NIGERIA’S ECONOMIC CRISIS Worsens As Foreign Investments Drop To $875m, Lowest In 5 Years.
Nigeria is clearly going through a major economic crisis, with a high inflation rate, rising food prices, and currency value falling, you can’t successfully argue that Nigeria’s economic fortunes are positive.
As it is, with the recent development, Nigeria won’t be turning around its economic misfortunes anytime soon.
Rising insecurity across the country is a major contributor to Nigeria’s economic woes as had been previously established and most recently proven in the drop in Foreign Direct Investment that came into the country in the second quarter of the year.
Nigeria’s Economic Crisis Worsens Thanks To Insecurity.
The spate of security crises, a tough business climate, and policy inconsistency are among the factors that cut Nigeria’s Foreign Direct Investment (FDI) to $875 million in the second quarter of this year, the lowest since 2016. This is according to a presentation by the Chairman, Presidential Advisory Committee on the Economy, Prof. Doyin Salami, for the Nigeria Economy Summit Group (NESG).
The report said total foreign investment inflows into Nigeria remain low as “investment inflows were $875 million in 2021 Q2 (second quarter) – the lowest quarterly inflow since 2016 Q1.
“FDI inflow into Nigeria has revolved around $1.0 billion in the last five years. FDI inflow in 2021 Q2 was $78m, even lower than 2020 Q2,” Salami said.
The report highlighted the hurdles facing the country’s investment climate to include macroeconomic instability, policy inconsistency, inadequate infrastructure, insecurity, and a tough business climate.
Analysis of the report showed that total investments inflow dropped from $1.99bn to $0.88bn in Q1 and Q2 of this year. The FDI also began a steep drop from the third quarter of last year after it rose $414.8m; it dropped to $251.3m in Q4 2020, further to $154.8m in Q1 2021, and was at an all-time low of $78m in Q2 2021.
On inflation, the report said the increase in food prices is mainly driven by insecurity.
Nigeria’s Economic Crisis Explained Further
Nigeria is also facing issues of a deficit balance of trade, the presidential committee report noted.
“There was a significant improvement in Nigeria’s trade deficit position in 2021 Q2. The deficit narrowed to N1.87 trillion. While the value of imports declined by 1.5% year on year, exports value increased by 75% with crude oil dominating export items at 80%.”
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On the current foreign exchange rate crisis, it said the market is witnessing a supply shortage to meet its demand with the gap expanding.
“From N92 in June to N99 in July, as CBN stopped the sale of forex to BDC operators; as of July 2021, interbank and parallel forex rates had depreciated by 6.27% and 6.67% year to date,” it noted.
Dr. Salami’s report said the forex pressure may continue till year-end “owing to limited inflows from both crude and non-oil sources, rising imports and a backlog of foreign currency demand.”
The report also touched on why Nigerians should worry about the future impact of the country’s current borrowing on the economy.
Borrowing by the government was another concern in the report, which noted that FG’s Expenditure keeps increasing at a faster pace than revenue growth. From January to May this year, it said the actual fiscal deficit was N3.01tr, which is 53.8% of the total budgeted deficit for 2021.
Solutions Proffered To Nigeria’s Economic Crisis
Having highlighted the problems and their major causes, the report went on to proffer solutions by way of five action points which will help the economy rebound for strong growth.
They include sectoral reforms by strategically repositioning sectors for growth, job creation, and poverty reduction; quick intervention and resolution of security crises; enhancing policy consistency by reducing policy reversal and somersaults that tend to be hostile to sectoral growth.
It also recommended more human capital development which would involve massive investment in research and development (R&D), digitization of health and education, and empowering the youthful population with productive skills.
Nigeria Military Intensify Efforts To Curb Insecurity
The past few months have seen the Nigerian military ramp up the fight against terrorists and bandits in Nigeria’s north as they look to curb the spat of insecurity ravaging the region and other parts of the country.
According to Brigadier General Onyema Nwachukwu, Director Army Public Relations, in a statement on Sunday, troops under the Joint Air and Land Components of Operation Hadin Kai neutralised more than 37 Boko Haram terrorists who were converging for a meeting near Sambisa forest in Borno State.
Brig. Gen. Nwachukwu in the statement noted that the successful operation began when the vigilant troops observed the movement of six-gun trucks within Sambisa Forest general area, which was subsequently located at a settlement near Yuwe.
He added that the trucks later moved to a remote location, where they were joined by other terrorist elements, in what seemed like a convergence for a meeting.
“Over 50 Boko Haram/ISWAP fighters were observed to have gathered at the meeting. Having clearly identified the terrorists’ hideout, the Air Component of OPHK immediately dispatched two aircraft to conduct air interdiction on the location”, he said.
According to the Army Director of Public Relations, the strikes, which were carried out under the cover of darkness, were successful and devastating, noting that battle damage assessment corroborated by local sources revealed that over 37 Boko Haram terrorists were neutralized, while several of them reportedly suffered varying degrees of injury.
In another development, Brig. Gen. Onyema Nwachukwu said as the aircrafts retreated to base after the air interdiction, the combat aircrew located another set of four gun trucks about six Kilometers South-West of Bama.
“The aircrew immediately relayed the coordinates of the location of the Gun Trucks to troops of the Land Component at Bama, who promptly engaged the location with Artillery fire bombardment, neutralizing the insurgents’ gun trucks”.
He said the feat in the joint operations was in continuation of the onslaught on terrorists’ enclaves by troops under Operation Hadin Kai in the North East. “Troops of OPHK remain resolute and unshaken in their effort to bring the insurgents to their knees”.
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