Nigeria received $5.36 billion capital inflows in Q3 2019

Nigeria received $5.36 billion capital importation (inflows) in the third quarter (Q3) of 2019, compared to $5.82 billion in the second quarter (Q2). This is the lowest amount of capital importation received in the year.

According to the latest capital importation report released by the National Bureau of Statistics (NBS), $5.36 billion capital importation received in the third quarter represents a -7.78% contraction from the total amount ($5.82 billion) received within the second quarter (Q2). Meanwhile, year-on-year, capita inflows rose by 87.99%.

Capital Inflows by Type

Nigeria’s capital importation is categorized into three investment types, and these include Portfolio Investment, Foreign Direct Investment (FDI) and Other Investment.

In Q3 2019, the largest amount of capital importation by type was received through portfolio investment, which accounted for 55.88% ($2.99 billion) of total capital importation, followed by Other Investment, 40.39% ($2.16 billion) of total capital, and then Foreign Direct Investment, which accounted for 3.73% ($200.08m) of total inflows within the period.

Foreign Direct Investment (FDI): FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. In the latest report, FDI constituted only 3.73% ($200.08 million) of total capital inflows in Q3 2019, this represents the lowest across all forms of capital inflows in the country. The breakdown of FDI shows that investment in equity amounted to $196.38 billion, while other capital stood at $3.70 million.

The Portfolio Investment: During the period under review, the largest amount of capital importation by type was received through portfolio investment, which accounted for 55.88% ($2.99 billion) of total capital importation in Nigeria.

Under the portfolio category, investment in money market instruments remains the largest recipient of capital inflows with a total of $2.54 billion, followed by $196.36 billion in equity, while investment in bonds stood at $91.60 billion.

Other Investment: According to the NBS report, other investment is broken down into four categories which include Trade credits, Loans, Currency deposits and other claims. However, the bureau only provided details for loans and other claims. In the third quarter of 2019, other investments recorded the second-largest capital importation, accounting for 40.39% ($2.16 billion) of total capital importation.

Capital inflows by Sectors

Further analysis of the capital importation shows that ten major sectors of the sixteen sectors recorded a decline in capital importation. The sectors (nature of business) that witnessed major decline within the quarter include Shares, Agriculture, Banking, Brewing, Construction, Consultancy, Financing, Fishing, Hotels, Production, Servicing and Transport.

On the positive side, major sectors that recorded growth in capital inflows within the quarter include consultancy, electrical, marketing, oil and gas, telecoms and transport.

In aggregate, the top five sectors with the biggest capital inflows received within the quarter are Banking ($1.75 billion), Financing ($1.47 billion), Telecoms ($884.85 million), Shares ($774.69 million) and production ($153.77 million).

Capital inflows by origin

The United Kingdom remains the biggest source of capital investment in Nigeria. In Q3 2019, investment from the U.K amounted to $2.01 billion (37.4%) down from $3.13 billion received in Q2 2019 and $4.53.22 billion in Q1. This accounted for 53.40% of the total capital inflow in Q3 2019.

The top five countries that accounted for the biggest capital inflows in Nigeria within the quarter include U.K ($2.01 billion), U.S ($1.23 billion), South Africa ($$708.77 million), Egypt ($251,1 billion) and Netherlands ($161.12 million).

What this means for the Nigerian economy

  • The decline in capital importation in Q3 2019 means the amount of foreign capital that investors brought into the Nigerian economy between July and September 2019 dropped when compared to the amount in Q2 2019 (April and June).
  • Meanwhile, this does not necessarily imply a negative trend in the economy, due to the fact the on a year-on-year basis, capital importation into the economy improved significantly by 87.99%.
  • This is further strengthened by the latest GDP data, which shows that the economy grew by 2.28% in real terms, in the third quarter of 2019, up from 1.81% growth recorded in the third quarter of 2018.
  • As earlier published on Nairametrics, expectations are high for the Nigerian economy as the World Bank’s 2.1% annual growth forecast for 2019 may eventually be surpassed.
  • However, the latest capital importation report shows a worrying trend.
  • For instance, the inflow of FDI into the economy dropped further, and this is not good for the economy. In Nigeria, FDI remains abysmally low.
  • Analysts have stated that the low inflow of FDI is not good for the economy as other forms of capital importation has very low potential to drive the economy as FDI does.

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