s current borrowing practices, urging a shift toward equity-based financing over debt. He noted that many countries with economies comparable to Nigeria’s borrow at significantly lower rates because they issue higher-grade debt instruments.

“They said they were not going to borrow, but they have continued to borrow. There are right and wrong ways of borrowing and efficient and inefficient methods. The foremost issue is the quality of the debt instruments you issue. Some countries of similar economic size borrow more heavily than we do but at a third of our rates,” he said. He further argued that Nigeria’s continuous reliance on debt to fund fiscal deficits is unsustainable.

“We should not continue to fund deficits year in, year out with debt. A country with a well-structured balance sheet would prioritise equity over debt,” he said.

Teriba called for the government to implement a robust investment strategy that prioritises structural reforms and incentives to attract foreign capital. He warned that without such efforts, inflationary pressures would persist, undermining economic stability.

“If we remain on this trajectory of high interest borrowing and poor credit management, we’ll miss the opportunity to stabilize our economy. However, if we adopt bold reforms and attract $50bn FDI, Nigeria can transition to an era of growth and stability,” he concluded.