At an annual growth rate of about 2 per cent, there can be no question but that the engine of the Nigerian economy labours and is heavy laden, to little fruition. There’s of course, no doubting how poorly it would fare were it invited to travel uphill soon (for instance, if a global recession were to depress both the demand for and price of its key export).


On the ever so important question of whether (or not) Nigeria is working the growing needs of the people is to avoid the pitfalls of an simplification that seeks to establish a moral equivalence between this and the characterisation of the fabled glass of water as either half-full or half-empty. Partisans of the incumbent administration are wont to cashier those who insist that the economy has put in a sub-par shift over the last four years, as pessimists who can only see glasses of water as half-empty where they ought to celebrate the fact that the glass is filling up. The charge of unbridled and unmoored optimism goes the other way. And few Nigerians are the better for this argument.

In defining what it means for an economy to “work”, the supposition here is that no one will mistake a vehicle with a six-cylinder engine as “working”, when it is firing on only one of its cylinders. To belabour this metaphor a bit, tell-tale signs of the state of a bad engine are the inability of the vehicle to build momentum, especially when going uphill, and the noxious smoke it consistently belches from its exhaust.

At an annual growth rate of about 2 per cent, there can be no question but that the engine of the Nigerian economy labours and is heavy laden, to little fruition. There’s of course, no doubting how poorly it would fare were it invited to travel uphill soon (for instance, if a global recession were to depress both the demand for and price of its key export). What about the smoke from its exhaust? If you took the official numbers for unemployment, inflation, and capacity use seriously, “polluting the environment” would be the inescapable response to the latter question.

Aficionados of the glass of water fable will be quick to remind you that the exhaust fumes from the economy’s exertions are not all sooty-black, though. More grey. And, readily, they’d point you to the healthy numbers on the current account balance, the gross external reserves, and the rude health that the domestic banking sector is in – as silver linings in an otherwise cloudy firmament. Recently, this reading of the Nigerian economy’s health got to add additional data to its arsenal.

Foreign investors didn’t send in money to build factories in the first quarter of this year – nor have they done so in any significant way for a while now. No. The monies we took in didn’t stand a lit candle’s chance in Hades of driving productivity enhancements or growth.


According to numbers recently released by the National Bureau of Statistics (NBS), capital imported into the country in the first quarter of this year crossed a (psychological?) threshold. Until the numbers from the January to March 2019 period, the largest amount of capital imported into the country was the US$6.6 billion brought in, in the first quarter of 2013. What, then, to make of the more than US$8 billion imported in the first quarter of this year? Is it not evidence of growing non-resident investor confidence in the economy and the way its current management is husbanding it?

As with other efforts to make sense of the exhaust from the economy’s engine, the truth is more nuanced. “Portfolio investment” (different from the “foreign direct” variety in the extent to which foreign investors have little or no long-term proprietary interest in the instruments, and look only to near-term gains) was the main component of the growth in capital imported into the country in the first quarter of the year. It grew by 57 per cent to US$7.15 billion, from US$4.57 billion in the same period last year. Accounting fully for 88.46 per cent of the US$8.49 billion capital imported into the country early this year.

Foreign investors didn’t send in money to build factories in the first quarter of this year – nor have they done so in any significant way for a while now. No. The monies we took in didn’t stand a lit candle’s chance in Hades of driving productivity enhancements or growth. No. They simply came in to take advantage of relatively high domestic interest rates. We all understand why foreign portfolios of debt and equity would flee the zero-interest bound environments in Europe and North America for higher yields in emerging markets such as ours.

Could non-resident investors and the banks be alive to dangers to investing in the real sector of the economy that the CBN may not have been aware of (or even ignored) in the design of its latest intervention programme? On this question, the next four years promise to be as important as the last four were revealing!


But why would an emerging market pay top dollars to sustain foreign interest in its short-term instruments? Largely, because of vulnerabilities arising from our preference for a “virile” naira exchange rate, and government’s increasingly deleterious appetite for borrowing. Alive to how the flow of domestic funds have not supported real sector activity, the Central Bank of Nigeria (CBN) recently leaned heavily on domestic banks to lend more to businesses than warehouse their liquid funds in government short-term borrowing instruments.

But in the design of policy meant to drive productive activity locally, we do well to understand why foreign direct investment (FDI – the bit that allows an “investor to exercise a certain degree of managerial control over a company”) into the country has remained flat over the years. Indeed, in the first quarter of this year, FDI into the country dropped from US$246.62 million in the first quarter of 2018 to US$243.36 million.

Could non-resident investors and the banks be alive to dangers to investing in the real sector of the economy that the CBN may not have been aware of (or even ignored) in the design of its latest intervention programme? On this question, the next four years promise to be as important as the last four were revealing!

Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.