President of the Lagos Chamber of Commerce and Industry (LCCI), Gabriel Idahosa, has said that the continued decline in capital importation into the country as well as its current structure and skyrocketing foreign exchange is a matter of great concern to businesses across the country.
Speaking on the state of the economy for the first quarter of this year, he revealed that capital importation into Nigeria declined by 36.5 per cent to $654.65 million in the third quarter of 2023 from $1.03 billion in the previous quarter and 43.6 per cent decline when compared to $1.16 billion in the third quarter of 2022.
“A disaggregation of capital imported by type of investment showed that other investments, at $507.77 million, accounted for the largest share of 77.6 per cent of the total. Of this amount, loans amounted to $507.71 million, representing 99.9 per cent of total. Inflow of FDI was $59.77 million (9.13 per cent) of which equity was $59.76 million, while “other capital” amounted to $0.01 million.
Portfolio investment inflow at $87.11 million constituted 13.31 per cent of the total. A further breakdown of portfolio investment inflow showed that bonds were $20.56 million and money market instruments were $58.19 million, accounting for 3.14 per cent and 8.89 per cent, respectively.”
Expressing concern over the skyrocketing FX exchange rate of the Naira, he said it keeps depreciating, negatively affecting business operations. The depreciation, he said, reflected the huge FX obligations, sub-optimal crude oil production and declining capital importation, resulting in low FX earnings from crude oil and a decline in foreign capital inflows thus exacerbating the demand pressure at the FX market.
Adding that the rates change daily, he said the emerging gap between the official rate and the BDC rate may be attributed to several factors, including FX liquidity issues at the parallel market, increasing demand pressure including huge FX obligations and interest rates below inflation.
Urging the federal government and central bank to build market confidence around free FX pricing and explore more policies that grow FX supply into the economy, he said this should be done quickly to save businesses from total collapse.
