Nigeria: Foreign Portfolio Investment Falls for Second Consecutive Year

This picture taken on January 28, 2016 in Lagos shows naira banknotes, Nigeria's currency. - Nigeria's central bank governor, Godwin Emefiele, on January 26 dismissed calls to devalue the naira in his monetary policy committee statement. Instead he chose to continue propping up the currency at 197-199 naira to the dollar and maintain foreign-exchange restrictions. As a result, the naira on the black market is hovering around a record low of 305, fuelling complaints from domestic and foreign businesses who can't access dollars required for imports.
This picture taken on January 28, 2016 in Lagos shows naira banknotes, Nigeria’s currency. – Nigeria’s central bank governor, Godwin Emefiele, on January 26 dismissed calls to devalue the naira in his monetary policy committee statement. Instead he chose to continue propping up the currency at 197-199 naira to the dollar and maintain foreign-exchange restrictions. As a result, the naira on the black market is hovering around a record low of 305, fuelling complaints from domestic and foreign businesses who can’t access dollars required for imports.

The volume of foreign portfolio investment in Nigeria declined for the second consecutive year, falling by 34% in 2021 to $3.39 billion, compared to $5.16 billion in 2021. It is the lowest amount of FPI attracted by the country in the last five years. This is contained in the capital importation breakdown data released by the Central Bank of Nigeria.

While the decline in foreign portfolio investment is partly a consequence of the global lockdowns and travel restrictions caused by COVID19, the data suggest that domestic investors are taking over the local financial market.

In 2019 FPI recorded in Nigeria was $16.38 billion, which by 65% to $5.16 billion in 2020. A further decline happened in 2021, resulting in $3.86 at the end of the year.

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Factors such as inflation and insecurity also have contributed to the loss of faith by foreign investors while a severe shortage of foreign exchange has been a sore point for the government and the Central Bank. The ease of doing business index lists Nigeria at 131 out of 190 economies across the world.


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