June 14, 2022/Coronattion Research
The National Bureau of Statistics (NBS) has released its latest report on capital importation for Q1 ’22. The data was obtained from the CBN and compiled using information on banking transactions from all registered financial institutions in Nigeria. The total value of capital imported in Q1 ‘22 was estimated at USD1.6bn, representing a decline of 28% q/q and 17.5% y/y. The capital importation data is gross, and not adjusted for capital exports.
The category referred to as portfolio investment accounted for the largest share (60.9%) of total capital importation in Q1 ’22. On a q/q basis, portfolio investment increased by 49% in Q1. Money market instruments accounted for 64% of total portfolio investments and increased by 10% q/q. We partly attribute the q/q increase to investors seeking safe shortterm instruments. Meanwhile, bonds accounted for 32% of total portfolio investments, increasing by 575% q/q and 124% y/y.
Demand for equities was relatively low in Q1 ‘22. This asset class accounted for 3% (USD31.8bn) of total portfolio investments. Data from NGX show the ratio of local to foreign investment participation at 81:19 in Q1 ‘22. We note that the NGX-ASI posted a positive return of 10% in Q1 ’22.
In the quarter under review, foreign direct investment inflow declined by -57% q/q to USD155m. On a y/y basis, there was a marginal increase. There has been a downward trend in greenfield investment projects. Given the direct correlation with investment attractiveness, ease of doing business and FDI flows, reforms that improve national security, reduce the country’s infrastructure deficit, and support a conducive business environment are critical.
China and Singapore were able to boost their respective FDI and facilitate economic transformation by providing value-add via affordable and skilled labour. Through reforms, South Korea deliberately created a motivated and educated populace in addition to spurring their country’s technological boom, these attracted increased FDI.
The FGN’s commitment to improve Nigeria’s ease of doing business ranking from 131 to 100
by 2025, is laudable. However, this requires well targeted capital expenses as well as proper
fiscal discipline. FDI inflow accounted for only 10% of total capital importation in Q1 ’22.
