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Economy & Politics

Abuja overtakes Lagos as top destination for Capital Importation

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Abuja overtakes Lagos as top destination for Capital Importation

The report shows a fourth successive quarterly growth in Capital Importation into Nigeria, since the second quarter of 2017 (Q2 2017).

The sum of $6,303.63 million was the value of total capital imported into Nigeria during the period which shows a 17.11% growth from the last quarter – Q4 2017 – with a year on year increase of 594.03%.

  • Foreign Portfolio Investment (FPI) which grew from $3,477.53 million in Q4 2017 to $4,565.09 million in Q1 2018 was the major reason for the increase in Nigeria’s capital inflow.
  • FPI alone accounted for 72.42% of the total Capital Importation into Nigeria during the quarter under review.
  • FPI has been growing faster than the other types of Capital Importation since Q2 2017 remaining the largest contributor with 35% in Q1 2018.
  • It stood at $4,565.1 million with a growth of 31.27% from the last quarter of 2017.

[READ MORE: Nigeria’s Foreign Portfolio Investment Vs Foreign Direct Investment]

Foreign Direct Investment (FDI) contributed 3.91% while Other Investment accounted for 23.67% of total Capital Importation.

  • FDI’s still pale in comparison to Portfolio Investment and it reduced by 83% to $246.62 million in Q1 2018 to represent only 3.9% of the total capital imported.
  • However, increase in Money Market Instruments with a value of $3,527.60 million was the main reason for the thick growth recorded by Portfolio Investment in the first quarter of 2018, with a lion share of 77.27% out of the total Portfolio Investments.
  • Though Other Investments stood at $1.49 billion in Q1 2018 to reduce by 2.29% from the last quarter of 2017, it nevertheless grew by 289.25% when compared to the same quarter in 2017.
  • It contributed 23.67% to Capital Importation into Nigeria in Q1 2018. Loans with a figure of $1,27 billion have a contribution of 85.02% of Other Investments.

Equities dominate

During the quarter, Capital Importation into Nigeria was dominated by shares.

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  • Capital inflow in the form of Shares grew by 3.05% to $3.79 billion from $3.68 billion reported in the previous quarter while the percentage share of equities to total Capital Imported reduced from 68.37% in Q4 2017 to 60.17% in Q1 2018.
  • However, the leading sector for foreign capital inflow still remained Banking, with 18.7% of the total Capital Importation in the first quarter of 2018 in a value of $1.18 billion.
  • Financing stood at $485.41 million as the second leading sector followed by Production, Servicing and Telecoms sectors in that order.

[READ MORE: Nigeria receives $17.5 billion diaspora remittances in 2019]

Abuja takes over

  • Meanwhile, Abuja, which overtook Lagos in the previous quarter attracted $3.54 billion to remain the highest state that received foreign Capital Inflow during the period, with a growth of 32.24% from Q4 2017.
  • Lagos stood in the second position with a marginal growth of 4.59% from $2.55 billion in the last quarter to $2.67 billion in the period under review while Akwa Ibom was third with $43.62 million Capital Imports.

Capital Importation by Countries

  • United Kingdom is still the number one nation in terms of Capital Investment in Nigeria with $2.25 billion which accounted for 35.73% of the total capital inflow in Q1,2018.
  • The UK increased her Capital Investments in Nigeria by 39.89% from the last quarter.
  • The United States was second with $1.26 billion accounting for 19.99% of the total Capital Imports. South Africa and Ghana were third and fourth with $493.22 million and $380.14 million capital inflows respectively.
  • That of South Africa in particular increased by 79.29% from Q4 2017.

Leading Banks

  • Lastly, Standard Chartered Bank was the bank through which the highest share of Foreign Capital flowed in the quarter under review, with 25.49% of the total capital inflow.
  • It was followed by Access Bank, Ecobank, Zenith Bank, Stanbic IBTC Bank and Guaranty Trust Bank in that order.
  • The six banks jointly accounted for 81.90% of the total capital Imported into Nigeria in Q1 2018.

[READ MORE: Nigeria received $5.82 billion capital inflows in Q2 2019, down by -31.41%]

Why it matters

The huge increase in the inflow of Capital Imports into Nigeria, especially Portfolio Investment, is typically a positive development for will the Nigerian Capital Market.

