Nigeria borrows $1.7bn to boost forex inflows – NBS

Data from the National Bureau of Statistics revealed that Nigeria got $1.71bn in foreign loans to boost foreign exchange inflow into the country in the first nine months of 2023.

Total capital importation including Foreign Direct Investment, Foreign Portfolio Investment, and others amounted to $2.82bn in the time under review according to the NBS.

So far, foreign loans have been responsible for 60.80% of forex inflows into the country.

Forex inflows into the country slowed in 2023, total capital importation fell by 33.99% in the period being reported when compared to the $4.27bn recorded in the corresponding period of 2022.

As of the first three quarters of 2022, only 38.56% of forex inflows ($1.65bn) into the country were loans.

FDI and FPI inflows into the country fell according to the data; FDI and FPI fell from $383.85m and $2.16bn to $193.4m and $843.24m respectively.

The lack of dollar supply had been blamed for the constant fluctuation of the naira in the foreign exchange market.

Commenting on the capital importation inflow into the country, the NBS said, “In Q3, 2023, total capital importation into Nigeria stood at $654.65m, lower than $1.16bn recorded in Q3, 2022, indicating a decline of 43.55 per cent. In comparison to the preceding quarter, capital importation fell by 36.45 per cent from $1.03bn in Q2, 2023.

“Other Investment ranked top accounting for 77.56 per cent ($507.77m) of total capital importation in Q3, 2023, followed by Portfolio Investment with 13.31 per cent ($87.11m) and Foreign Direct Investment with 9.13 per cent ($59.77m).”

When Nigeria floated its currency in June 2023, the expectation at the time was that it would improve forex inflows into the economy.

Since then, the naira has lost about 40% of its value according to the World Bank.

Recently, the International Monetary Fund disclosed that the national currency was under pressure.

It noted that the country was free to seek a loan from it to stabilise its currency.

The IMF said, ‘Nigeria is facing high inflation of 26 per cent year-on-year in August and pressure on the naira.

“In June, the authorities unified the different official exchange rate windows. This was a welcome step as it will help to strengthen the functioning of the foreign exchange market. We also welcome the CBN’s recent decision to lift the ban on the 43 items previously restricted from accessing foreign exchange from the official window. This is a positive step in the direction of a shift to a market-determined exchange rate regime.”

Recently, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, noted that the country was expecting about $10bn inflows in the nearest term to help it clear foreign exchange backlog and stabilise the naira.

He noted that the market was illiquid and not functioning properly because there is no supply.

“In addition, from the supply of foreign exchange through NNPC, increased production, reduced expenditure, from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advanced alongside that investment, there is a line of sight of $10bn worth of foreign exchange in the relatively near future in weeks rather months,” Edun said.

To tackle the lingering dollar scarcity in the country, the Nigerian National Petroleum Company Limited, announced that it had secured a $3bn emergency crude oil repayment loan from the African Export-Import Bank.

FDI falls by $471m in five years – NBS

In another development, it has been reported that Foreign Direct Investments into Nigeria declined by $470.8m in the last five years.

This followed analyses of different Capital Importation reports published by the NBS.

According to Investopedia, FDI is an ownership stake in a foreign company or project made by an investor, company, or government from another country.

On Friday, the NBS, in its third quarter 2023 Capital Importation report said the total foreign investments into the country dropped to $654.6m from $1.1bn in Q2.

Out of the $654.6m, Other Investment ranked top, accounting for 77.56 per cent ($507.77m) of total capital importation in Q3, 2023, followed by Portfolio Investment with 13.31 per cent ($87.11m).

On the other hand, Foreign Direct Investment accounted for only 9.13 per cent of the total capital importation during the quarter ($59.77m).

On a year-on-year basis, FDI decreased by 26.8 per cent from $81.72m recorded in the third quarter of 2022 to $59.77m in the third quarter of 2023.

If further declines by 89 per cent on a five-year basis, from $530m recorded in the third quarter of 2018 to the $59.77m recorded in the corresponding quarter of 2023.

The NBS data also showed that between 2018 and 2023, FDI into Nigeria had been on a consistent decline. For example, in 2018, Nigeria recorded FDI of $1.1bn. By 2019, it declined to $934.3m.

It grew slightly to $1bn in 2020 and fell sharply to $698.78m in 2021 before dropping significantly to $468m in 2022. In the first three quarters of 2023, Nigeria has only attracted FDI of 193.4m.

According to a Bloomberg report, the decline in Nigeria’s FDI inflow was attributed to factors such as multiple exchange rates and the central bank’s rationing of dollars.

The IMF, in its Country Report for Nigeria, also highlighted Nigeria’s complex exchange rate policy and multiple exchange rates as some factors affecting the inflow of FDI to the country.

Also, a former Statistician-General of the NBS, Yemi Kale, emphasized the need for clarity on the foreign exchange policy to attract foreign capital inflow.

While presenting a paper titled ‘Strengthening the technical capacity of stakeholders towards domesticating quality and sustainable investment into Africa,’ a professor of International Economic Relations at Covenant University, Jonathan Aremu, urged the Federal Government to prioritise intra-Africa trade as a means to boost foreign direct inflow.

Aremu said, “The government must guard against creating an investment regime that is more favourable to foreign investors by creating more onerous obligations than those that currently exist under the already existing bilateral investment treaties.

“It must provide a suitable, acceptable and effective method for the settlement of investment disputes; and ensure that the provisions which govern intra-Africa investment will lead to an increase in sustainable, intra-African and foreign direct investment flows.”