June 5, 2023/FBNQuest
Today, we examine the financial accounts of the balance of payments. According to the CBN’s most recent Quarterly Statistical Bulletin, the financial accounts recorded a lower net surplus of USD853m in Q4 ’22, equivalent to 0.7% of GDP, compared with a revised net surplus of USD2.7bn in Q3 ’22 (2.2% of GDP). The net surplus can be attributed to a net inflow of USD1.9bn from financial liabilities, although it fell short of the USD3.6bn surplus recorded in Q3 ’22.
Among the three sources that contributed to the inflow from financial liabilities, the largest contribution was from a net inflow of USD848m from other investment liabilities, primarily consisting of loans to the government.
In contrast to recent trends, foreign direct investment (FDI) inflow of USD753m was the second largest source of the surplus for financial liabilities.
The majority of the FDI inflow was driven by investments in equity capital, which resulted in an inflow of USD654m, a significant improvement over the USD196m recorded the previous quarter.
The surplus in financial liabilities was also boosted by an inflow of USD337m recorded for portfolio investments in debt securities.
Conversely, financial assets exhibited a deficit of -USD1.1bn, primarily driven by currency deposits held in foreign banks.
In recent years, foreign investors have remained cautious due to challenges related to fx liquidity and the repatriation of funds from Nigeria.
During his inaugural speech, the President emphasized his administration’s commitment to achieving exchange rate unification and enabling seamless repatriation of funds for investors.
If these objectives are successfully accomplished, Nigeria may regain its appeal to offshore investors.
