Foreign investments into the trade sector picked up in 2018 booking $131.6 million after a downward trend since 2015.
Capital importation report released by the National Bureau of Statistics (NBS) and analysed by BusinessDay showed that foreign investments declined to $55.7 million in 2017 from $385.6 million in 2014 but rose to $131.6 million in 2018.
Ayo Akinwunmi, head of research, FSDH Merchant Bank attributed the rise to the stability in the foreign exchange market in 2018.
“Throughout 2017, we saw a lot of devaluation and currency depreciation. And therefore when there is no stability in your currency, people will not want to bring in their money,” Akinwunmi said.
Vivian Alozie, an equity research analyst at Capital Bancorp Plc said that the increase could be as result of a bit of confidence in the macroeconomic environment despite the election and slight moderation of the growth rate.
According to the NBS, the trade sector has been in recession since 2016.It recorded three years of negative growth; -0.24 in 2016, -1.05 in 2017 and -0.63 in 2018.
Johnson Chukwu, CEO, Cowry Asset Management Limited said that the low purchasing power of consumers in the economy, lack of increment in the wages and salaries of workers and the bottlenecks in the importation of goods and services were the reasons why the sector is still in recession
The trade sector recorded low positive growth in the third and fourth quarters of 2018, but the positive growth was not able to offset the negative growths recorded in the first and second quarters of the year.
Insight from the NBS report showed that the sector grew by 0.98 percent in the third quarter of 2018 and 1.0 percent in the fourth quarter after contracting by -2.14 percent and -2.57 percent in Q2 and Q1 respectively.
“There was a delayed impact of CBN’s intervention in the FX market. So we are now beginning to see the effect now. Dollar supply has improved for businesses generally. For example, there are some businesses in Nigeria that do not produce, they just buy from abroad and sell,” Ibrahim Tajudeem, head of research, Chapel Hill Denham said
“So for those ones, a lot of them have been able to have access to FX because of CBN’s intervention in the market. It has begun to have positive impact in the economy,” Tajudeem added.
BUNMI BAILEY
