September 11, 2020/Cordros Report

Second-quarter data on foreign capital inflows to Nigeria reveals the depth of the decline caused by the COVID-19 pandemic and consequent risk aversion towards naira assets by foreign investors. According to data released by the NBS last week, capital importation declined by 78.6% y/y in Q2-20 to USD1.29 billion; a twelve-quarter low. The magnitude of the decline was most significant in Foreign Portfolio Investment (FPI) which has historically accounted for the largest proportion of foreign inflows. Going forward, it is certainly a case of “once bitten, twice shy” for foreign investors whom we believe will continue waiting on the sidelines until they see (1) policy action that increases their confidence in the stability and liquidity of the naira, and (2) more attractive fixed-income yields, vs. peers.

According to data released by the National Bureau of Statistics (NBS), Capital importation into Nigeria in Q2-20 plummeted by 78.6% y/y to USD1.29 billion, the lowest since Q1-17 (USD908.27 million), as investors flocked to safe-haven assets due to the COVID-19 pandemic. The drop was aggravated by Nigeria’s FX illiquidity situation as the CBN intensified its FX rationing following the oil price crash and the subsequent decline in oil receipts. Sequentially, capital importation fell by 79.9% q/q.

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