Four countries which are also recognised as the world’s leading financial centres have accounted for 74 percent of total capital inflows into Nigeria in the first six months of 2017, BusinessDay analysis of data released by the National Bureau of Statistics (NBS) has shown.
The United Kingdom accounted for the largest source of capital inflows during the period, being the source of a total inflow of US$999 million for the first six months of the year. The US came in a distant second, accounting for total inflows of US$503 million.
Belgium was the third highest source of capital , accounting for a total of US$286 million of inflows, followed by Singapore, which accounted for total inflows of approximately US$229 million.
The cumulative inflows from all four countries were slightly above US$2.02 billion or 74 percent of a total capital inflow of N2.7 billon recorded in the first half of 2017.
Ayodeji Ebo, managing director, Afrinvest Securities limited, told BusinessDay by phone, that some of these countries are in search of higher yield instruments, therefore they prefer to come to Nigeria.
In an emailed response to BusinessDay, Ebo said the striking growth in the total value of capital imported in half year 2017 can be traceable to the set-up of the Investors and Exporters window by the CBN in April 2017.
The sterling performance recorded by quoted shares on the Nigerian bourse is a testament to the surge in Foreign Portfolio Investment in the second quarter. In addition, this has improved the foreign exchange supply, as well reduced the pressure on the CBN to defend the naira, as observed in the recent convergence of the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) and Parallel market forex rate.
On the African continent, the Republic of South Africa and Mauritius accounted for the biggest capital inflows into Nigeria. While inflows from South Africa stood at US$115 million in the period, capital inflows from Mauritius stood at US$136 million.
While most major South African companies have operations in Nigeria, Mauritius is often used as a tax heaven for some investors seeking to invest in Nigeria.
A further analysis of the capital inflows into Nigeria shows that US$1.08 billion, representing about 40 percent of total capital inflows, went into the buying of shares of listed companies. Further analysis shows that more than 70 percent of the investment in shares came into the country between April and June, an indication that the introduction by the Central Bank of Nigeria (CBN) of a new foreign exchange window, to cater for investors and exporters (NAFEX) in April, had a positive impact on dollar inflows into Nigeria.
The more flexible exchange rate in the NAFEX window has proved popular with foreign investors, with more than US$7 billion transactions reported to have taken place in the market since its inception.
Other major sectors that attracted significant inflows of capital, besides the equity market, include telecommunications, which attracted total inflows of US$320 million within the period. The services sector also attracted significant inflows of US$292 million, the same amount that also went to the oil and gas sector, while the banking sector attracted total inflows of US$216 million within the period.
Stanbic IBTC, Standard Chartered Bank and Citi Bank, accounted for 60 percent of capital inflows into the country. The three banks were the source of US$1.6 billion that came into the country in the first half of 2017. Stanbic IBTC led with the total inflows that came in through the bank standing at US$673 million.
Standard Chartered Bank brought in total inflows of US$567 million, while Citi Bank accounted for the third highest inflows of US$389 million within the period. Nigerian banks accounted for the balance of 40 percent capital inflows into the country, with Ecobank, Zenith and Access Bank accounting for more than 70 percent of the balance.
After a dry up of capital inflows into Nigeria in the first half of 2017, investment inflows into the Nigerian economy surged by 95 percent or $884.1 million in the second quarter on 2017, the NBS data shows.
Total investment inflows into Nigeria reached $1.7923 billion in the second quarter of 2017, $884.1 million, more than the figure recorded in the first quarter and indicating a growth of 95.02 percent.
Year on year inflows increased by 43.6 percent from the $1,042.2 million recorded about same period on 2016. On a month on month basis, the economy attracted the largest inflows in May, reported at $616.5 million, followed by June with $612.6 million and then April with $563.3 million.
“The main driver of the quarterly growth in capital importation in the second quarter, was Portfolio Investments, which increased by 145.7 percent, followed by Other Investments, which grew by 95.02 percent, and then Foreign Direct Investment (FDI), which increased by 29.8 percent over the previous quarter,” the NBS said in the latest capital importation report released on Tuesday.
The NBS categorises investment inflows which it calls ‘Capital Importation’ into three main investment types, including, Foreign Direct Investment (FDI), Portfolio Investment and what it calls ‘Other Investments’, with each comprising various sub-categories.
As contained in the report, Portfolio Investment was the largest component of imported capital in the second quarter of 2017, and accounted for $770.5 million, or 43 percent of the total. This was closely followed by Other Investments, which accounted for $747.5 million, or 41.7 percent and then FDI, which accounted for $274.4 or 15.3 percent during the quarter.
A year on year comparison of the three investment types indicates that Portfolio Investments increased by 128.4 percent, from the $337.3 million recorded in second quarter of 2016. Other Investments also increased by 43.6 percent, from the $520.6 million reported in the same quarter of 2016, while FDI grew by 48.9 percent, from $184.3 million.
The total amount of FDI recorded during the quarter was $274.4 million, representing an increase of 29.8 percent over the previous quarter and a 48.9 percent increase over the same period of 2016.
According to the data office, Equity investments accounted for the majority of total FDI imported in the second quarter of 2017, accounting for 99.9 percent ($274.1 million) of total FDI and increasing by 30.5 percent over the last quarter. Other Capital under FDI accounted for the balance of 0.1 percent ($300,000) of total FDI, showing some 76.6 percent drop over the previous quarter.
The second quarter recorded an estimated $770.51 million in portfolio investments. This figure was 145.7 percent higher than the amount reported in the first quarter of the year, and 128.4 percent higher than the amount reported in the same period of 2016.
An analysis of the composition of portfolio investments shows that Equities recorded the largest share, accounting for 79.7 percent, or $614.05 million of the total, followed by Money Market Instruments, which accounted for 12.8 percent, totaling $98.6 million, while bonds accounted for 7.5 percent or $57.9 million.
Other investments recorded an increase of 95 percent over the quarter and 43.6 percent over the same period of 2016.
The NBS said Loans continued to dominate Other Investments, also as seen in previous quarters, accounting for 100 percent of capital imported in this category during the second quarter.
The other components of Other Investments did not report any figures for the second quarter of 2017, however this may be revised in the next quarter, when more information becomes available. Capital is either imported in the form of shares, or directly imported by different sectors of the economy.
In the second quarter of 2017, the value of share capital imported was $932.58 million, which represents an increase of 548.5 percent, relative to the previous quarter, and an increase of 168 percent relative to the second quarter of 2016.
“This was by far the sector to attract the largest amount of capital in the second quarter of the year,” the NBS stated in the report.
“This was a significant increase, relative to recent quarters, the highest amount since the third quarter of 2015, when it declined significantly from $1,736.48 million to $831.88 million in the fourth quarter of 2015.
“Share capital investment, which is closely related to Equity investment (FDI and Portfolio) was largely responsible for huge increase in capital importation during the quarter. The proportion of Shares compared to total value of capital importation over the previous quarters,” the NBS stated.
