Investment inflows into Nigeria declined by 78 percent year-on-year to a four-year low of $1.29 billion in the second quarter of 2020, according to an NBS report published Friday.
Here are the sectors that attracted the most and least capital in the period.
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Source: NBS, BusinessDay
Which sectors benefited the most in Q2 2020
The NBS report shows that investors were mostly attracted to shares, financing and banking which accounted for 36 percent, 24 percent and 10 percent of the capital imported during the second quarter respectively.
The production and telecommunication sectors emerged the fourth and fifth sectors benefiting the most from investment inflows in Q2.
The sectors attracted $110.8 million and $106 million respectively which accounted for 8.55 percent and 8.16 percent correspondingly percent of the whole capital importation into Nigeria during the reference period.
Although these sectors attracted investments above other sectors in the second quarter, the report shows a significant decline in investment inflows compared Q1 and Q2 2019.
Investment inflows into the shares shrunk by 75 percent to $465 million, down from $817 million and $1.12 billion recorded in Q1 2020 and Q2 2019 respectively.
The Financing also saw investment inflows decline by 99 percent to $309 million in Q2 2020 from $1.3 billion in Q1 2020 and $1.6 billion in the same period last year.
The banking sector also had investment inflows decline by 97 percent to $140 million in Q2’2020 compared to $1.9 billion in the same period last year, and $3 billion in the preceding quarter.
Investment inflow into the telecoms sector declined by 45 percent to $105 million Q2’2020 from $157 million in Q1’2020 and $4.5 billion in the same period last year while production inflows also plunged to $110 million in Q2’ 2020 from $273 million in Q1’2020.
Other sectors such as the trading and agricultural sector also declined significantly. The agricultural sector gave up 12.5 percent growth in inflows as investment declined to $49 million in Q2’2020 from $54 million in Q1’2020, and $197 million in the same period last year.
Trading sector also recorded a 97 percent decline in investment inflows, plunging to $68 million in Q1’2020 from $122 million and $207 million Q1’2020 and Q2 ‘2019 respectively.
The brewery sector attracted $20 million investment inflows in the second quarter of 2020 after recording zero investments in Q1’2020 and Q4’2019 correspondingly.
Which sectors benefited the least in Q2 2020
The NBS report shows that the servicing and the oil and gas sector performed below expectation in Q2.
Investment inflows into the oil and gas sector was down 42 percent to $7 million in Q2’2020 from $10 million and $139 million in Q1’2020 and Q2’2019 correspondingly. The sector contributed just 8.55 percent to total inflows in Q2.
Servicing also recorded an investment of $7.2 million in Q2’2020 down from $42 million and $445 million recorded Q1’2020 and Q2 ‘2019 respectively, contributing 0.56 percent to total capital importation.
Electricity also lost 5 percent investment as inflows declined to $3.8 million in Q2’2020 from $4.1 percent in Q2’2019.
Investment into the transport sector plunged by 91 percent to $1.5 million in Q1’2020 from $17 million in the preceding quarter and $3.43 million Q2’2019.
Marketing, fishing and IT services recorded low investment inflows, contributing 0.08 percent, 0.01 percent and 0.03 percent respectively to total capital importation into Nigeria in Q2’2020.
Drilling, hotels, tanning and weaving saw zero investments in the second quarter of 2020.
Why the record investment plunge
Covid-19 had a hand in the decline as investors pushed back and moved towards safe havens, according to Azeez Kuranga, a Macro Analyst at Cordros.
“However, the FX demand management strategy of the CBN aggravated it as foreign investors found it hard in repatriating their funds”.
“On attracting capital going forward, we can only hope there is a strong demand for the special OMO auction which the CBN wants to flow. Aside that, the currency can be devalued towards its REER value at least to close the wide gap between the current parallel market rate and the CBN official rate at least to give some sort of respite to the foreign investors.’ Kuranga said
According to him “rapid and conscious steps should be taken towards increasing the contributions of other sources of dollars to the external reserve, apart from crude oil which has shown a strong positive correlation with the reserves”.
