2021: What's holding back FDI into Nigeria?

Nigeria experienced a significant decline in total capital importation in 2020, with the lowest level in four years at $9.68 billion, as reported by the National Bureau of Statistics. The United Nations Conference on Trade and Development also noted a drop in investments, from $3.3 billion in 2019 to $2.6 billion in 2020. These figures raise concerns about Nigeria's ability to attract foreign direct investment (FDI) and spur economic growth. To delve deeper into the issue, Kyari Bukar, former Chairman of the Nigerian Economic Summit Group, shared insights on strategies to enhance FDI inflows in a recent interview with CNBC Africa. Bukar acknowledged that Nigeria faced challenges even before the COVID-19 pandemic hit. The pandemic served as a catalyst, exacerbating existing economic issues. The country's capital importation decline of 69% in 2020 compared to an 18% drop in Sub-Saharan Africa paints a concerning picture. As the global economy grapples with uncertainties, Bukar highlighted the potential impact of Joe Biden's presidency in the United States, which could lead to capital flowing into emerging markets like Nigeria. Key themes in revitalizing FDI include policy consistency, transparency in foreign exchange (FX) policy, and inflation management. Bukar emphasized the need for market-friendly policies and auction-based FX management to boost investor confidence. Addressing regulatory risks and ensuring fiscal reforms are accountable and transparent are vital steps to attract capital inflows. Additionally, managing inflation rates is crucial to safeguarding the value of Nigeria's currency. The ongoing pandemic adds another layer of complexity to the FDI landscape. Vaccination efforts play a role in attracting foreign investors, with successful vaccinations enhancing investor confidence. Bukar stressed the importance of procuring accessible vaccines like the Johnson & Johnson product, which simplifies handling and distribution. While challenges persist in vaccine availability and budget allocations, strategic vaccination strategies could bolster FDI prospects in Nigeria. Despite the hurdles, Bukar remains optimistic about Nigeria's FDI potential. While the $9.68 billion capital importation in 2020 pales in comparison to 2019's $24 billion, he envisions a path to doubling this figure through market-friendly policies. Fostering a conducive investment climate and bridging the gap in FDI and other investment categories are critical for sustainable economic growth. In conclusion, Nigeria faces a pivotal moment in attracting FDI and revitalizing its economy post-pandemic. By implementing strategic reforms, enhancing policy clarity, and leveraging vaccination initiatives, the country can position itself as an attractive destination for foreign investors. The road ahead may be challenging, but with concerted efforts, Nigeria has the potential to unlock greater FDI inflows and drive economic development.