Foreign portfolio investment (FPI) into the country increased by 305.8 percent to $7.1 billion in the first quarter of 2019 from $1.7 billion in the fourth quarter of 2018.
On a year-on-year basis (Y-o-Y) the FPI also increased by 56.5 percent from $4.6 billion the first quarter of 2018 to $7.1 billion in 2019.
FPI dominates the capital inflows, accounting for 84 percent of the total inflow. This is an indication of foreign investors’ appetite for the Nigerian securities according to analysts at FSDH research, an arm of FSDH Merchant Bank Limited.
Capital inflows into Nigeria in Q1 2019 was the highest first quarterly figure in five years. Foreign capital inflows increased in Nigeria because of low yields in international market.
The FPI inflows although at a slower rate provided short-term support for the foreign exchange. Capital inflows through the Investors’ and Exporters’ foreign exchange Window (I&E Window) stood at $1.42 billion in June 2019, which was a decline compared with $2.33 billion recorded in May 2019. The June 2019 figure was the lowest figure recorded since July 2017.
Total inflows from inception of the I&E Window in April 2017 till June 2019 stood at US$66.35 billion. FPI is the single largest contributor to the total foreign inflow since inception of the I & E Window, accounting for 47.96 percent of the total inflows from inception.
Analysis of Foreign Inflows through the I and E window since April 2017 to June 2019, show that non-bank corporates contributed $1.48 billion and accounted for 2.22 percent of total inflow, other corporates contributed $0.31 billion and accounted for 0.46 percent, the Central Bank of Nigeria (CBN) contributed $11.29 billion and accounted for 17.01 percent of total.
The CBN’s economic report for the month of May 2019 show that aggregate foreign exchange inflow into the economy amounted to US$10.22 billion, showing an increase of 3.2 percent above the level at the end of the preceding month, but contrasted with the decline of 4.0 per cent below the level in the corresponding period of 2018. The increase was as a result of 4.3 per cent and 2.6 per cent rise in inflows through the Bank and autonomous sources, respectively.
According to the report, aggregate foreign exchange outflow from the economy, at US$3.97 billion, fell by 18.5 per cent and 22.9 per cent below the levels in the preceding month and the corresponding period of 2018, respectively. This was attributed, mainly, to the 15.8 per cent and 37.8 per cent decline in outflows through the Bank and autonomous sources, respectively.
Inflow through autonomous sources, rose by 2.6 per cent to US$6.21 billion in May 2019, compared with the level at the end of April 2019. Outflow from autonomous sources, on month-on-month basis, fell by 37.8 per cent to US$0.37 billion, reflecting the decline in both visible and invisible imports.
Accordingly, foreign exchange flows through the economy, resulted in a net inflow of US$6.26 billion in the review period, compared with US$5.04 billion and US$5.51 billion at the end of April 2019 and end of May 2018, respectively.
However, aggregate sectoral utilisation of foreign exchange fell by 29.7 per cent to US$2.83 billion in May 2019, compared with the level in the preceding month. The invisible sector accounted for the bulk (63.7 per cent) of total foreign exchange disbursed in the review month, followed by components of the visible sub-sector listed in descending order as follows: Industrial sector, 15.7 per cent; manufactured products, 7.5 per cent; food products, 5.9 per cent; minerals and oil, 5.2 per cent; transport, 1.6 per cent; and agricultural products, 0.4 per cent.
The CBN will this week auction Treasury Bills worth N107.05 billion. This consists of 91-day bills worth N5.85 billion, 182-day bills worth N26.60 billion and 364-day bills worth N74.60 billion.
“We expect their stop rates to decrease marginally due to increase demand amid boost in system liquidity which, in addition to maturing T-Bills worth N41.68 billion, is also expected to result in decline in Nigeria Inter-Bank Offered Rate (NIBOR)”, analysts at Cowry Asset Management Limited said.