  • Higher FPI creates the liquidity that can sustain market growth, particularly for stocks. Investments in the capital markets also reflect the spate of equity investments that have taken place in the Nigerian Economy over the last 6 months.
  • Improving capital importation translates to higher external reserves. Nigeria’s external reserves are close to $48 billion and have helped stabilize the exchange rate.
  • Improving FDI is mostly sought after as it reflects investor confidence in investing in development areas of the country. FDIs have always been lower than FPIs.
  • The downside risk with FPIs inflows is that a threat to the economy typically results in its immediate outflows. This is why it is often referred to as hot money.

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Economy & Politics

House of Reps Speaker assures that the PIB will be passed in April 2021

Femi Gbajabiamila has revealed that the lower legislative chamber intends to pass the PIB in April 2021.

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House of Reps determined to resolve ASUU issues and empower youths - Gbajabiamila , #EndSars: House of Reps to draft new Police legislation in 30 days, Speaker Gbajabiamila asks NLC to suspend strike, offers palliatives, #EndSARS: House of Representatives will do everything to deliver a policing system that works - Gbajabiamila

The Speaker of the House of Representatives, Femi Gbajabiamila, has revealed that the lower legislative chamber intends to pass the Petroleum Industry Bill (PIB) in April 2021.

The assurance by the Speaker follows so many years of delay in the passage of the bill, which is expected to encourage investment into the oil industry, due to political disagreements and objections from International Oil Companies.

This disclosure was made by Gbajabiamila, while speaking at the 2-day public hearing organized by the house Adhoc committee on PIB on Wednesday, January 27, 2021.

The Speaker pointed out that although the timeframe for the passage of the Bill is short, he assured that it will receive the thoroughness it deserves and as well, made a commitment on behalf of the house to pass the legislation in April.

What the Speaker House of Representatives is saying

Gbajabiamila, in his statement, said, ‘’I thank the Chairman and the committee for the dedication and efforts thus far. I have confidence that they will deliver on this critical National Assignment within the time we have set. I look forward to presiding over the consideration of the committee’s report.’’

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“We intend to pass this bill by April. That is the commitment we have made. Some may call it a tall order, but we will do it and we will do it with every sense of responsibility without compromising the thoroughness of the work that will be done.’’

‘’A lot of work has gone into the preparation of this bill but it’s not straight-jacketed, the idea of the public hearing is to have interests that may have not been accommodated prior to the introduction to the Bill to lend their voices,’’ he added.

While speaking at the occasion, the Chairman of the Adnoc Committee on PIB, who is also the Chief Whip of the House of Representatives, Mohammed Tahir Monguno, said that as we gather here today, we may differ in opinions and background but the truth is the passage of this Bill is long overdue.

What you should know

  • It can be recalled that the Senate President, Ahmad Lawan, had a few days ago while speaking at the 2-day public hearing organized by the senate on the PIB, said the upper legislative chamber is looking at passing the Bill in April or May.
  • He noted that the non-passage of the PIB had been a major drag on the industry over the years, significantly limiting its ability to attract both local and foreign capital at a time that when other countries are scrambling to exploit their oil and gas resources.
  • The PIB is a Bill that seeks to provide Legal, Governance, Regulatory Fiscal Framework for the Nigerian Petroleum Industry.
  • On November 24, 2020, the PIB was debated, it passed the second reading and then referred to the Adhoc, Committee on the Bill.

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Economy & Politics

MPC recommends CBN increase lending to government via Ways and Means

The MPC urged the CBN to increase its lending to the government as it believes it will help reflate the economy from its recession.

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CBN Bans Maize Importation

The Monetary Policy Committee has urged the Central Bank of Nigeria to increase its lending to the government via Ways and Means as it believes it will help reflate the economy from its recession.

This is contained in a recent communique from the first Monetary Policy Committee (MPC) meeting concluded on Tuesday, 26th January 2021.

According to the report, the committee considered the broad-based global stimulus packages introduced by the apex banks of different countries to support their economic recovery in the face of the Covid-19 pandemic.

Some of the stimulus packages noted by the MPC include; expanded credit lines, asset purchase programme, corporate bond purchase, additional funding facilities for the financial system, commercial paper purchases, special central bank lending, and increase in Ways and Means limits.

