Nigeria Records Highest Quarterly Foreign Investments Inflow in Four Years

Nigeria is making headlines with a record-breaking $3.38 billion in foreign investments during the first quarter of 2024, marking the highest quarterly inflow in four years. This surge in investments is a testament to the impactful reforms implemented by the Central Bank of Nigeria (CBN), as highlighted in the latest capital importation report by the National Bureau of Statistics (NBS).

The report reveals a remarkable 210.2 percent increase in foreign investments from the previous quarter, showcasing a significant growth trajectory. Year-on-year, foreign capital inflows rose by an impressive 198.1 percent from the same period in 2023, indicating a positive trend in investor confidence.

Analysts attribute this surge in investments to key reforms by the CBN, including the harmonization of the foreign exchange rate market, clearance of forex backlogs, naira devaluation, and high interest rates aimed at curbing inflation. These measures have collectively sent positive signals to investors, prompting a substantial increase in capital inflows.

Portfolio investment emerged as the largest contributor to the foreign investment surge, accounting for 61.5 percent of the total with $2.08 billion. Other investments followed closely with $1.18 billion, while foreign direct investment (FDI) lagged behind, contributing only $119.2 million.

Notably, money market instruments under portfolio investment saw a dramatic increase, surging by 592.7 percent to $1.61 billion in Q1. This surge is attributed to open market operations (OMO) attracting foreign investors with over 25 percent yield for a carry trade in naira while managing FX risks.

The anticipated $1 billion loan from Afrexim as part of a $3.3 billion inflow from a commodity swap deal further underscores the growing confidence in Nigeria’s economic prospects. Foreign inflows into stocks also saw a significant jump, reaching N93.37 billion in the first three months of the year, the highest in any three-month period since 2019.

The NBS report highlighted the banking sector as the top recipient of capital inflows, followed by the trading and production/manufacturing sectors. Geographically, the United Kingdom emerged as the top investor, contributing 53.5 percent of the total investments, followed by the Republic of South Africa and the Cayman Islands.

Lagos State stood out as the top destination for foreign capital, receiving 82.4 percent of the total capital imported, followed by Abuja and Ekiti. Stanbic IBTC Bank Plc led in capital importation into Nigeria, followed by Citibank Nigeria Limited and Rand Merchant Bank Plc.

While the positive outlook is promising, experts caution against premature celebrations. Adeola Adenikinju emphasized the importance of ensuring that foreign portfolio investments (FPI) translate into foreign direct investments (FDI) that generate employment and reduce poverty for sustainable economic benefits.

President Bola Tinubu’s efforts to attract foreign investment through policy reforms have played a significant role in Nigeria’s economic resurgence. With a focus on sustainable growth and development, Nigeria is poised to continue attracting foreign investments and strengthening its position as an attractive investment destination.