To underscore the severity of the economic challenges Nigeria is facing, the country attracted only $3.73 billion in foreign direct investment (FDI) between 2020 and the third quarter of 2024.

Foreign direct investment (FDI) refers to an investment by a party in one country into a business or corporation in another country with the intention of establishing a lasting interest.

It is this lasting interest that differentiates FDI from foreign portfolio investments (FPI), where investors passively hold securities from a foreign country.

An analysis of FDI contributions to the country’s capital importation over the period, as published by the National Bureau of Statistics (NBS), shows that the figure is 41.99% lower than the $6.43 billion received in the preceding five years from 2015 to 2019.

According to the figures, in 2020, the total FDI was valued at $1.29 billion. The figure rose to $1.42 billion in 2021, only to slump to $386.2 million in 2022 and further decline to $377.77 million in 2023.

FDI hit rock bottom in the three quarters of 2024, attracting only $252.82 million.

Conversely, in 2015, the total value of FDI that came into the country was $1.25 billion. This figure, however, dropped to $1.04 billion in 2016 and further to $981.78 million in 2017. It then jumped to $2.23 billion in 2018 but slumped again in 2019 to $929.58 million.

Nigeria has faced decade-long economic challenges exacerbated by the drop in crude oil prices and the COVID-19 pandemic, leading to the devaluation of the naira at different points and hyperinflation that has maintained a steady upward trend for close to three years, hitting 34.60% in November 2024.

Nigeria is currently experiencing what could be described as its worst cost-of-living crisis in decades, brought about by the twin reform initiatives of fuel subsidy removal and the floatation of the naira introduced by the Tinubu administration.

The country is also grappling with serious security challenges, which have either deterred potential foreign investors or forced those already invested to exit.

Reports indicate that over the last three years, more than 16 multinational companies have left the country, worsening revenue generation efforts and unemployment challenges. Among the companies that have divested from Nigeria are Diageo, which sold off its stake in Guinness Nigeria to Tolaram; Kimberly-Clark, manufacturers of Huggies and Kotex diapers; US-based Procter and Gamble (P&G); GlaxoSmithKline (GSK); Sanofi-Aventis Nigeria; Unilever Nigeria, which exited the home care and skin cleansing markets in November 2023, citing the need for a “more sustainable and profitable business model.”

These companies cited reasons such as high energy costs, currency depreciation, and insecurity.

Nigeria’s business environment is often characterized by uncertainty, corruption, and regulatory challenges, deterring foreign investors.

The country’s infrastructure deficits, including inadequate power supply, transportation, and logistics, have also been linked to the high cost of doing business, which even forces local investors to close operations.

Nigeria’s bureaucratic processes are slow and cumbersome, making it difficult for foreign investors to navigate the system and obtain necessary permits and approvals. A lack of transparency in government policies and frequent changes to economic regulations create further uncertainty for potential investors.

Experts have advised that instead of spending taxpayers’ money on foreign trips in search of investors, the funds should be used to improve domestic conditions to attract investments.

To illustrate the urgency, Nigeria spent billions of naira funding President Buhari’s visits to 43 countries and, more recently, Tinubu’s 29 foreign trips.

According to data from GovSpend, a portal documenting Presidential Villa expenditures, Nigeria spent over N2.3 billion between February and July 2024 to fund the President’s foreign trips.

President Tinubu reportedly made 29 trips to 16 countries, spending over 124 days outside Nigeria within the period. Despite these efforts, data from the NBS indicates that Nigeria recorded no foreign capital inflow from 11 of the countries visited during the first half of 2024.

To address the worsening economic challenges and attract more FDI, Professor Godwin Oyedokun of Lead City University, Ibadan, advised the Nigerian government to improve the business environment; invest in critical infrastructure; promote transparency and accountability; simplify bureaucratic processes; provide investment incentives; enhance security and stability; improve access to finance; build a skilled and qualified workforce.

“The authorities need to work towards ensuring political will and reducing corruption, as these factors significantly influence investment decisions,” Oyedokun said.

He also warned against over-dependence on foreign portfolio investments (FPI), noting that they are often more volatile than FDI, leading to sudden capital flight during economic downturns or political instability, which can destabilize the local economy.