Thread by @StearsBusiness

💵 💵 A THREAD

In a year that has brought so many new experiences, there is one Nigerians will be familiar with: dollar scarcity.

For something so top-of-mind for many Nigerians, little is said about where dollars come from or worse most of what is said is wrong.

1/13

This thread is a deep dive into where Nigeria gets its dollars from.

OIL
REMITTANCES
FOREIGN DIRECT INVESTMENT
LOANS

2/13

OIL

Oil earnings have become less important over time. That sounds positive, but this is mainly because oil exports have declined over time.

Next time you hear that “90% of Nigeria’s foreign exchange comes from oil” REJECT it.

3/13

In 2019, oil exports only accounted for 47 cents out of every dollar that came into Nigeria.
Insert chart.

4/13

REMITTANCES

You also hear that “Nigeria’s biggest export is not oil, but people”.

While that may be true in a figurative sense, remittances account for about 20%, much less than oil.

5/13

Meanwhile, Nigeria does not export much aside from oil and people; $10 billion worth of non-oil exports is not even good for 10% of all dollar inflows.

Remittances are highly regarded because of how stable they are, but the data shows this may be a double-edged sword.

6/13

Yes, remittances barely budged in 2016 when everything else crashed—it accounted for a third of all dollar inflows that year.

But remittances are also sticky in the good times. After growing by 37% between 2005 and 2010, remittances grew just 19% over the next decade.

7/13

FOREIGN DIRECT INVESTMENT

On to foreign investments now, which were four times higher in 2019 than they were in 2010. On the surface, this is wonderful. If Nigeria can keep attracting foreign investors, the country would have the capital it needs to grow.

8/13

Unfortunately, once we separate foreign direct investment (FDI) from foreign portfolio investment (FPI), we begin to worry for Nigeria’s investment prospects.

9/13

In 2019, only 5% of foreign capital was FDI. And this is not just because FPI grew rapidly; FDI declined from a peak of $7 billion in 2008 to $934 million last year.

FDI has basically disappeared

10/13

LOANS

The headline here is that Nigeria has really ramped up external borrowing in the last few years.

The loans received in 2017 ($7.5 billion) were only slightly less than what Nigeria accumulated in the preceding ten years combined ($7.8 billion).

11/13

Although external loans are ostensibly gotten for long-term purposes like infrastructure investment, the Federal Government’s preference for borrowing abroad has helped top up the CBN’s external reserves.

12/13

Alas, these loans must be repaid one day, and cannot be considered a sustainable source of dollars.

You can read the full story. We also talk about how Nigeria spends its dollars.

13/13

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