FDI boost of $50bn key to achieving 5% inflation in Nigeria in 2025, says economist
Onome Amuge
Investing beyond borders is a core pillar of foreign direct investment (FDI), which involves buying a controlling stake in assets such as businesses, real estate, or productive resources in a foreign country, granting the investor direct influence over these assets.
In Nigeria, FDI has proven to be a vital source of capital importation, with the country attracting a cumulative total of $252.83 million in the first three quarters of 2024.
Despite FDI’s significant contribution to Nigeria’s economy, economists argue that the country needs to up its game and attract more foreign investment if it hopes to achieve sustainable economic growth.
Standing at the forefront of calls for greater FDI is Ayo Teriba, the Chief Executive Officer of Economic Associates and a renowned figure in the Nigerian economic landscape.
In his most recent proposal, Teriba asserted that Nigeria must pull in $50 billion in Foreign Direct Investment if it hopes to bring inflation down from its current rate of 34.6 percent to five percent by 2025.
The CEO of Economic Associates posited that expanding the country’s net reserves would serve as a potential economic fix for Nigeria’s current economic woes. This, he suggested, would not only serve as a stabilising force for the economy but could also pave the way for Nigeria’s macroeconomic conditions to become more moderate in the long run.
According to Teriba, Nigeria’s economic woes,most notably, the country’s stubbornly high inflation rate and unstable exchange rate could be mitigated with a robust increase in capital inflows and the resultant surge in the nation’s foreign reserves.
Teriba advocated for a proactive and aggressive approach from the government, stressing that without bold reforms designed to draw in substantial foreign direct investment , Nigeria’s economy, currently struggling with a slew of interconnected issues, would remain in a state of stagnation.
According to the economist, only transformative FDI inflows could catalyse the kind of economic transformation necessary to lift Nigeria out of its current economic challenges and create a sustainable pathway towards long-term prosperity.
” Five percent inflation is possible next year. Look at what happened in Argentina. Economists don’t prophesy but make conditional statements.
“If the president can complement the efforts on tax and finance reforms with an investment act to attract $50bn FDI within the next year, exchange rates will stabilize, and inflation will drop to single digits,” he said.
Teriba cautioned that the government’s existing economic policies, especially its preoccupation with debt servicing, are obstructing its ability to reach the proposed FDI target, which he views as an essential component in tackling Nigeria’s endemic economic challenges.
He highlighted that borrowing to settle existing debt is not only ineffective in addressing the root of Nigeria’s economic issues, but it is also a self-defeating strategy that entrenches the country in a vicious cycle, further impeding its ability to attract the FDI necessary to spur economic growth and stability.
“The interest rates offered to Nigeria by international creditors are among the highest globally, primarily due to the country’s poor credit rating. This makes borrowing inefficient and unsustainable as a long-term strategy,” he pointed out.
Teriba criticised the government’s reliance on debt, advocating instead for a paradigm shift towards equity-based financing to unlock Nigeria’s potential for economic growth.
He pointed out that other nations with comparable economies, which manage to issue higher-grade debt instruments, are able to borrow at more attractive rates. By contrast, Nigeria’s debt-based approach, which has resulted in its current lower-grade debt instruments, has contributed to its difficulties in attracting foreign direct investment and has acted as a barrier to achieving the economic stability and growth it so desperately needs.
Teriba highlighted the pressing need for the government to take decisive action by adopting a comprehensive investment strategy, focused on structural reforms and incentives, to attract foreign capital. He cautioned that in the absence of these efforts, inflationary pressures would continue to burden the economy, jeopardising stability.
The economist cautioned that if Nigeria persisted on its current path of high-interest borrowing and poor debt management, it would forego the opportunity to stabilise its economy. However, he argued that if the government implemented ambitious reforms and succeeded in attracting $50 billion in foreign direct investment, Nigeria could enter a new era of economic growth and stability.