Nigeria’s capital inflow dropped to $1.63 billion in November 2024, reflecting a 13.8% decline from October’s $1.89 billion.
This is according to the Central Bank of Nigeria’s (CBN) Economic Report for November 2024.
The decline was driven by a reduction in portfolio investments, foreign direct investment (FDI), and other investment categories, including loans.
The dwindling capital inflows highlight investor concerns about Nigeria’s macroeconomic environment, exchange rate stability, and policy direction.
“Capital inflow declined to US$1.63 billion in November 2024, from US$1.89 billion in October 2024. A breakdown showed that portfolio investment inflow decreased to US$1.36 billion, from US$1.41 billion due, mainly, to lower purchases of equity and shares. Similarly, foreign direct investment decreased to US$0.12 billion from US$0.18 billion in October 2024. ‘Other investments’, mainly loans, also decreased to US$0.15 billion from US$0.30 billion in the preceding month.” CBN Economic Report for November 2024 reveals.
Breakdown of Capital Inflows
A breakdown of the data reveals that:
- Portfolio investment inflows—which consist of foreign purchases of Nigerian equities, bonds, and money market instruments—declined to $1.36 billion from $1.41 billion in October. This drop was primarily due to lower equity and share purchases by foreign investors.
- Foreign Direct Investment (FDI) fell to $0.12 billion in November, marking a 33.3% drop from $0.18 billion in October. This suggests that investor confidence in long-term projects in Nigeria remained weak.
- Other investments, including loans and trade credits, dropped significantly to $0.15 billion from $0.30 billion in the previous month, reflecting a 50% decline.
Factors Driving Capital Inflow Decline
The drop in capital inflows can be attributed to several factors, including:
1. Monetary Policy Uncertainty – Investors are cautious due to the CBN’s evolving foreign exchange policies and interest rate adjustments.
2. Naira Volatility – The fluctuation in the exchange rate continues to deter foreign investors who seek stability in Nigeria’s financial markets.
3. High Global Interest Rates – With central banks in developed economies maintaining high interest rates, investors prefer safer assets in the US, Europe, and Asia over emerging markets like Nigeria.
4. Security and Political Risks – Ongoing economic and political uncertainties have contributed to reduced confidence in Nigeria’s investment climate.
Implications for the Nigerian Economy
The continued decline in capital inflows could further strain Nigeria’s external reserves, impact the exchange rate, and reduce liquidity in key sectors of the economy.
Foreign investments are crucial for economic growth, job creation, and infrastructure development, making the persistent decline a concern for policymakers.
Highlights
- Capital inflow declined from $1.89 billion in October to $1.63 billion in November 2024.
- Portfolio investment fell to $1.36 billion, mainly due to reduced equity and share purchases.
- Foreign direct investment (FDI) dropped to $0.12 billion from $0.18 billion in the previous month.
- ‘Other investments,’ including loans, fell to $0.15 billion from $0.30 billion.
