The ongoing global financial crisis has induced a 90 per cent fall in foreign investment in Federal Government (FGN) bonds, Director-General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, announced yesterday.

In a paper, Nigeria's debt management and the global financial crisis, at the roundtable on the global financial crisis and Nigeria, organised by the Nigerian Institute of International Affairs (NIIA), in Lagos.

Nwankwo who was represented by a director in the DMO, Mr. Magaji Mahmoud, disclosed that following the global financial crisis, foreign holdings of FGN bonds dropped from 10 per cent to one per cent. "The drop reflects the credit crunch and liquidity crisis in the markets of developed countries," he added.

In order words, foreign holdings in FGN bonds have dropped by N8.55 trillion to N950 billion from N9.5 trillion. According to statistics from the DMO, the volume of FGN bonds traded in the Over-the-Counter (OTC) market between January 2007 and August 2008 stood at N9.5 trillion.

He harped on the need for the Federal Government to step up its drive for Foreign Direct Investment (FDI) as opposed to foreign portfolio investment.

He said, "There is the need for the country to be cautious about the percentage of foreign holding of the country's domestic debt stock, given the mobility of portfolio investment. It needs to focus more on attracting FDI, rather than portfolio investment. We need to target inflows from Nigerians in Diaspora when seeking external financing."

Speaking in the same vein, Dr. Emmanuel Ani, Research Fellow of the NIIA, predicts a decline in the remittances by Nigerians in the diaspora, foreign exchange, grants and aids to the country from international donor agencies.

According to him, "Foreign exchange receipts from exports of 'invisibles' such as shipping, insurance, tourism among others will drastically reduce because of the global financial crunch. Capital inflow, both long term and short-term which includes loans and investments, unilateral transfers as gifts or grants, both private and public will drastically decline.

Not quite divorced from the above points is the impact of the crisis on home remittances by Nigerians in diaspora, who have been sending billions of Naira home on a regular basis to add liquidity to the country's economy.

Ani advised the government to check the country's importation, curtail capital outflow and be prudent in managing its foreign reserves and foreign exchange earnings, if it is to escape the pangs of the global financial crisis.

"To minimise the devastating effect of the global financial crisis, it is advisable that Nigeria be prudent in managing the foreign exchange from her exports, diversify sources of such exchange earnings and intensify its efforts to stop capital outflows into banks in the western world and the United States by corrupt politicians as such outflows would neither benefit them nor the nation.

Mr. Henry Boyo, a financial analyst, called for the federal government to pay states their share of the federal allocation in dollars rather than in naira and abolish the $3 billion sales to the Bureau De Changes monthly and weekly in the dollar auction by the CBN so as bolster the countries' revenue base and enhance liquidity as a measure to reduce the impact of the global financial crisis on the country.