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Reasons Nigeria’s Foreign Direct Investment inflows continue to nosedive

United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report indicated that foreign direct investments (FDI) inflow into Africa’s largest economy, Nigeria has continued to worsen due to volatile economic indices.

According to the report, Nigeria’s economy that attracted a total FDI of $2.6 billion in 2020 down from the $3.3 billion attracted the previous year 2019.

The UNCTAD 2020 World Investment Report noted, however, that FDI flows to Nigeria totalled $3.3 billion in 2019, a 48.5 per cent decrease compared to $ 6.4 billion in 2018.

In 2019 alone, Nigeria accounted for a quarter or about $122 million of the total raised by African tech start-ups, beaten only by Kenya with $149 million, according to Disrupt Africa figures. By other estimates from WeeTracker and Partech African, Nigerian start-ups raised between $663 million and $747 million in 2019, making it the largest venture capital market on the continent.

The UNCTAD World Investment Report 2018 maintained that Nigeria’s economy remained depressed as FDI fell 21 per cent to $3.5 billion.

One sector that benefited was agriculture that has attracted its highest level of investments since 2014 on continued government support to the industry.

Data from the National Bureau of Statistics (NBS) capital importation report show that foreign direct investment (FDI) in the agric sector hits $490million (N176.4 billion) in 2019, up 69percent from $290million in 2018.

This notwithstanding, an international economic report, Trading Economics, noted that FDI in Nigeria has averaged $943.13 million from 1990 to last year.

Analysts said Nigeria’s tough outlook was further compounded by risks related to the COVID-19  pandemic, the pace of the rollout of vaccination programmes and economic support packages, and uncertainty about the policy environment for investment.

According to analysts, investment returns were declining across sectors with the steepest decline in manufacturing. Declining investment flows is seen as a major blow for a country battling to eliminate poverty and reducing inequality.

The analysts said while some sectors such as Fintech have received a positive stimulus, so much has not come in terms of investments on infrastructure, to boost local manufacturing capacity and drive employment.

Meanwhile, analysts expected increase in FDI flows in 2021 from investment in technology and healthcare – two industries affected differently by the pandemic.

Experts expect implementation of the African Continental Free Trade Area Agreement and the possibility of some large announced Greenfield investments materialising to result in higher FDI flows.

In its report On Current State of Nigeria Agriculture and Agribusiness Sector, international multidisciplinary practice, PWC observed that the implementation of AfCFTA would help to support Nigeria’s agri-business, to create markets for farmers, strengthen the agro-value chains and significantly reduce agricultural imports. The company added that Nigeria’s agricultural trade deficit continues to widen amid government’s push for self-sufficiency in the sector.

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