Data released by the National Bureau of Statistics indicates that Capital importation was particularly low in January, at $187.90 million.
NBS report said “This was only the fourth month since 2007 in which capital importation was less than $200 million. The main driver of the quarterly decline was a fall in other Investment, although Foreign Direct Investment (FDI) also contributed. Portfolio investment was the only category to record an increase relative to the previous quarter”.
According to NBS “The fall in FDI comes after four consecutive quarters of increase, and the fall in Other Investment follows three consecutive quarters of increase. However, the data is volatile and therefore the dip in Q1 may not be sustained. Nearly all of the quarterly fall resulted from declines in capital imported into the Telecommunications and Oil and Gas sectors, which recorded unusually high values in the previous quarter.
“The total value of capital imported into Nigeria in the first quarter of 2017 was estimated to be $908.27 million. Although this was an increase of 27.75% relative to the same quarter of 2016, it was nevertheless 41.36% smaller than the value of capital imported in the previous quarter, and was the second lowest value recorded since 2007. There was a high-profile sale of (bonds denoted in a non-local currency) during the quarter, but this has not yet appeared in the data; there is a lag between subscription and actual payment, and therefore it is possible that this will show up next quarter.
“The second largest component of capital importation in the first quarter of 2017 was Portfolio Investment, which accounted for $313.61 million, or 34.53% of the total. This represented growth of 10.34% relative to the previous quarter, and 15.71% relative to the same quarter of 2016; this was the only category to record both year on year and quarterly increases, and it was the first year on year increase since the third quarter of 2014. This was possibly related to recent successes in stabilizing the Naira: during the quarter the Naira halted its continual decline, although it remains to be seen if this lasts. Portfolio investment is likely to be more affected than this than other investment types, due to its short-term nature.
“There was a significant change in the composition of Portfolio Investment. Portfolio Equity, usually the largest component, declined from $176.44 million in the previous quarter to $101.99 million, a fall of 42.19%. By contrast, Money Market Instruments increased from $82.37 million to $211.61 million, an increase of 156.90%. The latter therefore became the largest component, and accounted for 67.48% of Portfolio Investment, compared to 32.52% for Portfolio Equity. No capital was imported in the form of bonds. FDI was the smallest component of capital importation in the first quarter of 2017, as has generally been the case since 2013. This investment type accounted for $211.38 million, or 23.27% of the total. This represented a quarterly decline of 38.66%, but a year on year increase of 21.17%. Of the two subcategories, both recorded positive investment, but there was only $1.28 million of investment in the form of Other Capital, and so FDI Equity accounted for $210.10 million, or 99.40% of the total.
“The country from which Nigeria imported the most capital was the United Kingdom, which accounted for $302.47 million, or 33.30% of the total. This value represents a decline of 37.36% relative to the previous quarter, a slightly smaller fall than for the total value, which resulted in the share of the UK increasing from 31.18% in the previous quarter. As well as the existence of an historical relationship between the UK and Nigeria, London (the capital of the UK) is also a key financial centre, which could help to explain the high value of capital importation accounted for by the UK. Since 2010, the UK has accounted for the highest value of capital importation in all but two quarters (both in the second half of 2015).
“The country to account for the second largest value of capital importation was the United States. The US accounted for $215.66 million in the first quarter of 2017, or 23.74%. The US has also been one of the most important investors in Nigeria, usually either the largest or second largest investor country. It also shares a language with Nigeria, it has also been historically the largest economy in the world, and is active in foreign investment globally.
The next two largest investors in the first quarter of 2017 were Singapore (accounting for 8.09%) and Mauritius (7.86%). The Netherlands is usually one of the largest investors, but became less important this quarter after a quarterly decline of 96.54%..
