Nigeria manufacturing sector’s setback continues as FDI down 57.4% in Q1’24

Onome Amuge

The Nigerian production and manufacturing sector experienced a steep decline in foreign investment inflows in the first quarter of 2024, data from the National Bureau of Statistics (NBS) has shown. The numbers indicate a 57.36 percent drop in investment compared to the previous quarter, with the sector plunging from N450.11 billion in Q4 2023 to N191.92 billion in Q1 2024. 

While the Q1 2024 quarter-on-quarter decline in foreign investment inflows was disconcerting enough, a comparison of Q1 2024 and Q1 2023 figures suggests an even more distressing trend. 

According to the latest NBS report, capital importation into Nigeria’s production and manufacturing sector tumbled 25.07 percent year-on-year. With a marked reduction from N256.12 billion in Q1 2023 to N191.92 billion in Q1 2024, the data suggests an increasingly inhospitable environment for international investment in the Nigerian economy.

Despite the worrisome 25.07 percent year-on-year decline in capital importation into Nigeria’s production and manufacturing sector in Q1 2024, a longer-term analysis of NBS data indicated a positive trend. 

Starting from N913.88 billion in 2020, foreign investment inflows have steadily risen to N934.11 billion in 2021, N948.43 billion in 2022, and N1.59 trillion in 2023, representing a 73.98 percent increase over four years.

Further analysis shows that the share of total foreign investments into the sector has been on a rising trend over the past four years.

A detailed analysis of NBS figures shows that foreign investment inflows have steadily increased over the past four years, both in absolute value and as a percentage of total capital importation.

In 2020, the N913.88 billion foreign investment inflows into Nigeria’s production and manufacturing sector accounted for 9.44 percent of total capital importation of N9.68 trillion. In 2021, the N934.11 billion investment represented 13.94 percent of total capital importation, which stood at N6.70 trillion. In 2022, foreign investments of N948.43 billion into the sector made up 17.79 percent of the total capital importation of N5.33 trillion, while the N1.59 trillion investment into the sector in 2023 represents 40.66 percent of total foreign investments of N3.91 trillion recorded for the year.

Although the manufacturing sector in Nigeria experienced a sustained increase in foreign investment inflows from 2020 to 2023, the first quarter of 2024 marked a significant halt in this trend. Specifically, the foreign investments attracted during Q1 2024, which amounted to N191.92 billion, constituted only 5.68 percent of the total capital importation of N3.38 trillion recorded during the same quarter, representing a sharp decline in investor confidence in the country’s production and manufacturing sector.

Commenting on the recent decline in foreign investment inflows into Nigeria’s production and manufacturing sector, Segun Ajayi-Kadir, the director general of the Manufacturers Association of Nigeria (MAN), expressed concerns over the numerous challenges that continue to hinder investment and expansion in the sector. 

According to Ajayi-Kadir, it is difficult attracting new investments into the manufacturing sector, given the current economic climate that is characterised by macroeconomic instability and uncertainty.

“This is not to take away the undeniable fact that there is huge potential from sustaining existing investments and attracting new inflows if the binding constraints militating against the performance of the sector are ameliorated,“ he added.

Ajayi-Kadir, urged manufacturers to secure credit facilities in the domestic market at competitive rates that allow for profitability.