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Foreign investors dump Lagos for Abuja as Capital Importation drops to $5.5 billion

The sum of $5.51 billion was the value of total capital imported into Nigeria in Q2 2018.

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The National Bureau of Statistics (NBS) has released the Nigerian Capital Importation for the second quarter of 2018. The report shows the first quarterly decline in Capital Importation into Nigeria since the first quarter of 2017 (Q1 2017). 

The value of total capital importation into Nigeria during the period was $5.51 billion, which shows a 12.53% decline from the last quarter – Q1 2018 – with a year on year increase of 207.62%. 

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  • Foreign Portfolio Investment (FPI) which slumped from $4.56 billion in first quarter of 2018 to $4.11 billion in the second quarter was the major reason for the fall in Nigeria’s capital inflow. 
  • FPI alone accounted for 75% 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.
  • Other Investment also contributed to the decline in Capital Importation with a decrease of 24.07% from the previous quarter of Q1 2018.
  • However, a decrease in Money Market Instruments (which is the largest contributor to FPI) with a value of $2.67 billion was the main reason for the decline recorded by Portfolio Investment in the second quarter of 2018. It fell by 24.29% from the previous quarter.
  • Foreign Direct Investment (FDI) contributed 4.7%, while Other Investments account for 20% of the total Capital Importation.
  • Despite growing by 5.97% to $261.35 million from last quarter, FDI’s contribution is still very low, when compared with Portfolio Investment – contributing only 5% of the total capital imported in Q2 2018. This signifies a fall of 4.75% on year on year basis, with Equity Investment contributing 97.85% of FDI in Q2 2018. 
  • Other Investment has been falling since Q1 2017 and still declined by 24.07% to stand at $1.13 billion in Q2 2018, it nevertheless grew by 51.55% when compared to the same quarter in 2017. It contributed 20.5% to Capital Importation into Nigeria in the second quarter of 2018. However, Loans with a figure of $1.12 billion dominated other investment with a contribution of 99%.

Equities still dominate 

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

  • Capital inflow in the form of shares grew by 7.87% to $4.09 billion from $3.79 billion reported in the previous quarter while the percentage share of equities to total Capital Imported stood at 74.21% in the second quarter of 2018.
  • Servicing overtook Banking to become the leading sector for foreign capital inflow in the second quarter of 2018 with a value of $479.85 million.
  • Banking Sector fell to the second position to stand at $294.96 million, followed by Production, Financing and Agricultural sectors in that order.

Abuja maintains lead 

  • Meanwhile, Abuja, which overtook Lagos in the fourth quarter of 2017 attracted $2.55 billion to remain the highest state that received foreign Capital Inflow during the period, despite declining by 13% from Q1 2018.
  • Lagos stood in the second position with a quarter-on-quarter reduction of 37.80% from $2.67 billion in the last quarter to $1.66 billion in the period under review, while Abia was third with $1.2 billion Capital Imports.

Capital Importation by Countries 

  • United Kingdom is still the number one nation in terms of Capital Investment in Nigeria with $1.77 billion which accounted for 32.15% of the total capital inflow in Q2 2018. The UK reduced her Capital Investments in Nigeria by 21.29% from the previous quarter.
  • The United States came second with capital imports of $1.22 billion, which is a decline of 2.85%. The United Arab Emirates (UAE) and Switzerland were third and fourth with $535.98 million and $297.32 million capital inflows respectively.
  • While Ghana that was third in the last quarter decreased by 88% to $156.30 million in Q2 2018.

Stanbic IBTC widens its lead 

  • Stanbic IBTC was the bank through which the highest share of Foreign Capital flowed in the quarter under review, with 54.9% of the total capital inflow, showing a slight increase from 48.5% recorded in Q1 2018.
  • It was followed by Standard Chartered Bank, CitiBank, Access Bank, Zenith Bank, and Guaranty Trust Bank. The six banks jointly accounted for 90% of the total capital Imported into Nigeria in Q2 2018.

Why it matters 

The decrease in the inflow of Capital Imports into Nigeria, especially Portfolio Investment, is typically a negative development for the Nigerian Capital Market. 

  • Lower FPI evaporates the liquidity that can sustain market growth, particularly for stocks, reducing capital importation translates to lower external reserves. Nigeria’s external reserves has been on a free fall in the past few months and recently dropped below $47 billion for the first time in 4 months. This can be directly traced to the decline in Capital Importation in Q2 2018.
  • Meanwhile, improving FDI is mostly sought after as it reflects investors’ confidence in investing in development areas of the country. FDIs have always been lower than FPIs.

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Financial Services

FBN Holdings announces N25 billion capital injection into FirstBank

The fresh equity capital injection is coming on the heels of FBN Holdings’ recent divestment from FBN Insurance.

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N25 billion worth of equity capital has been injected into First Bank of Nigeria Limited by its parent company, FBN Holdings Plc. The move is coming on the heels of FBN Holdings’ recent divestment from FBN Insurance Ltd.

A statement signed by FBN Holdings’ Company Secretary, Seye Kosoko, as seen on the Nigerian Stock Exchange’s website, noted that the N25 billion is part of the net proceeds from the recent divestment from  FBN Insurance Limited.

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Following this N25 billion capital injection, First Bank of Nigeria Limited’s Capital Adequacy Ratio (CAR) has increased to 16.53%. This is before capitalising year to date profit for half-year 2020.

