Nigeria Re-emerges Africa’s Preferred Destination for FDI as Capital Importation Soars in Q3


Nigeria’s economy, the largest in Africa, is back in the global reckoning after narrowly slipping out of recession in second quarter, as hitherto withdrawn funds are tracing their ways back into the gradually recuperating economy, with capital importation growing by 147.5 per cent in third quarter ended September 30, 2017. Bamidele Famoofo writes

In quick succession, the most populous country in Africa, Nigeria, has achieved many gains, especially after it wriggled out of its worst recession in two decades in second quarter of 2017. Nigeria moved up 24 places in the Ease of Doing Business ranking to emerge among top 10 most improved economies in the world in 2017. The country under the administration of President Muhammadu Buhari again in third quarter 2017, defied both the World Bank and International Monetary Fund projections of maximum one percent growth in Gross Domestic Product for 2017, to record 1.4 percent growth as at third quarter of 2017.

Capital Importation

The most recent of Nigeria’s achievements is the positive outlook of foreign investors on the emerging opportunities in the economy to make money, as total capital importation into the economy recorded an unprecedented growth in third quarter of 2017. A report on capital importation into the country by foreign investors put together by the National Bureau of Statistics and the Central Bank of Nigeria, released last week in Abuja, showed that capital importation into Nigeria in 2017 Q3 recorded a substantial increase compared to the past few quarters, as the economy continued to recover from recession following its exit in Q2 2017.

The total capital imported in the third quarter was put at $4,145.1 million, more than double the inflow in the second quarter of this year, representing an increased value of 147.5 percent on a year on year basis.

“This inflow of capital in Q3 2017 is the first time since the beginning of 2015 that capital hit over $4,000 million in a quarter. The boom in capital importation in Q3 2017 was mainly driven by significant growth in both Portfolio Investment and Other Investment,” the report stated.

Portfolio Investment

Portfolio investment, which was put at $2,767.4 million in the third quarter of 2017, remained the largest component of capital import and contributed to 67 percent of the total amount. This component expanded faster than the other two main categories with a year on year growth rate of 200.7 percent. Foreign Direct Investment recorded $117.6 million which fell by 65.5 percent year on year while Other Investment increased by 124.55 percent compared to 2016 Q3.

Although Other Investment in 2017 Q3 more than doubled the value in the third quarter of 2016 from $516.2 million to $1,260.1 million, it remained about 30 percent of the total capital importation.

“Portfolio investment in the third quarter more than tripled the figure of the second quarter of the same year, hitting $2,767.3 million. This figure was 200.7 percent higher than the same quarter in 2016 which was recorded $920.32 million. The boom of portfolio investment was driven by strong growth of equity and bonds and a dramatic capital investment increase in the form of money market instruments,” the report released by NBS disclosed.

THISDAY had earlier reported that the interest of foreign investors in the equity segment of the Nigerian capital market recorded an appreciable improvement in 2017, as more funds flowed into the economy, though local investors as at end of September 2017, still continued to dominate investment in that market.

Foreign portfolio investment on the Nigerian Stock Exchange in nine months ended September 30, 2017 stood at N783.34billion (about $2.56billion).

The figure outperformed the N517.55 billion invested in the Nigerian capital market in full year 2016 by 51.36 percent.

According to the Nigerian Stock Exchange, “The performance is a proof that foreign investors, who decided to beat a retreat from the biggest economy in Africa during the time of recession, are beginning to have confidence again in doing business in Nigeria. Both foreign and domestic investments recorded a drastic drop on the Nigerian bourse in 2016.”

Compared to the figure in 2015, transaction by foreign investors recorded a huge decline to the tune of 49.5 percent from N1.025 trillion in 2015 to only N517.55billion in 2016 while domestic investment dropped from N880.56billion in 2015 to N633.82billion in 2016, representing a 28.0 percent drop.

But the trend has changed as foreign investment accounted for 47.31 percent of total investment in the market as at September 30, 2017 as total portfolio investment recorded on the Nigerian Stock Exchange in the review period stood at N1.656 trillion compared to N1.151trillion recorded in full year ended December 31, 2016.

Foreign portfolio investment in 2016 compared to the total investment made in the market as at December 31, 2016 stood at 44.95 percent, which is 2.36 basis points higher than the performance in 2016.