Nigeria and its corporates spent a sum of $55 billion on foreign expatriates for business, professional, and technical services in the last 10 years.
The revelation came to light in a review of Nigeria’s current account data from the Central Bank of Nigeria (CBN). This accounted for about 84 percent of the total business expenses paid abroad during the period, which is about the highest cause of capital flight in Nigeria in the period reviewed for any specific item.
Between 2011 and Q1 2021, Nigeria spent a sum of $55 billion on foreign business, professional and technical service fees. A closer look at the data shows that Nigeria received only $770.48 million in the period under review, which generates a net aggregate of $54.23 billion.
Its inflow of $770.48 million, only represents 1.4% of the total $55 billion spent in the period under review. The highest outflow was recorded in 2019, with $14.84 billion followed by 2018 with $11.76 billion. The lowest outflow recorded over the period was in 2013 when a sum of $1.38 billion was spent. However, in terms of inflow, the highest was recorded in 2013 with $203 million.
The huge disparity between the inflow and outflow, which is a deficit to the Nigerian economy necessitates the need to build and develop Nigeria’s professional service sector.
The Nigerian professional, scientific and technical services sector is only valued at $5.72 billion (N2.35 trillion) according to the 2020 GDP figures, accounting for just 3.4% of Nigeria’s real GDP.
This is a really meagre contribution, especially with the growing need for technical expertise around the world in various sectors such as oil refinery, industrial manufacturing, financial services, and tech amongst others.
The sector had endured contractions for five consecutive quarters between Q1 2020 and Q1 2021 before printing a 1.92% growth in the second quarter of 2021. The sector was only able to post positive growth due to a favourable base period.
It is worthy of note that the more Nigeria continues to record significant capital outflows on items that could have been accessed locally, the more Nigeria’s foreign reserve continues to suffer decline. Especially, since we are still very much an import-driven economy.
In contrast, the amount spent during the period is 60 percent more than Nigeria’s current foreign reserve position of $34.18 billion.
Nigeria’s huge capital flight is still a cause of concern, as its net current account has maintained a deficit in the past two years since Q1 2019 till date. This is no surprise, given the level of recurrent foreign trade deficit recorded in recent times, dwindling diaspora remittance, high personal and business travel allowance, all of which have made the Naira weaker against other currencies of the world.
Notably, naira in the past week crashed to a record low of N545/$1 at the parallel market due to scarcity of the highly coveted foreign currency and the inability of the banks to meet demands.