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Like the Biblical Dry Bone, Nigeria’s Capital inflow can Rise Again if…  

According to the #Nigeria Bureau of Statistics (NBS), the total #capital importation into Nigeria in Q1 2023 stood at $1,132.65 billion, a 28% decrease compared to $1,573.14 billion recorded in Q1 2022. When compared to the preceding quarter, the nation’s statistics agency said that capital importation rose by 6.78 percent from $1,060.73 billion in Q’4 2022. 

#Portfolio investments, which accounted for the largest capital according to the report stood at 57.3%; other investments at 38.31%, while foreign direct investment contributed 4.2% to the figure. 

The report noted that importation from The #UnitedKingdom accounted for the highest capital importation on a country-by-country basis with 59.5%, followed by the #UnitedArabEmirates with 9.6% and the #US at 8.4%. 

Aerial view of cargo ship in transit.

On a sectoral basis, capital importation into the #banking sector recorded the highest inflow of $304.56 million (26.89%) of the total capital imported in the period, followed by the inflow into the #production sector, at $256.12 million (22.61 percent), and #IT Services with US$216.06 million (19.08 percent). 

#Lagos topped the list of states by Destination of Investment with US$704.87 million, accounting for 62.23 percent of total capital investment in Nigeria with #Abuja following with $410.27 million (36.22%). 

In Case You Do Not Know 

Capital importation refers to the movement of money into a country for the purpose of investment, trade, or business operations. Developing countries such as Nigeria desire capital to complement her domestic savings for growth and development, thus foreign capital becomes an important source of augmenting the saving-investment gap in most resource-deficient economies, especially in developing countries. 

What Types of Capital Do Countries Import? 

Capital Importation for Nigeria is divided into three main investment types: Foreign Direct Investment (FDI), Portfolio Investment, and Other Investments. 

Foreign Direct Investment: Foreign Direct Investment is the direct transfer of technological know-how and managerial practices to the host country. 

Foreign Portfolio Investment (FPI) on the other hand is a mere change of ownership. FPI has high liquidity and a short time horizon because it can be traded in the financial market, unlike #FDI which is in real assets. Also, the FDI inflow is hardly affected by the national exchange rate as the #FPI.  

Portfolio investments can be made into all types of assets, such as government bonds, real estate investment trusts, stocks, and exchange-traded #funds. While #direct investment is when an investor buys a stock with the aim of gaining voting power in the company. 

What BAT Administration can do to Increase Capital Inflow into Nigeria? 

To grow the nation’s capital inflow, the Nigerian government should focus more on Foreign Direct investment if the government’s commitment to growing capital inflow into the country must be achieved. To achieve this, governments at all levels in Nigeria can encourage foreign capital inflow by  

Providing Tax incentives to potential foreign investors: Government can extend more favorable tax treatment of certain sectors compared to what is granted to the general industry.  

Revamping almost all of Nigeria’s dead industrial estates: In addition, the government can attract direct capital inflow into the country by revamping almost all of Nigeria’s dead industrial estates as well as increasing the number of export processing zones across the country. 

Simplifying bureaucratic procedures for business expansion: One of the issues that potential investors face is the bureaucratic procedures facing potential investors especially in registering their business and obtaining licenses to do business in Nigeria. By simplifying these bottlenecks, foreign investors would be encouraged to push their funds and investments into the country.  

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