Foreign Capital Importation Dropped to Nine-year Low in 2016


• UK, Netherlands, US accounted for largest inflows

James Emejo in Abuja with agency report

Nigeria’s capital imports slumped to a nine-year low in 2016, as Africa’s biggest economy battled a weaker currency and its first recession in 25 years.

The National Bureau of Statistics (NBS) said yesterday that capital importation into Nigeria fell 47 per cent last year to $5.12 billion, largely because the weak currency meant fewer dollars were required for the same naira investment. It said $9.64 billion was imported in 2015, reported Reuters.

“This was the lowest value since the (data) series started in 2007, which reflects the numerous economic challenges that afflicted Nigeria in 2016,” the statistics office said.

Equity investments from portfolio investors and direct investment rose sharply from 2012 to 2014, at a time when Nigeria was one of the fastest growing economies in the world and a top destination for investment.

But a sharp drop in the price of crude oil, Nigeria’s main export, from mid-2014, slashed government finances, weakened its economy, triggering a recession and battered its currency, frustrating business and leading investors to flee its markets.

The NBS said portfolio investments fell the most in 2016, deterred by the recession and the currency, down by 69.8 percent from 2015, as investors weighed market conditions relative to expected returns.

Nigeria’s stock market fell 6.2 percent last year while the naira lost a third of its official value against the dollar. In 2017, stocks have continued to fall, down 3.1 percent so far, while the naira is almost 40 percent weaker on the black market.

The NBS also said Nigeria imported the bulk of its capital from Britain, the U.S. and Netherland, with the telecoms, banking and oil sectors as the main beneficiaries.

It added that the total value of capital imported into the country dropped by 5.38 per cent to $1.54 billion in the fourth quarter of last year (Q4 2016), compared to $1.82 billion in the previous quarter. The figure also represented a fall of 0.52 per cent relative to Q4 2015.

The NBS attributed the contraction relative to the previous quarter to a decline in portfolio investment, which recorded the smallest component of capital importation at $284.22 million, or 18.35 per cent of total inflows.

It said: “This was the lowest share accounted for by this investment type since the beginning of 2009.”

NBS said that the quarterly decline in portfolio investment was mainly due to base effects, as there were large investments in money market instruments and bonds in the third quarter, which were not matched in the final quarter.

However, Foreign Direct Investment (FDI) recorded the second largest capital import, accounting for $344.63 million, or 22.25 per cent of the total importation, representing a growth of 1.17 per cent relative to the previous quarter, and 179.83 per cent relative to

the same quarter in the previous year – the first year on year growth in five quarters.

The growth was tied to the base effect as “the value of FDI in the final quarter of 2015 was one of the lowest on record”.

Other Investment type recorded the largest inflows in the period under review, accounting for $920.03 million, or 59.40 per cent of capital imported in Q4, representing a quarterly increase of 63.95 per cent and a year on year increase of 91.16 per cent.

It increased between 2015 and 2016 by 3.48 per cent, largely due to an increase in loans.

Nevertheless, the NBS noted that the level of capital imported was similar in each month of the quarter, though the highest was in December when $555.37 million was recorded.

According to the NBS, 32 countries actively participated in investing in the country in Q4 2016, compared to 34 in the previous quarter and 40 in Q4 2015.

The United Kingdom accounted for the largest capital importation at $482.89 million, or 31.18 per cent of the total inflows, though this represented a fall of 56 per cent relative to the previous quarter when $1.09 billion was investment.

The Netherlands had the second largest value of $296.52 million, or 19.14 per cent of the total. The US was third at $242.46 million.

The UK also invested the most in the country in 2016 with $2.13 billion imported, followed by the US at $945.59 million and the Netherlands at $516.89 million.