Total Foreign Capital Importation Declines Significantly to $710.97m in First Quarter

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James Emejo in Abuja

Nigeria’s total foreign capital importation declined by as much as 54.34 percent to $710.97 million in the first quarter of the year (Q1 2016) compared to $1.55 billion in Q4 2015, according to the National Bureau of Statistics (NBS).

Year-on-year, capital importation also declined by 73.79 percent.
Both the quarterly and year on year decline also represented the lowest records since the series began, the NBS stated.

“As a result of these changes, total capital importation has fallen by 89.13 per cent since its peak level in the third quarter of 2014,” it added.

According to the summary of Capital Importation Report for the First Quarter of 2016, which was posted on its website yesterday, the magnitude of the decline in Q1 attested to the challenging period which the Nigerian economy is currently undergoing following the fall in crude oil prices.

But it added the huge drop could also explain why the amount of capital imported into the country in recent years may have been higher than usual.

One of such theories was the inclusion of Nigerian in the JP Morgan Bond Index, and globally low interest rates triggering a search for higher yields over this period, the NBS noted.

It further said: ”The fact that the amount of capital imported has dropped to a record low suggests that there are further reasons why Nigeria has attracted less foreign investment in recent quarters.

“Investors may be concerned about whether or not they will be able to repatriate the earnings from their investments, given the current controls on the exchange rate. In addition, as growth has slowed in recent quarters, there may be concerns about the profitability of such investments.”

In the period under review, Portfolio investment was largest, accounting for $271.03 million, or 38.12 percent of all capital imported, with equity as the largest subcomponent which accounted for $201.69 million, representing 74.41 per cent of portfolio investment and 28.37 per cent of total capital imported.

Equity has been the largest part of portfolio investment in every quarter since 2007.

Although it remains the largest subcomponent, this is despite contributing the most to the decline in portfolio investment; Equity recorded a quarterly decline of 74.54 per cent, and a yearly decline of 82.30 per cent, the NBS stated.

It further stated:”The second largest subcomponent of Portfolio Investment was Money Market Instruments, which accounted for $67.85 million, or 25.03 per cent of portfolio Investment, despite recording a quarterly decline of 57.62 per cent. In contrast to the same quarter of 2015, Bonds was relatively unimportant, accounting for only 0.55 per cent of portfolio investment. This followed a year on year decline of 99.79 per cent, from $705.12 million to $1.50 million in the first quarter of 2016.”

According to the statistical agency, second largest component was Other Investment, which accounted for $265.48 million, or 37.34 per cent of all capital imported.

As in the final quarter of 2015, only two subcomponents recorded any investment: loans, which accounted for $241.81 million or 91.09 per cent of other investment, and other claims, which accounted for $23.66 million or 8.91 per cent. Each of these subcomponents had seen large quarterly declines, of 42.54 per cent and 60.86%% respectively.
In contrast to other investment types, Foreign Direct Investment (FDI) recorded a quarterly increase in the first quarter of 2016, from $123.16 million to $174.46 million.

“As a result its share of total capital importation increased from 7.91 per cent to 24.54 per cent, although it remained the smallest part of imported capital. FDI is dominated by equity, which accounted for $173.73 million in the first quarter, or 99.58 per cent of FDI. This share represents an increase relative to the previous quarter; as a result of equity increasing by 43.60 per cent relative to the previous quarter, and Other Capital declining by 66.60 per cent. Given the respective shares of Equity and Other Capital, movements in FDI largely reflect movements in Equity,” the NBS added.