Weak naira, poor portfolio investment drag Nigeria’s capital importation down 47 per cent

Nigeria Stock Exchange

Nigeria’s capital importation fell by 46.86 per cent from $9.64 billion in 2015 to $5.12 billion in 2016, the National Bureau of Statistics, NBS, has said.

A report released by the NBS on Wednesday stated that the fall meant that the figure was the lowest value since the series started in 2007, and reflected the numerous economic challenges that afflicted Nigeria in 2016.

According to the report, the total value of capital imported into Nigeria in the fourth quarter of 2016 was $1,548.88 million, which represents a fall of 0.52 per cent relative to the fourth quarter of 2015.
The fall, NBS noted, was due to a decline in portfolio investment, adding that Foreign Direct Investment (FDI) and other investment both increased.

“Portfolio investment fell the most, by 69.81 per cent. This investment type, whereby investors seek quick returns rather than control of management in companies, is most likely to be affected by current market conditions,” the report said.

“The quarterly decline in portfolio investment was mainly due to base effects: there were large investments in money market instruments and bonds in the third quarter, which were not matched in the final quarter.”

According to the report, the weakening of the naira may have had an impact, too, because a weaker naira means more can be purchased with each dollar, and therefore investment projects requiring naira payments cost less in dollar terms.

The report explained further that capital importation can be divided into three main investment types, including Foreign Direct Investment (FDI), Portfolio Investment and Other Investment, adding that in the final quarter of 2016, Other Investment was the largest component of imported capital and accounted for $920.03 million, or 59.40 per cent.

“This followed a quarterly increase of 63.95 per cent, and a year on year increase of 91.16 per cent. While this is partly the result volatility in the series, the value of Other Investment was nevertheless strong, and has been surpassed by only four previous quarters since 2007,” it stated.

“All four subcategories within Other Investment recorded positive investment, in contrast with the previous quarter in which investment was recorded for only Loans and Other claims (subcategory).”

It added further that the second largest component of capital importation in the final quarter of 2016 was Foreign Direct Investment (FDI). This investment type, the report said, accounted for $344.63 million, or 22.25 percent of the total.

A sector-by-sector analysis of the data revealed that three sectors that accounted for most of the movement in capital imported into different sectors. Banking was the sector to import the largest value of capital in the previous quarter. But following a quarterly fall of $394.22 million, or 70.96 per cent, it became only the third largest, and imported $161.30 million in the final quarter of 2016.

By contrast, the report said, Telecommunications sector recorded an increase of $309.45 million, which more than doubled the amount of capital imported in the previous quarter to reach $554.25 million.

The Oil and Gas sector also recorded a large increase, of $155.67m or 90.7 percent, to reach $327.30 million, and became the second largest.

The report noted that the state to import the most capital into Nigeria in the final quarter of 2016 was Lagos, as in all previous quarters. It explained that Lagos is the commercial and financial capital of Nigeria, and home to Nigerian Stock Exchange where shares are traded. As such, it accounts for most of the capital imported into the country, representing 90 per cent of capital importation in nearly all months.
The report added that Abuja is generally the state to import the second largest quantity of capital in 2016.

In the final quarter of 2016, the report noted that there were 32 different countries that were active in investing in Nigeria. The figure is two countries less than in the previous quarter.

According to the report, the country from which Nigeria imported by far the most capital was the United Kingdom, UK, which accounted for $482.89 million, or 31.1 per cent of the total.

This was followed by the Netherlands, which accounted for $296.52 million, or 19.1 per cent of the total capital importation, the report said.


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