Cheap naira assets have shaved the value of foreign capital inflow into Nigeria by the most on record, state-data agency, National Bureau of Statistics (NBS) said Wednesday, Feb.1
The total value of capital imported into Nigeria in the fourth quarter of 2016 was estimated to be $1.5 billion, a decline of 15 percent relative to the third quarter, and a fall of 0.52 percent relative to the fourth quarter of 2015, the NBS capital importation report stated.
This brings total capital importation in 2016 to $5.12 billion, the lowest value since the series started in 2007 and a 46.8 percent decline compared to 2015’s $9.64 billion, according to the NBS.
“The weakening of the naira may have had an impact since a weaker naira means more can be purchased with each dollar, and therefore investment projects requiring naira payments cost less in dollar terms,” the statistics agency said in a report on its website.
Record low foreign capital importation in 2016 was much to the expectation of analysts polled in a BusinessDay survey.
Bismarck Rewane, CEO of economics consulting firm, Financial Derivatives attributes the decline to weak investor confidence, policy inconsistency and the recent United States Federal Reserve interest rate hike.
Rewane, however, expects “foreign capital inflows will pick up marginally to $1.7 billion in 2017, pending liberalization of the foreign exchange market and a sense of government policy direction.”
The decline in the quarter under review relative to the previous quarter was entirely due to a decline in portfolio investment, according to the NBS.
Portfolio investment fell 70 percent to N284 million year-on-year from N952 million in the same period of 2015 and 69 percent N920 million in Q3.
“The quarterly decline in portfolio investment was mainly due to base effects as there were large investments in money market instruments and bonds in the third quarter, which were not matched in the final quarter,” the agency noted.
The other two investment types that make up capital importation recorded significant year-on-year increases.
Foreign direct investment rose 179 percent year-on-year to N344.63 million from N123.15 in the same period of 2015, and saw a 0.01 percent increase from N340.64 in Q3.
Other Investment was the largest component of imported capital in Q4 and accounted for $920.03 million, or 59.40%. This followed a quarterly increase of 63.95%, and a year on year increase of 91.16%.
The naira weakened 1.8 percent to N306.18 per dollar at the official window as at 1 pm, according to Bloomberg data. The black market rate was N498/$.
The naira has shed more than half of its value since a big devaluation in June 2016.
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