The NBS recently released its latest report on Nigerian Capital Importation, which covers Q1 2017. The data was obtained from the CBN and compiled using information on banking transactions. The total value of capital imported into Nigeria in Q1 2017 was estimated at US$908m, representing an increase of 28% y/y. However compared with the previous quarter this was a 41% decline. January posted the lowest inflow at US$200m.
· Other investments category was the largest component of imported capital, accounting for 42% of the total. However, on a q/q basis it declined considerably by 58%.
· Portfolio investment accounted for the second largest component with inflows worth US$314m (35% of the total); representing increases of 10% q/q and 16% y/y. The CBN’s fx interventions had a role to play in the increased inflows, during the period under review there was some level of stability in the fx market.
· Money market instruments increased significantly by over 100% to US$212m and accounted for the largest share (67%) of portfolio investments. In stark contrast, portfolio equity inflows remained subdued at US102m; this component suffered a 42% q/q decline. We assume seasonality contributed to this decline.
· FDI was the lowest contributor to capital importation in Q1 with inflows worth US$211m; there was a 39% q/q decline. We have mentioned on a few occasions that an increased steady flow from FDI rests upon the authority’s ability to solve the structural issues within the country.
Source: National Bureau of Statistics (NBS); FBNQuest Research
In terms of origination of inflows, the United Kingdom had the largest share at US302m accounting for 33% of the total. Meanwhile, the US, Singapore and Mauritius represented 24.1%, 8.1% and 7.9% respectively.
· Based on trading activities so far this quarter, we expect the Q2 report when published to show a marked q/q increase in portfolio flows in particular. Beyond Q2, much will depend on how further the fx reforms go e.g. additional transparency on NAFEX.