The Federal Capital Territory (FCT) is struggling to recover from a significant crash in foreign capital recorded in the second quarter of 2023 after the 2023 elections.
According to the capital importation report of the National Bureau of Statistics (NBS), the capital city witnessed a staggering 53% plunge in the second quarter of 2023, a concerning statistic for investors and policymakers alike.
The stark decline is evident in the numbers. From a robust $410.27 million in Q1 2023, foreign investment into the FCT plummeted to about $194.28 million in the following quarter.
This 53% drop is not the only alarming fact. A year-on-year comparison paints a similarly grim picture, with a 57% decline from Q2 2022’s $453.95 million to Q2 2023.
This downturn marks the lowest ebb in foreign capital inflow since Q4 2021, where the figure stood at $170.55 million.
36% y-on-y decrease in Q3 2023
Abuja is yet to recover from this new 15-month low as it recorded a very marginal increase of less than 1% by Q3 2023. Q3 2023 offered a twinkle of hope with a marginal uptick of 0.2%, reaching $194.66 million when compared with the previous quarter.
However, this was not enough to offset a year-on-year decrease of 36% from Q3 2022’s $303.81 million. Also, the cumulative impact over the first nine months of 2023 is stark as Abuja attracted a total of $799.21 million, which was a decline of 34% from the $1.2 billion recorded in the same period in 2022.
Economists blame post-election fever, insecurity
Dr. Aliyu Ilias, a seasoned development economist, attributed this volatility to the recent elections and changes in government.
He also highlighted the ripple effect of insecurity in neighboring states on investor confidence in Abuja.
Dr. Aliyu Ilias said:
- “There is volatility in FCT because of the election. Also, most states surrounding Abuja have issues of kidnapping, banditry, and terrorism. Niger, Kogi and Kaduna are highly volatile. All these adjourning states have issues. That is likely the problem.
- “If you look at Abuja, because of the political turbulence or policy somersault, that is another reason why investments will not come. People prefer to go to where there is peace, and everything is organized to invest.”
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, concurred, pointing out the cautious approach of investors during election periods.
He observed that Abuja’s investment landscape is predominantly real estate-centric, with fewer manufacturing ventures, leading to cautious real estate investments.
He said:
- “During the elections, investors are normally very cautious. Because Abuja is the federal capital, it may be a bit more politically volatile or sensitive area. Another possibility is that it depends on the opportunities that come up.”
A Professor of Economics at Onabisi Onabanjo University, Prof Sheriffdeen Tella, underscored the instability of the investment environment and the restrictive foreign exchange policies deterring investors. He questioned the viability of real estate investments in a cash-strapped economy.
This investment slump in Abuja underscores a broader challenge for Nigeria: as foreign direct investments falter, the nation leans more heavily on foreign loans, raising concerns about sustainable economic growth and stability.
