Culled—Proshare
October 19, 2017/ FBNQuest Research
On Monday we commented on the current account in the balance of payments (BoP) for Q2 2017. Today it is the turn of the capital/financial account, and the investment flows in particular. These are gross flows (ie those in the reporting economy before investment by Nigerian residents offshore).
Direct, portfolio and other investment were again positive on this basis in Q2. The chart shows portfolio flows peaking above US$4bn in Q2 2013, when Nigeria was still basking in the glow of its inclusion in the JP Morgan indices for local currency, emerging sovereign debt.
Direct investment in 2016 amounted to US$4.5bn, equivalent to 1.1% of GDP. This is pitifully low. The numerous structural flaws in the economy and the investment climate are barriers for the direct investor although they are not always the preoccupation of the offshore portfolio community.
The short-term prospects are better for the two other components. The Eurobond issuance, we assume, explains the improvement in other investment in Q1 2017, and is set to be repeated this quarter. We should shortly see the impact of the NAFEX experiment on portfolio investment.
When we adjust for the assets on the capital account (Nigerian investment offshore) in Q2, all three components remain positive on a net basis: direct investment of US$580m, portfolio investment of US$1.48bn and other investment of US$2.58bn.
