Data available on Nigeria's capital imports between 2015 and 2022 reveal a huge fall in capital imports during the previous eight years. Nigeria could only attract $89.4 billion in the period under review, compared to around $98 billion between 2007 and 2014.
Around $22.1 billion of the $89.4 billion influx into the nation in the previous eight years came through FDIs and FPIs taking positions in equity-type ventures. The remaining $67.3 billion comes via debt-linked instruments and foreign instruments loans that Nigeria still owes. This information is courtesy of a report from the Nigerian business news platform Nairametrics.
This compares to $71.4 billion between 2007 and 2014, which is around 72.3% (the last eight years being 24.7%) of total capital importation.
Investors' preference for the country's debts over the more favored equity-linked investments has been a recurring topic of foreign investment inflows from 2015 till the present.
Before 2015, foreign investors made significant investments in Nigeria's economy, either through the stock market or through direct commercial operations. Yet, when investor confidence in the economy waned, investor preference shifted to debt-linked instruments that provided some assurance of a return on investment.
Short-term money market products have become popular among international investors, rising from $5.6 billion in 2007 to $34.4 billion in the following eight years.
The Central Bank of Nigeria's strategy of encouraging forex retention also had a key impact on the surge of foreign portfolio investments into the money market between 2017 and 2019, resulting in the sale of more than $26 billion in OMO bills (between 2018 and 2020 alone).
The program was designed to encourage international investment and increase Nigeria's foreign reserves. While this program was effective in the near term, it had numerous downsides, such as hefty interest payments and, as a result, a considerable devaluation of the Nigerian currency over time.
Corporate bond issuance in Nigeria also led to a rise in capital inflows. The purpose of the issue was to raise funding for infrastructure development and other initiatives. This action was hailed as a positive step since it allowed investors to participate in Nigeria's economy, contributing to the country's economic growth and development.
Nigeria's tough business climate is one of the main reasons that led to the fall in foreign investment during the last eight years.
Other major difficulties restricting capital importation (particularly equity-linked inflows) into Nigeria include the collapse in oil prices, significant budget deficits, capital regulations, corruption, and insecurity.