Nigeria’s Economy Attracts $77bn Foreign Investments in Six Years

..New forex policy to boost investment inflow

By Goddy Egene

The Nigeria’s economy attracted $76.89 billion foreign investments between 2010 and 2015 just as analysts have said the new flexible foreign exchange policy will boost foreign investments in the near term.

Data sourced by THISDAY from the National Bureau of Statistics (NBS) showed that the investments comprise foreign direct investments (FDIs), foreign portfolio investments (FPIs) and others. In 2010 the country attracted $6 billion investments, made up of $0.73 billion FDIs, $3.87 billion FPIs and others $1.40 billion. The value of investments rose to $7.90 billion in 2011 with FDIs accounting for $1.75 billion, FPIs $4.51 billion and others $1.64 billion.

The value jumped by 110 per cent in 2012 rising to $16.62 billion. Out of this amount, FDIs was $2.0 billion, FPIs stood at $13.49 billion while others stood at $1.13 billion.

The upward trend was maintained in 2013 and the value of investments rose by 28.3 per cent to $21.32 billion led by FPIs with $17.37 billion.  FDIs recorded $1.28 billion, while others stood at $2.67 billion.

However, the value fell marginally by 2.7 per cent from $21.32 billion in 2013 to $20.75 billion in 2014. Out of these, FDIS accounted for 2.28 billion, while FPIs and others recorded $14.92 billion and $3.56 billion respectively.

But in 2015, the value witnessed an unprecedented decline, falling by 79 per cent to $4.30 billion.  FDIs fell to $0.66billion, from $2.28 billion; FPIs crashed from $14.92 billion to $2.28 billion, while others fell from $3.56 billion to $1.36 billion.

Analysts at FSDH Merchant Bank Limited linked the drop recorded in 2015 partly to the unacceptable forex regime.  They however expressed optimism that the new   market structure announced by the Central Bank of Nigeria (CBN) last week would increase supply of forex from FPIs and FDIs.

“The introduction of the forex Futures market should reduce the frontloading of forex and consequently in the spot market. In addition, we believe the market structure that the CBN announced was well thought out and investors will have confidence in the system to manage their exchange rate risks. On the supply side, we note that it would increase the supply of forex from FPIs and FDIs,” they said.

Commenting on how the policy would impact corporate earnings, FSDH said: “We expect companies with U.S Dollar receivables to benefit from this development. Meanwhile, companies with Naira receivables but with dollar denominated financial obligations without any hedging strategy in place will record exchange rate losses. Some of the companies operating in the power sector may fall into this category. They may require additional bailout very soon if they have to improve power generation and distribution in the country. In addition, the impact of this may be transferred to the banking sector in the form of increase in the non-performing loans. But the opening of the foreign exchange inter-bank market and the futures market will create additional activities in the inter-bank market, with banks earning additional income. This will also promote trade finance businesses.”