Despite a slump in the nation’s
capital imports to a nine-year low in 2016 to $5.12 billion from $9.64 billion
in 2015, there are indications that 2016 may not be entirely bad in the area of
foreign direct investments for the country as it is for other countries as
inflows hit $1.044 billion.
According to the National Bureau of Statistics (NBS), capital importation into Nigeria fell 47 percent last year to $5.12 billion, largely because the weak currency meant fewer dollars were required for the same naira investment from $9.64 billion imported in 2015.
Capital
Importation comprises of three main investment types, namely Foreign Direct
Investment (FDI), Portfolio Investment and other investments. Corroborating
this fact, latest report of the Global Investment Trends Monitor of United
Nations Conference on Trade and Development (UNCTAD) showed that despite a 13
per cent drop in global foreign direct investments flows in 2016, inflows to
Nigeria recorded an uptick closing the year at $4 billion from $3.1 billion. UNCTAD
however warned that there are significant uncertainties that could have a
material impact on the scale and contours of any FDI recovery in 2017.
It said: “The
“normalization” of monetary policy in the United States after nearly a decade
of historically low interest rates could result in a significant shift in
composition of capital flows, with implications for exchange rates and
financial systems throughout the world and especially for developing economies.
“Rising
cost of capital may hinder investment by multinational enterprises which have
taken on significant levels of corporate debt in recent years. There is also
substantial uncertainty about the shape of economic policies in the
near-future, especially in developed economies, which may serve to dampen FDI. This
was the lowest value since the (data) series started in 2007, which reflects
the numerous economic challenges that afflicted Nigeria in 2016.”
Equity
investments from portfolio investors and direct investment rose sharply from
2012 to 2014, at a time when Nigeria was one of the fastest growing economies
in the world and a top destination for investment. But a sharp drop in the
price of crude oil, Nigeria’s main export, from mid-2014, slashed government
finances, weakened its economy triggering a recession and battered its
currency, frustrating business and leading investors to flee its markets.
The NBS said
portfolio investments fell the most in 2016, deterred by the recession and the
currency, down by 69.8 per cent from 2015, as investors weighed market
conditions relative to expected returns. Nigeria’s stock market fell 6.2 per
cent last year while the naira lost a third of its official value against the
dollar. In 2017, stocks have continued to fall, down 3.1 per cent so far, while
the naira is almost 40 per cent weaker on the black market.
The NBS said
Nigeria imported the bulk of its capital from Britain, the U.S. and Netherland,
with the telecoms, banking and oil sectors the main beneficiaries. For UNCTAD
however, global FDI flows fell by 13 per cent in 2016, reaching an estimated
$1.52 trillion, in a context of weak global economic growth and a lackluster
increase in the volume of world trade.
Equity
investments at the global level were boosted by a 13 per cent increase in the
value of cross-border mergers and acquisitions (M&As), which rose to their
highest level since 2007, reaching $831 billion.
“A
key concern for policymakers continues to be how to reactivate productive
investment in their economies to generate employment and spur advances in
productivity. Despite the acceleration in economic activity, the ILO estimates
that global employment growth will continue to decelerate in 2017, falling to
1.1 per cent. To take full advantage of the improving global economic
environment countries must make boosting domestic and foreign investment key
policy priorities”, UNCTAD
stated. (Guardian)
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