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Despite Decline in Two Quarters, Capital Importation Surges 61% in 3 Years - THISDAY

DECEMBER 01, 2019

Notwithstanding the recent decline, the National Bureau of Statistics says capital importation into Nigeria has significantly risen in the last three years with nine months accrued value in 2019 surpassing the 2018 total value by 17 percent, Bamidele Famoofo reports

Total capital importation into Nigeria, witnessed growth in the last three years from about $12.23billion (N3.75 trillion) as of the end of 2017 to $19.67 billion (N6.04 trillion) in nine months of 2019, representing a growth of 61 percent.

According to figures made available by the NBS, total capital importation in nine months of 2019 surpassed the 12 months performance of 2018 by 17 percent. Total value in 2018 stood at $16.81 billion (N5.16 trillion) compared to $19.67 billion or N6.04 trillion in nine months of 2019.

Capital importation is the total inflow of foreign currency in cash or goods by investors or lenders into a country.

In the last two quarters, however, capital importation into Nigeria has witnessed a decline.

“The total value of capital importation into Nigeria stood at $5,367.56 million in the third quarter of 2019. This represents a decrease of -7.78 percent compared to Q2 2019,’’ NBS disclosed.

In contrast, year-on-year, the figure recorded in the third quarter of 2019 represented an 87.99 percent increase compared to the third quarter of 2018.

2019 Performance

The largest amount of capital importation by type was received through portfolio investment in Q3, which accounted for 55.88 percent ($2.99 billion) of total capital importation, followed by Other Investment, which accounted for 40.39 percent ($2.17 billion) of total capital, and then foreign direct investment (FDI), which accounted for 3.73 percent ($200.08 million) of total capital imported in Q3 2019.

By sector, capital importation by banking dominated Q3 2019 reaching $1.76 billion of the total capital importation in Q3 2019. The United Kingdom emerged as the top source of capital investment in Nigeria in Q3 2019 with $2.01 billion. This accounted for 37.47 percent of the total capital inflow in the review period.

By destination of investment, Lagos state emerged as the top destination of capital investment in Nigeria in Q3 2019 with $4.98 billion. This accounted for 92.71 percent of the total capital inflow in Q3 2019.

Stanbic IBTC Bank Plc emerged at the top of capital investment in Nigeria in Q3 2019 by the bank, with $1.63 billion. This accounted for 30.38 percent of the total capital inflow in Q3 2019.

The breakdown of the performance of capital importation in 2019 on a quarter-on-quarter basis showed that FDI suffered a setback among other classes of investments. FDI witnessed a consistent decline from the first quarter in 2019 to Q3. The figure dropped by 8.41 percent from $243.36 million in the first quarter to $222.89 million in the second quarter of 2019. FDI further dropped by 10.23 percent from $222.89 million in the second quarter to $200.08milion as of September 30, 2019.

Equity investment as a component of FDI also recorded a slide in second and quarter compared to the value accrued in the first quarter. Investment in the equity market by investors under the FDI portfolio, declined by 8.2 percent, from $242.67 million to $222.89 million in the second quarter of 2019. Investment under this category further dropped by 11.9 percent to $196.38 million in the third quarter from $222.89 million in the second quarter.

Portfolio investments witnessed a sharp contrast compared to FDI though investors in this segment also reduced their commitment to the Nigerian market so far in 2019. Portfolio investment dropped from $7.15 billion in the first quarter of 2019 to $4.29 billion, representing a sharp decline of 40 percent.

Total portfolio investment in the third quarter dropped by 30 percent to $3 billion from $4.29 billion in the second quarter.

Analysis of activities of portfolio investors in the equity market segment of the Nigerian Stock Exchange (NSE) in the review period showed that the total commitment of investors to the market dropped by 45.4 percent between the first quarter and third quarter, dropping from $656 million to $358 million. Investments in bond instruments also witnessed a decline from $566 million in the first quarter to $91.6 million. It represents a shortfall of 84 percent.

Investors in the Nigerian money market also reduced their exposure in the money market instruments as investment dropped from $5.92 billion in the first quarter to $2.55 billion in the third quarter, representing a decline of 57 percent.

Other investments which include trade credits, loans, currency deposits and other claims (all associated with the banking industry) was the only segment that enjoyed increased patronage from investors. Capital importation in this segment of the market increased from about $1.1 billion in the first quarter to $1.3 billion in the second quarter, depicting an increase of 18 percent. The figure grew appreciably by 67 percent in the third quarter to $2.17 billion from $1.3 billion in the second quarter.

Breakdown of activities under the other investment segment showed that loans to borrowers increased in all the three quarters, climaxing in the third quarter. Loans increased from $752.3 million in the first quarter to $1.8 billion in the third quarter, representing a growth of 139.4 percent. Growth between the second and the third quarter of 2019 stood at 102.3 percent, from $890.96 million to $1.8 billion.

Capital Importation by Country of Origin

In the third quarter of 2019, the United Kingdom was the biggest contributor to capital importation to Nigeria. Nigeria realized $2.01 billion from the country that is currently battling Brexit while the United States came next among the top 10 contributing countries to Nigeria’s capital importation with $1.23 billion in a space of three months.

South Africa was third on the table with about $709 million while Egypt and Netherlands contributed $251 million and $161 million respectively to Nigeria’s prosperity in the review third-quarter period. Other countries in the top 10  contributing-category include Mauritius, $155 million; France, $148 million; Singapore, $140 million; Belgium, $109 million and UAE, $78.2 million.

Capital Importation by Destination

Lagos state was the preferred destination for capital flow in the third quarter of 2019 followed by the Federal Capital Territory (Abuja). Lagos, Nigeria’s most vibrant commercial city, attracted $4.98 billion as capital importation in the third quarter of 2019 compared to $4.14 billion in the preceding quarter. Quarter-on-quarter, capital inflow into the state grew by 20.3 percent. FCT witnessed a decreased capital flow of -77.2 percent from $.1.67 billion in the second quarter ended June 30, 2019, compared to $381 million recorded in the third quarter ended September 30, 2019.

Ogun was the third biggest beneficiary of foreign capital inflow with a distant $7 million in the third quarter compared with $4.8 billion which accrued to it in the second quarter ended June 30, 2019. It represents an increase of 46 percent.

Edo, Kaduna, and Oyo recorded a decline in foreign capital inflow between quarter on quarter.

Edo dropped from $1.04 million to $0.83 million, representing a 20.2 percent decline while Kaduna recorded a drop from $1.97 million to $0.25 million, representing a decline by 87 percent. Oyo state recorded a marginal 3.9 percent drop from $1.78 million in the second quarter to $1.71 million in the third quarter.

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