The Manufacturing sector in the third quarter of 2023 attracted a total of $279.51 million in Foreign Direct Investment (FDIs).
This represents a drop of around 53.80% when compared with the figure for the previous quarter which stood at $605.04 million.
On a year-on-year basis, FDI to the manufacturing sector declined by 71.2% from $392.54 recorded in Q3, 2022 to its figure in the quarter under review.
This is according to figures obtained from the National Bureau of Statistics NBS, Q3 Foreign Capital Importation report.
However, in the first nine months of 2023, the manufacturing sector received around $1.14 billion in foreign capital.
This represents an increase of $415.82 million when compared to the $724.75 million received in the same period of 2022.
It is important to note that the decline in foreign capital is not unique to the manufacturing sector but to the general economy in Q3.
Total capital importation for Q3 stood at $654.65 million which represents a drop of 36.45% when compared to the figure recorded in Q2 ($1.03 billion).
Every year, foreign capital declined by 43.55% from the $1.16 billion recorded in the same quarter of 2022.
Why decline in foreign capital import to the manufacturing sector
- The manufacturing sector in the past few years has been faced with a series of problems that have curtailed its growth. These problems include; rising foreign exchange rates, high energy costs occasioned by epileptic power supply, multiple taxation, inflation, etc.
- A review of the performance of some manufacturing firms listed on the NGX reveals that 8 companies recorded a foreign exchange loss of -N129.811 billion while only three of these companies recorded a foreign exchange gain of just N3.49 billion. This coupled with the difficulty of multinationals in the manufacturing space to repatriate cash has resulted in notable exits in recent times.
- A one-time Minister of Finance and also Trade and Investment, Mr. Olusegun Aganga stated in a lecture that Nigeria has been deindustrializing since 2015 due to the reduction in the contribution of the manufacturing sector to the economy.
- In Q3, 2023 the contribution of the manufacturing sector to GDP dropped to 8.42% from the 8.62% growth rate recorded in Q2, 2023.
The manufacturing sector gdp was on a decline from about 2012 for about 13 quarters. It turned positive at about 2017/2018 and has experienced modest growth.
It’s thereby quite mind boggling to say Nigeria has been de insustrializing when in 2022, Nigerias manufacturing sector is bigger than it was in 2014. And this is measured in USD, despite devaluation.
If measured in in Naira the sector has grown hugely.
We need to report the challenges, but the wider context should always be properly captured.