READ: Buhari orders MDAs to grant FIRS access to their systems

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What you need to know

  • Recall that Nairametrics reported that the Federal government borrowed a total of N2.8 trillion via Ways and Means from the CBN in 2020 due to the FG’s failure to meet its revenue targets as a result of the impact of the crash in global oil prices and the covid-19 pandemic.
  • However, the MPC noted the large stimulus packages deployed by other countries to quicken their growth recovery. Notably, the report stated that Japan provided stimulus packages valued at 66% of its 2019 GDP, UK (45.04%), USA (28.4%), Brazil (27.6%), South Africa (12.6%).
  • Also, China deployed 11.5% of its GDP, India (10%), Russia (7.1%) as against Nigeria’s 4%.
  • It is worth noting, that the Ways and Means financing was brought to public view in 2016 by the former CBN Governor, Lamido Sanusi after he accused the government of contravening the CBN Act by borrowing more than the required 5% of the prior year revenue.
  • While in 2020, the government borrowed 62.2% of its 2019 revenues of N4.5 trillion.
  • Also, recall that the budget deficit of N5.6 trillion from the total N13.58 trillion signed by the president is expected to be mainly financed by domestic and foreign borrowings, despite debt stock hitting N32.2 trillion as of September 2020.

READ: This is when CBN will cut Monetary Policy Rate – Emefiele 

The MPC, therefore, urged the Apex Bank to further expand its current stimulus packages to support the fiscal interventions to reflate and boost recovery in the economy.

In order to improve revenue, the MPC also called on the government to take advantage of the take-off of the African Continental Free trade Area (AfCFTA), as it believes it could boost domestic production and generate sizeable revenues for the government.

READ: CBN says 17 banks to restructure over 32,000 loans

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Bottom line

With the decline in government revenue, due to the crash in oil price and disruption caused by the Covid-19, it is practically impossible for the government to fund its expenditure for the year without borrowings. Hence the need for the CBN’s support loans.

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Economy & Politics

Covid-19: No more lockdown, CBN advises government

Despite rising Covid-19 cases, the CBN MPC encourages government to avoid locking down the economy again.

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Banks' stakeholders express 4 main concerns bothering the sector right now, CBN, MARKET UPDATE: CBN’s historic agriculture lending; Is it yielding the desired results? 

The Central Bank of Nigeria (CBN) encouraged the Federal Government of Nigeria to avoid locking down the economy again as the second wave of Covid-19 causes an increase in confirmed cases and more deaths.

The apex bank cited the negative impact of another lockdown on the economy as a major concern suggesting that sustaining the tepid economic recovery was perhaps a higher priority than curtailing the fast-spreading variant of the second wave virus via another lockdown.

The remarks were contained in the monetary policy communique read out by the central bank governor Godwin Emefiele following the end of the bank’s monetary policy committee meeting, the first for the year.

READ: CBN retains MPR at 11.5%, holds other parameters constant

“While expressing understanding of the public health dilemma of the recent spike in infections, MPC encouraged Government not to consider a wholesome lockdown of the economy so as not to reverse the current gains of the stimulus earlier provided in 2020.” Emefiele

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As of  January 26, 2020, Nigeria had a total number of Covid-19 cases of about 124, 299, and 1,522 deaths as the second wave continue to spread rapidly across the country. Since December 1st, Nigeria’s positive cases have risen by about 56, 742 cases (83% ) from about 67,557 on the last day of November 2021.

READ: CBN issues modalities for payout of diaspora remittances in dollars

However, the central bank’s recommendations are hinged on the precarious state of the economy which is highlighted throughout a rather sobering MPC communique. In one statement the apex bank admitted that the rise in covid-19 cases was dragging economic recovery backward as more Nigerians become wary of socializing but the spate of economic recovery cannot be jeopardized.

According to the CBN “the outlook for the recovery, however, appears to be dampened by the second wave of the pandemic considering its intensity” yet it still maintained that the previous lockdown was the trigger for another recession.

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“In the Committee’s consideration, it noted that the COVID-19 pandemic and the necessary measures put in place by the Government to forestall its public health impact, such as the lockdown and other associated restrictions, contributed to the Nigerian economy going into recession, much like almost every other country in the world.”

