Precipitous Decline in foreign capital in a Transition Period

  • Capital importation figures has now shown a persistent decline from $23.9 billion in 2019, $9.65 billion in 2020, $6.70 billion in 2021, and $5.32 billion in 2022.
  • The persistent decline in capital importation may be attributed to the rounds of global economies’ monetary tightening, since the COVID 19 Pandemic and into the Russia/Ukraine war, low investor confidence due to the ambiguous foreign exchange regime, challenges in accessing foreign exchange, high foreign exchange volatility, unflattering ratings by Moody’s and Standards and Poors’, continuous security challenges, high cost of doing business, weak growth and high inflation and interest rates, fiscal and monetary constraints and all in a period of tense political transition.
  • While substantial reforms may yet be done to reverse the trend of declining foreign capital in the long term, we believe that in the meantime, the country will struggle to attract increasing foreign capital for most of 2023 and struggle to keep the exchange rate from depreciating further, unless it is able to boost its crude oil and non-oil exports, especially now that oil prices are once again rising.


The National Bureau of Statistics (NBS) reported that the total capital importation into Nigeria in Q4 2022 stood at $1,060.73 million, representing a 51.51% decrease from $2,187.63 million recorded in the same quarter, last year. The report also shows 8.53% decrease from the preceding quarter, where capital importation was $1,159.67 million in Q3 2022. The largest contributor in 2022 was portfolio investment which amounted to $2,442.24 million, representing 45.8% of total capital importation, lesser than 50.53% contributed in 2021. Other Investments such as trade credits, loans, and currency deposits came second amounting to $2,418.56 million and a 45.39% increase from 39.04% in 2021. Foreign Direct Investments totaled $468.08 trillion, signifying 8.71% contribution in 2022 from 10.43% in 2021. On a sector basis, the top three sectors with the highest inflows in 2022 were the Banking sector with 39.21% ($2,089.60 million) of the total capital importation, the Production sector accounting for 17.80% ($948.43 million) and the Financing sector which accounted for 14.85% ($791.16 million). The sector with least contribution was the transport sector with a 0.02% ($1.32million) in 2022.


Capital importation figures has now shown a persistent decline from $23.9 billion in 2019, $9.65 billion in 2020, $6.70 billion in 2021, and $5.32 billion in 2022. The importance of capital inflows in a country where foreign exchange is in high demand to stimulate economic activity is very clear. Accordingly, the continuous decline in foreign capital inflows in the presence of dwindling crude oil sales and generally poor and unstable export earnings has slowed down foreign reserves accretion and widened the foreign exchange supply gap thereby putting pressure on the exchange rate which has depreciated for the most part since 2022. Additionally inadequate access to foreign exchange has constrained inputs for production leading to higher production costs, lower revenues and slower economic growth.