Tony Chukwunyem Financial Derivatives Company (FDC) Ltd has harped on the need for Nigeria to rethink its investment strategy, as the country’s current investment levels are “inadequate to drive the structural transformation needed for sustainable economic growth.”
In a report obtained by New Telegraph, the firm said: “By rethinking its investment strategy and implementing bold institutional, economic and industrial reforms, Nigeria can replicate the successes of China and Vietnam in leveraging investment for industrialization and productivity enhancement.”
“A strategic shift towards infrastructure expansion, industrial policy alignment, and deepening the financial sector is imperative to ignite industrial production, energize businesses, and propel the country towards a high-growth trajectory.
Without such recalibration, Nigeria risks perpetuating its low-investment, low-productivity trap, hindering its aspirations for economic transformation,” it warned.
The FDC noted in the report that Nigeria’s economic growth has stalled in the past decade due to “structural impediments, productivity slowdown and global commodity price shocks.”
Specifically, it stated that the country’s nominal Gross Domestic Product (GDP)-in dollar terms- plummeted to $200 billion in 2024 from $570 billion in 2014, “reflecting weak growth and massive exchange rate depreciation.”
The firm further said: “Our study shows a strong correlation between sustained economic growth and investments. This suggests that to achieve long-term growth and prosperity, Nigeria must refocus on an investmentled growth strategy.
There must be a shift from the current investment approach, which is often superficial and fragmented, to a more strategic focus on capital deepening.
By intensifying investments in critical sectors, Nigeria can catalyse industrial expansion, enhance productivity, and unlock its latent potential for accelerated and sustainable growth.”
According to the FDC, Nigeria has a widening productive investment gap, especially infrastructure investments, Foreign Direct Investment (FDI) inflows, and capital formation.
It cited the African Development Bank’s latest 2024 infrastructure index reports, which show that Nigeria ranks 24th on the continent, with an estimated infrastructure gap of about 75 per cent.
“Infrastructure deficits are particularly pronounced in electricity (97.3%), transport (94.4%), and ICT (81.2%), reflecting systemic under – investment and constrained productivity.
Weak fiscal space, governance inefficiencies, inconsistent policies, and regulatory bottlenecks heighten underinvestment in infrastructure.
Additionally, reliance on oil revenue has constrained capital allocation, while poor maintenance culture and the dearth of a clear infrastructure investment strategy further exacerbate the widening gap across key in – frastructure sectors,” the FDC stated.
Throwing light on how low FDI inflows has contributed to underinvestment in Nigeria, the firm said: “In capital-scarce economies like Nigeria, FDI is essential for supplementing domestic savings, financing infrastructure, and facilitating technological diffusion.
“However, Nigeria’s FDI inflows have plunged to a multi-decade low, reaching just $380 million (4.8% of SSA’s inward FDI) in 2023—down frodecade-high of $1.5 billion (6.7% of SSA’s inward FDI) in 2015.
“At present, FDI accounts for merely 0.1 per cent of nominal GDP. Low FDI inflows restrict capital formation, limit technology transfer, and stifle economic diversification, reinforcing dependence on volatile commodity exports, particularly oil, which accounts for nearly 90 per cent of Nigeria’s exports.”
In addition, the FDC pointed out that Nigeria’s Gross Fixed Capital Formation (GFCF) has declined over the past decade, underscoring weak investment in productive assets.
“This suboptimal level of capital accumulation is largely attributable to constrained credit access and elevated borrowing costs.
At 13 per cent of GDP, Nigeria’s credit to the private sector remains severely low — significantly lower than China (195%), Vietnam (126%), and South Africa (91%). The government’s increasing dependence on the domestic loanable funds market further exacerbates the situation.
“Over the past five years, domestic credit to the government has constituted more than 30 per cent of total credit extended by financial institutions, expanding at an annual rate of 35 per cent, while private sector credit has grown at a much lower rate of 23 per cent per annum.
“The result is that government borrowing crowds out private sector investments, leading to low GFCF, which further constrains industrial expansion, stymies technological advancement, and hampers productivity growth.
To break out of this low-investment trap, Nigeria must pursue a more deliberate investmentled growth strategy that prioritizes industrialization, infrastructure, and private-sector dynamism,” the firm opined.
