The total value of capital inflows into Nigeria stood at $5.854 billion in the first quarter of 2020, representing a 53.97 percent increase compared to $3.802 billion recorded in Q4 2019.
But there are fears that the impressive numbers could see a huge decline in coming quarters as the impact of the COVID-19 pandemic begins to be felt.
According to the National Bureau of Statistics report released on Tuesday, the largest amount of capital importation by type was received through portfolio investment at $4.309 billion, accounting for 73.61 percent of total capital importation.
This was followed by other investment, which accounted for 22.73 percent at $1.33 billion of total capital, and Foreign Direct Investment (FDI), which accounted for 3.66 percent or $214.25 million of total capital imported in Q1 2020.
Johnson Chukwu, CEO, Cowry Asset Management, told BusinessDay that the increase recorded in the quarter is commendable but not good enough as a huge percent of the investment was in portfolio investment which adds little or no effect to economic growth.
“It is not so good to see that only 3.66 percent was invested in Foreign Direct Investment, while the huge amount was in portfolio investment; that is liquid money and can leave at any time, which may have left in Q2 due to the COVID-19,” Chukwu said.
He further said that there would be a huge decline in the inflows in the next quarters of the year.
“We should expect a huge drop in Q2, Q3 because the pandemic with its uncertainties would have caused many of these funds to be withdrawn from the system,” Chukwu said. “The first quarter, as we see, did not really reflect the effect of the COVID-19, but we should brace up for a huge decline in capital inflow in the meantime.”
Chijioke Ekechukwu, former director general, Abuja Chamber of Commerce, said the increase was as a result of naira depreciation within the period which aided more capital inflow but really does not lead to a positive economic growth considering the direction of the investment.
He further said that the next quarters might not yield so much due to the scourge of the COVID-19 pandemic.
“As we know, the effect of the COVID-19 pandemic can be seen on all economics of the world, and Nigeria is no exemption. It is time for us to get our policies right, put in our best as a nation to hit our economy running because we may not be receiving capital inflows in the nearest future due to the COVID-19 crisis,” Ekechukwu said.
The NBS report showed the United Kingdom emerged as the top source of capital investment in Nigeria in Q1 2020 with $2.90 billion, accounting for 49.68 percent of the total capital inflow in the quarter.
“Standard Chartered Bank Nigeria Limited emerged at the top of capital investment in Nigeria in the period with $1.65 billion, representing 28.30 percent of the total capital inflow in Q1 2020,” the NBS report said.
“By destination of investment, Lagos State emerged as the top destination of capital investment in Nigeria in Q1 2019 with $5.135 billion; this accounted for 87.72 percent of the total capital inflow in Q1 2020,” it said.
Looking ahead, Auwal Ibrahim Rafsanjani, executive director, Civil Society Legislative Advocacy Centre, said it was not possible to see such increase in Q2 as all economies have been hit by the pandemic.
“As nations begin economic activities, it is the time to begin to build up all what was lost to the pandemic, but as we know, this is not so in Nigeria, with the continued mismanagement of funds and frequent borrowings which have not created an opportunity for growth,” Rafsanjani said.
“We may see continuous decline in capital inflows going forward, especially for the diaspora inflows,” he said.
