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Equity component of FPI, FDI rises to $1.19bn in 2018

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Nigeria saw a slight improvement in total capital importation into the country as the equity component of Nigeria’s Foreign Direct Investment (FDI) trended upward by 21.4 per cent to $1.19 billion in full year 2018 compared to $0.98 billion recorded in the preceding year, a recent capital importation report by the National Bureau of Statistics (NBS) shows.

The equity value of 2018 is the biggest ever posted since the economy slipped into recession for the first time in 25 years in 2016. The quarterly performance breakdown was a mixed bag. While the quarterly equity value for first, second and third quarter of 2018 far surpassed the equity inflow across all the quarters of 2017, the fourth quarter 2018 figure however recorded a sharp drop: the third lowest since 2014.

Equity component of FPI rose steadily from $0.25 billion in Q1 2018 to $0.53 billion in Q3 2018 before declining by 70.6 per cent to $0.16 billion in Q4 2018. Consequently, on a quarter-on-quarter basis, the equity component sank 70.6 per cent from $0.16 billion in Q3 2018 to $0.53 billion in Q4 2018.The share of the equity component of FDI was 99.5 per cent as at year end 2018, a trend it has always maintained.

Conversely, the total value of the equity component of the foreign portfolio investment as at end of 2018 was twice that of the equity component of the FDI. Equity FPI decreased by 35 per cent to$2.36 billion relative to $3.64 billion recorded in 2017.

The drop in the equity component of FPI inflow has been predicated on the political uncertainties surrounding the forthcoming elections in the country which had made many investors to withdraw their funds from the stock market. The impact of investors view on the riskiness of investing on the economy is more pronounced when the equity value is assessed on a quarterly basis.

Since second quarter of 2018, equity value of FPI has retreated. Despite rising by 49 per cent from $0.7 billion in Q1 2018 to $1.05 billion in Q2 2018, equity component of FPI dropped sharply by 62 per cent to $0.39 billion in Q3 2018 and settled at $0.22 billion as at Q4 2018, the lowest value ever recorded since Q1 2017.

Equity component of FPI decreased by 44.7 per cent to $0.22 billion in Q4 2018 relative to $0.39 billion in the corresponding quarter of the same year

Aside the uncertainties around the election, analysts have fingered the monetary policy tightening in the United States as the reason for the capital flow reversal.

The Nigerian Stock Exchange (NSE) equity market started the year on a high, with the All Share Index (ASI) reaching a ten-year peak of 45,092.83 in January, driven primarily by the positive performance of the All Share Index (ASI) in 2017.

The NSE ASI however closed the year by 31,430.50, a decrease of 17.81 per cent – underscored bybearish sentiments arising from political risks, oil price volatility and rising global yields. Equity’s share in the total FPI in 2018 stood at 20 per cent relative to 47.4 per cent and 49.6 per cent in 2016 and 2017 respectively.

 

KELVIN UMWENI

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