READ: CBN says 22 banks to restructure over 35,000 loans due to COVID-19

CBN Paints a gloomy picture of the economic recovery

The members of the monetary policy committee also detailed challenges to economic recovery being experienced by the country such as higher inflationary rates, weak PMI numbers, and an increase in non-performing loan ratios of commercial banks.

On increase in non-performing loans

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“The Monetary Policy Committee (MPC), however, noted the marginal increase in the Non-Performing Loans (NPLs) ratio which rose to 6.01 percent at end-December 2020 from 5.88 percent at end-November 2020 and above the prudential maximum threshold of 5.0 percent. While noting that this development is not unexpected under the prevailing circumstances, it urged the Bank to strengthen its macroprudential framework to bring NPLs below the prescribed benchmark.”

READ: FG to create “Special Instruments” as part of plans to formalize its borrowing from CBN

On PMI numbers

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The MPC noted with concern the continuing sluggish recovery in the Manufacturing and Non-Manufacturing Purchasing Managers’
Indices (PMIs), which remained below the 50-index point benchmark in December 2020, at 49.6 and 45.7 index points, respectively, compared with 50.2 and 47.6 index points during the previous month. This weak performance was attributed to the resurgence of the pandemic, foreign exchange pressures, increased costs of production, general increase in prices and decline in economic activities.

READ: CBN Cashless Policy: Emiefele regrets decision, insists on the policy 

On Inflation

This uptick was attributed to the increase in both the food and core components of inflation, which rose to 19.56 and 11.37 percent in December 2020, respectively, from 18.30 and 11.01 percent in November 2020. This continued upsurge in food inflation was attributed to the logistical bottlenecks, spurred by the increasing security challenges in many parts of the country, which disrupted food production and supply to the market. Other factors driving the core inflation, include the recent deregulation of the downstream sector of the oil industry, which led to hikes in the price of Premium Motor Spirit (PMS) and the upward adjustment in electricity tariff.

READ: CBN lends DisCos N18.5 billion to procure meters

What this means

As the economy slowly recovers from the Covid-19 induced lockdown, several of our major indicators still show there is trouble ahead. These 3 indicators are some of the most telling.

  • Higher non-performing loans, though expected are symptomatic of what businesses are currently going through as they strive to improve their balance sheet. With weaker sales and piling inventory most businesses will continue to struggle to meet up with their debt obligations increasing the number of non-performing loans in the country.
  • The Purchasing Managers Index is a critical bellwether for predicting when Nigeria gets out of the recession. As a compilation of how businesses are fairing, an index below 50 suggests we are far from a V-shaped recovery and could face a longer wait to get out of the current recession.
  • Nigeria’s galloping inflation rate and economic contraction have created stagflation that puts the economy in a rather precarious situation. Much of the causative factors for the rising inflation are outside of the control of the CBN suggesting a higher inflation rate could persist in the coming months.
  • The CBN indicates we could get out of higher inflation rates later this year, but not before it hit its peak as we expect the cost of goods and services to keep rising.

READ: Agro processors appeal to CBN to provide easy Forex access for SMEs

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CBN Outlook

Despite the gloomy picture, the CBN expects the economy to recover this year provided the country continues with its economic stimulus.

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Available data and forecasts for key macroeconomic variables for the Nigerian economy suggest further improvement in output
growth in the first quarter of 2021. This would be supported by the coordinated and sustained interventions of the monetary and fiscal authorities, including the broad-based stimulus and liquidity injections.

READ: New CBN guidelines ban MMOs, PSPs, Operators from receiving diaspora remittances

But to ensure its optimistic outlook for the economy comes through, the CBN is recommending that more efforts should be geared towards acquiring and distributing vaccines rather than shutting down the economy.

“Members thus agreed that the Committee’s current priority remains to quicken the pace of the recovery through sustained and targeted spending by the fiscal authority supported by the Bank’s interventions. In this light, it was thought necessary to increase collaboration with the fiscal authority by providing complementary spending to finance productive ventures in a bid to improve aggregate supply and reduce prices. This is in addition to effectively collaborating with the Presidential Task Force on COVID-19 through the existing private sector Coalition against COVID-19 (CACOVID) to procure and distribute vaccines to fast-track the pick-up of business activities and economic recovery.”

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