CBN’s I&E Boosts Foreign Investment in Equities Market by 116%

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•  Turnover grows 22% year-on-year

 

By Bamidele  Famoofo

One year after the introduction of the Investors’ & Exporters’ (I&E) Window by the Central Bank of Nigeria (CBN), Foreign Portfolio Investment (FPI) in the Nigerian equities market recorded a 116 per cent growth year-on-year (YoY) as at end of April, 2018.

Total foreign portfolio investment between January and April this year, rose to N504.35billion compared to N233.51billion recorded in the same period in 2017, representing an increase of 116 per cent.

Investments by foreign investors in the market witnessed a sharp decline in the same base period in 2016 when the figure dropped to N148.87billion as against N439.57billion recorded in April 2015 Year-to-Date (YTD).

FPI in Africa’s largest economy returned to the path of growth in 2017, rising to N233.51billion in April YTD compared to N148.87billion YTD in April 2016, representing 56.9 per cent increase.

FPI in 2018 (April YTD) compared to the same period in 2017 recorded 116 per cent growth from N233.51billion in 2017 to N504.35billion in April (YTD).

Data supplied by the Nigerian Stock Exchange (NSE) showed that transactions at the nation’s bourse decreased by 22.11 per cent from N272.48 billion recorded in March 2018 to N212.23 billion (about $0.70 billion) in April 2018. The cumulative transactions from January to April increased by 114.22 per cent from N509.38 billion recorded in 2017 to N1.091 trillion in 2018.

Foreign investors outperformed domestic investors by 15.48 per cent in April 2018. Total domestic transactions reduced by 36.0 per cent from N140.27 billion in March to N89.70 billion in April 2018. Foreign transactions also reduced by 7.32 per cent from N132.21 billion to N122.53 billion within the same period.

There was a 7.79 per cent decrease in foreign inflows from N69.71 billion in March 2018 to N64.28 billion in April 2018. Besides, foreign outflows reduced by 6.8 percent from N62.50 billion to N58.25 billion within the same period.

Meanwhile, financial experts have attributed the renewed interest of foreign investors in the Nigerian equities market to the smooth operations of the I&E window introduced by CBN in April 2017. 

According to the apex bank, “The purpose of I&E Window was to boost liquidity in the FX Market and ensure timely settlement of eligible transactions.”

Afrinvest Research noted that weak sentiment in the Nigerian capital market was upturned in April 2017, following the launch of the I&E FX.  “Market returned 42.3 per cent in 2017 following a 3-year losing streak. The performance was due largely to renewed interest by foreign and domestic investors because of stability in macroeconomic fundamentals”.

Specifically, analysts at Afrinvest Research confirmed that the I&E FX window operations has had a material effect on the attraction of FPI into the Nigerian economy through the equities market since its introduction about a year ago.  According to them, “Foreign Portfolio Inflow (FPI) into Nigeria through the NSE, more than doubled from N256.5billion in 2016 to N596.8 billion in November 2017. Average monthly inflow of FPI into the equities market in the review period rose 153.8 percent to N54.3billion from N21.4billion.”

Governor of Central Bank of Nigeria, Mr. Godwin Emefiele, in his review of the performance of the nation’s economy in January 2018, said the introduction of the I & E FX window has boosted the confidence of investors in the Nigerian economy.

Emefiele, in a signed statement, had said the condition of the economy in January reflects strong investor confidence in Nigeria. “We have recorded inflows of almost US$13billion since our introduction of the Investors’ and Exporters’ (I&E) Window about nine months ago.”

According to the apex bank, the inflows from foreign investors into the economy of Nigeria, have boosted FX supply and helped stabilise the exchange rate.

His words: “We have also seen the market capitalisation of our Stock Exchange improve by 22.3 per cent from N13.21trillion on 30 November 2017 to N16.15trillion as of 19 January 2018”.

Furthermore, Emefiele disclosed that the All-Share Index (ASI) of the Nigerian bourse, which was rated second best performing exchange in Africa and 11th best performing stock exchange globally in 2017, had recorded a favourable growth in the very first month of the year 2018 at 18.8 percent as the Index moved from 37,944.60 points in November 2017 to 45,092.83 points on January 19, 2018.

Other areas, where Nigeria has enjoyed gains from the I&E window, according to analysts at Afrinvest Research, are favourable movement on the World Bank Ease of Doing Business Ranking for 2018, where Nigeria ranked among the 10 most improved countries of the world. According a statement attributed to the office of the Vice President of Nigeria, “Nigeria moved up 24 places (relative to a target of 20) to 145th in the World Bank Ease of Doing Business Ranking and ranked in the top most improved countries”.

Emefiele has assured that the CBN will do everything at its disposal to ascertain that the gains from I &E FX window on the economy is sustained.  “The management of the CBN is determined to sustain these gains and will continue our vigilance and pro-activity to ensure macroeconomic stability through 2018,” he said.


 
BRIEFS

Budget

President Muhammadu Buhari signed the 2018 Appropriation Bill into law on Wednesday in Abuja. The total budget is N9.1 trillion, up from the N8.6 trillion Buhari submitted to the National Assembly on November 7 last year. The two chambers of the National Assembly had passed the budget on May 16 after raising the figure by N500 million. They also increased the oil benchmark proposed by the executive from $45 to $51 per barrel.

FX Market

The Central Bank of Nigeria boosted the foreign exchange market with $210 million to meet customers’ requests in various segments, Isaac Okorafor, Acting Director, Corporate Communications, said in Abuja. According to him, the bank, in its desire to meet customers’ needs, offered $100 million to authorised dealers in the wholesale segment of the market, while the Small and Medium Enterprises segment got $55 million. Okorafor also said customers needing foreign exchange for invisibles, such as tuition fees, medical payments, and Basic Travel Allowance, among others, were allocated $55 million. He added that the naira continued its stability in the foreign exchange market, exchanging at an average of N360 per dollar in the Bureau De Change segment of the market last Wednesday.

Oil Spill

Oil giant, Shell Nigeria Exploration and Production Company Limited, is liable to a $3.6 billion fine levied on it by the National Oil Spill Detection and Response Agency over a 2011 crude oil spill offshore on Nigeria’s coastline, a federal court has ruled. Justice Mojisola Olatoregun held that NOSDRA’s power to impose penalties did not violate the provisions of the Nigerian constitution.

Border Closure

The federal government closed the land border with an unnamed neighbouring country to avoid smuggling of foreign rice into Nigeria. Minister of Agriculture and Rural Development Audu Ogbeh disclosed this in Abuja while speaking at a youth leadership clinic under the auspices of Guardians of the Nation International. Ogbeh said shutting the borders had become necessary to encourage local production and sustain the economy of the country. Nigeria shares borders with Niger, Chad, Benin and Cameroon. The pronouncement came weeks after media reports indicated that importation of Thai and Vietnamese rice was flourishing in the south-western borders of Nigeria with Benin Republic.

Foreign Investment

No fewer than 20 German firms were in Nigeria to explore investment opportunities. The chief executives of the visiting firms, led by the Minister of Industry, Trade and Investment, Okechukwu Enelamah, paid a courtesy visit to Vice President Yemi Osinbajo to obtain first-hand information on the various investment opportunities. According to Enelamah, the delegation came from Bavaria, the region of Germany covering Munich and other industrial areas of the country. He said, “This is a very robust delegation; one of the important insights I gained from the meeting is that they really think that Nigerian economy is picking up. 

They think investments are all looking positive and they believe that it is better to face it and see for themselves rather than read about it from a distance. It is also noteworthy that some of them are already here and most of them are actually prospecting.” 


 
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