Capital importation drops by $2b in one year

Brokers on the floor of Nigerian Stock Exchange in Lagos.

Brokers on the floor of Nigerian Stock Exchange in Lagos.

The record of capital importation into Nigeria dropped by $2.05 billion between June 2015 and 2016, an analysis of Capital Importation Report has shown.

This came as the figures for the second quarter of 2016 were estimated at $647.1 million, representing 75.73 per cent decline from the volume of capital inflows in the corresponding period of 2015.

The amount recorded in the second quarter also represented 8.98 per cent decline relative to the first quarter figures at $711 million.

According to the Nigerian Bureau of Statistics, the figure marked the lowest level of capital imported into the economy on record; the largest year-on-year decrease; and the second consecutive quarter in which these records have been set.

It noted that the persistent decline in the value of capital imported into the economy is symptomatic of the difficult period the country has been going through.

“The second quarter saw the economy enter into the first recession during the rebased period (according to the technical definition of two consecutive periods of decline).

“This may suggest less profitable opportunities for investment. In addition, in the second quarter there was considerable uncertainty surrounding future exchange rate policy, which may have deterred investors.

“The Naira was allowed to depreciate towards the end of the quarter. These factors were likely to have contributed to the record decline in capital importation,” the NBS report noted.

The year-on-year decline of capital importation also cut across each broad type- Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI) and Other Investment.

However, in comparison with other types, FPI recorded by far the largest decline- 88.76 per cent year-on-year, against 37.00 per cent and 1.22 per cent for FDI and Other Investment respectively.

An analysis of quarter-on-quarter basis, FDI recorded the largest decline of 23.75 per cent ($133.03 million), compared with a decline of 9.49 per cent ($245.32 million) for FPI and an increase of 1.24 per cent ($268.77) for Other Investment.

Consequently, Other Investment overtook FPI as the largest component of capital importation, and accounted for 41.53 per cent, compared with shares of 37.91 per cent and 20.56 per cent for FPI and FDI.

In the corresponding period of 2015, Portfolio investment accounted for 81.88 per cent of total investment, affirming that FPI has been the hardest hit by recent economic events.

As in all previous quarters, Equity investments dominated 83.18 per cent FPI’s capital importation, but slightly lower its share a year ago at 84.56 per cent, but higher than the first quarter record.

However, like in each quarter over the past two years, FDI accounted for the smallest share of imported capital, with $133.02 million, representing 20.56 per cent of the total.

For the first time since the series began, Equity stake accounted for the entirety of FDI, as no capital was imported in the form of Other Capital.

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