Last week the ever busy National Bureau of Statistics (NBS), released data which showed the total value of capital imported into Nigeria stood at $5.82 billion in the second quarter (Q2) of 2019.
This represents a 31.41 percent decrease compared to Q1 2019 and a 5.56 percent increase compared to Q2, 2018.
The largest amount of capital importation by type was received through Portfolio investment, which accounted for 73.76 percent or $4.29 billion of total capital importation, followed by Other Investment, which accounted for 22.41 percent or $1.3 billion and Foreign Direct Investment (FDI), which accounted for 3.83 percent or $222.89 million.
Capital importation to the banking sector dominated in Q2 2019 reaching $1.89 billion of the total capital imported, while the United Kingdom emerged as the top source of capital investment in Nigeria in Q2 2019 at $3.13 billion, accounting for 53.85 percent of the total capital inflow.
Stanbic IBTC Bank Plc emerged as the top Bank through which capital flowed into Nigeria in Q2 2019 at $1.76 billion, followed by Citibank Nigeria at $1.01 billion and Rand Merchant Bank at $611.7 million.
Clearly these multinational banks with strong connections to home markets and group balance sheet as source of capital are doing much better than local banks in this regard but that is a story for another day.
The major issue that strikes anyone reading through the report is the lack of geographic diversification in terms of final destination of capital imported into the country.
This is important because it is not something that can be willed into existence by Government via pronouncements, as capital only heads to countries, states or regions where it will be well received, bureaucracy is low and risks are commiserate with returns.
According to the NBS data, by Destination of Investment, Lagos state (no surprises there) emerged as the top destination for capital investment in Nigeria in Q2, 2019 at $4.13 billion.
This accounted for 71.09 percent of the total capital inflow for the period.
Lagos is the commercial capital of Nigeria, so it is expected to get a huge chunk of the capital imported into the country. However it was hoped that more of the capital inflows would go inwards to other states of the Federation to fund investments that help create jobs.
So which other states got a piece of the $5.2 billion that flowed into the country in the second quarter of 2019?
The list is small and tells a bigger picture of lack of reforms and understanding by Governors on the need to make their states business friendly.
Only 10 states (including the Federal Capital) appeared on the list, a majority of whom recorded token amounts as capital imports.
Lagos, as earlier mentioned received $4.137 billion, followed by Abuja FCT ($1.672 billion), Ogun State ($4.8 million), Kaduna ($1.97 million), Oyo ($1.78 million), Edo ($1.04 million), Anambra ($110,000), Kano ($100,000), Nasarawa ($100,000) and Rivers ($30,000).
Lagos and Abuja accounted for 99.82 percent of total capital inflows which is a worrying sign for Nigeria’s attempts to develop its other regions.
Low capital inflow to Kano in the North West, Anambra in the South East, Rivers in the Niger Delta and Ogun/Oyo in the West is particularly disappointing as these states are the major commercial hubs that underpin the regions.
The North Eastern region, ravaged by conflict also did not register a single state where foreign capital was willing to deploy in.
Can Nigeria survive and have a stable, sustainable future with only 2 (Abuja, Lagos) out of hundreds of its cities, creating jobs and attracting investment? Surely it cannot.
While individual states will need to do most of the heavy lifting, the Federal Government probably has some role to play here also. Insecurity is a major deterrent to investments as can be seen in the North East, and the FG needs to do more to tackle it.
A rising tide of kidnappings in the Kaduna, Kano axis is surely unhelpful, never mind some of the excellent reforms that the Kaduna State governor has recently enacted, which has attracted firms like Olam.
The FG also has to get out of the way of the States that wish to attract Private capital to fund infrastructure and other projects.
The Government should expedite its privatisation and concession efforts as some Federal assets located in various States could be a magnet for capital infusion to the benefit of the domestic State economy.
For instance beyond shutting the Enugu Airport for probably inadequate repairs the FG should quickly privatise or concession the airport (and other dilapidated ones), so private investors can pump capital in and position it as a major hub in the South East.
The time for rhetoric is long gone, campaigns to be elected as Governor and President are over and most court battles won or lost. It is now time for elected Governors and the President to be innovative and provide solutions to the country’s numerous problems!
PATRICK ATUANYA
