Foreign ownership in Nigeria fell to $12.8 billion between 2022 and 2023 due to the currency crisis and corporate withdrawals.
The World Investment Report 2024 states that foreign holdings in Nigeria decreased from $86.2 billion in 2022 to $73.4 billion in 2023.
Nigeria’s stock of outbound foreign direct investments (FDI) decreased somewhat from $18.3 billion in 2022 to $17.7 billion in 2023.
The total value of foreign investments held within the nation at a certain time is known as foreign holdings or foreign direct investment (FDI) inward stock. It represents the total worth of foreign investors’ investments, including their ownership of companies, real estate, and other assets. Equity capital, reinvested earnings, and intra-company loans between international investors and their local affiliates are some ways to quantify it.
Conversely, Nigeria’s outward FDI stock is the entire value of investments made by Nigerian companies or individuals in companies, real estate, or other assets in foreign nations.
The departure of multinational corporations from Nigeria and the devaluation of the naira, which impacted the USD valuation of foreign holdings in Nigeria, was linked to the reduction in Nigeria’s inward FDI stock.
Nigeria saw a 109 percent growth in foreign direct investment (FDI) inflows between 2022 and 2023, from $895 million in 2022 to $1.87 billion in 2023. The naira depreciated by 49% between 2022 and 2023, and this increase in inflow was not enough to stop the value loss that followed.
Foreign companies, including the pharmaceutical behemoth GlaxoSmith Kline, Procter & Gamble, Equinor, Bolt Foods, and Sanofi-Aventis Nigeria, also left Nigeria in 2023. With Heineken leaving Champion Breweries, Diageo International leaving Guinness Nigeria, Eni leaving Nigerian Agip Oil Company, and Mobil leaving Mobil Producing Nigeria, the trend of businesses leaving Nigeria has persisted in 2024.
Microsoft shut down its $100 million Africa Development Centre as part of Kimberly Clark’s shutdown of operations in Nigeria.
The $73.4 billion in foreign holdings are expected to drop much further as FDI inflows into Nigeria reach historically low levels in 2024.
The drop in businesses leaving Nigeria has been attributed to factors such as growing operating expenses, macroeconomic instability, and a lack of foreign exchange. In its “Investment Climate Statements,” the US State Department noted that corruption impedes Nigeria’s economic development.
The statement identified corruption at the port as a limitation in the Nigerian economic environment, stating that “Domestic and foreign investors often cite corruption as a significant barrier to doing business.”
Another limitation mentioned in the document was security issues.
Another cause for concern is the sharp drop in the value of the naira in a single year. Since the 2023 foreign market float, the value of the naira has dropped by 70%. According to experts, some foreign-held companies in Nigeria saw negative returns on their capital expenditures due to the depreciation of the naira, which caused them to reduce their investment activity.
Another significant obstacle is inflation. The National Bureau of Statistics (NBS) reports that it rose from 32.70 percent in September to 33.88 percent in October 2024.
Since assuming office, President Bola Tinubu has made it his goal to draw in foreign capital and increase their presence in Nigeria.
But the main effect of his administration’s measures, especially those implemented through the Central Bank of Nigeria (CBN), has been an injection of “hot money,” with foreign portfolio investments in Nigerian fixed-income instruments and stocks seeing notable increases.
Some of the previous administration’s investment promotion programs, like the Presidential Enabling Business Environment Council (PEBEC), have been accepted by the president. The Nigerian investment policy, which was authorised towards the conclusion of previous President Muhammadu Buhari’s term, has not been discussed by the administration, though.
In order to reduce inflationary pressures, Bismarck Rewane, CEO of Financial Derivatives Company, advised the Central Bank of Nigeria (CBN) to stabilize the currency and management of money supply growth top priority.
“The CBN must keep stabilizing the naira and controlling money expansion as its top priorities. This is the quickest way to reduce inflationary pressure,” Rewane stated at Parthian Group’s 2024 Macroeconomic Outlook Forum in Lagos last week.