More details: While commenting on this development, FBN Holdings’ Chief Financial Officer, Oyewale Ariyibi, said that the “divestment has unlocked significant value embedded in the former subsidiary which is being leveraged to strengthen the core baning business for which the Group is renowned.”

The company also explained that the overriding objective of these recent moves is to “optimise capital across the Group to drive business growth, enhance efficiency, and improve overall shareholders’ value.”

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The backstory: Back in April this year, FBN Holdings Plc first disclosed ongoing talks with Sanlam Emerging Markets (Proprietary) Ltd over a possible sell-off of its 65% stake in FBN Insurance to the South African firm. Fast-forward to early June, FBN Holdings again informed stakeholders that it had completed the divestment process. All the while, no mention was made about the value of the transaction until now.

Note that FBN Holdings Plc reported a profit after tax of N49.5 billion for the half-year period ended June 30th, 2020. This represents a 56.3% increase when compared with N31.6 billion reported in H1 2019. The company’s Chief Executive Officer, UK Eke, recently commented on performance, noting that “the H1 2020 financial results are impressive and reconfirm our consistent focus on enhanced shareholder value.”

FBN Holdings’ share price on the Nigerian Stock Exchange is currently trading at N5.05. The company has a market capitalisation of about N181.3 billion, according to information gleaned from Bloomberg.

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Hospitality & Travel

UAE denies placing travel ban on Nigerians, gives reason for suspending visa issuance

The travel between Nigeria and UAE remained limited due to the closure of the Nigerian airspace.

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UAE denies placing travel ban on Nigerians, gives reason for suspending visa issuance

The United Arab Emirates (UAE) Embassy in Nigeria has reacted to media reports about the purported travel restrictions imposed on Nigerians wishing to travel to the UAE.

In its response, the UAE Embassy in Abuja refuted the accuracy of the information which was contained in those reports, while also affirming the growing bilateral relations between the 2 friendly countries.

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This disclosure was made in an official statement by the United Arab Emirates Embassy in Abuja on Thursday, August 6, 2020.

The embassy, in its statement, said the UAE government acknowledged that travel between Nigeria and the UAE has been limited due to the closure of the Nigerian airspace. Part of the statement said:

In response to recent press and social media reports regarding purported travel restrictions between the UAE and Nigeria, and in an affirmation of the growing bilateral relations between the two friendly countries, the UAE Embassy in Abuja denies the accuracy of the information contained in these reports.

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“At the onset of the COVlD-19 pandemic, the UAE took a number of precautionary measures to combat the virus’ spread, including the temporary suspension on issuing UAE visas for all nationalities as of March 17, 2020.

“After entering the recovery phase of the pandemic, the UAE eased some measures on July 7, permitting visitors from various countries to adhere to the necessary precautionary measures, including by showing negative PCR test results within 92 hours of travelling to the UAE. This includes those visiting from Nigeria.”

(READ MORE:FG travel restrictions on 13 countries: A little too late?)

The statement also noted that the UAE Embassy and the Nigerian Government will continue to work closely to obtain the necessary approvals to facilitate travel between both countries.

It can be recalled that there were media reports which were triggered by claims of a travel agency, saying that visa renewals for Nigerians in the UAE, approval for permanent residents, and tourist visas have been discontinued.

Some social media users, in reaction to the development, linked the new restrictions to some of the fraud cases involving some Nigerians in Dubai recently

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Hospitality & Travel

FG commences process of resumption of international flight operations in weeks

The government has expressed its readiness to reopen the nation’s airspace in a matter of weeks.

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COVID-19: Reactions trail FG travel ban on 13 countries

The Federal Government has commenced the process of gradual resumption of international flight operations which were suspended as part of measures to contain the spread of the COVID-19.

Airport authorities have expressed their readiness to reopen the nation’s airspace in a matter of weeks rather than months.

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During a briefing on Thursday, the National Coordinator of the Presidential Task Force (PTF) on COVID-19, Sani Aliyu, said that approvals have been given for aviation authorities to commence the process for the resumption of international flight operations.

Aliyu revealed that the Nigerian Civil Aviation Authority (NCAA), other aviation agencies and the airlines, are to come up with a safe process through which airlines operating international flights can resume operations.

The PTF National Coordinator further disclosed:

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For international travel, we have made recommendations to the aviation industry to commence the process for reopening international airports, provided all existing international and local COVID-19 protocols are in place.

“We have modified the protocol for passenger arrivals at the airports. Domestic passengers arriving at the airports are advised to arrive one hour before their flights and three hours before international flights when this restarts.”

He said passengers arriving for domestic flights can now arrive an hour and a half before departure, while international flight passengers are to arrive 3 hours before departure.

In his statement earlier, the Chairman of the Presidential Task Force (PTF) on COVID-19, who also doubles as the Secretary to Government of the Federation, Boss Mustapha, had disclosed that the major changes being proposed in the eased lockdown were aimed at achieving gradual reopening of international flight operations within parameters.

It also includes reopening of rail transportation within established parameters and the granting of permissions to exit classes to resume ahead of examinations.

In his own contribution, the Minister for Aviation, Hadi Sirika, said that the decision to resume flight operations was not purely an aviation problem, as it had to do with health.

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He revealed that the PTF had set up a technical committee that would deliberate on the date that all the stakeholders in international air transport would be happy to start operations.

While sharing in the pain of Nigerians, Hadi Sirika admitted that the closure of the international air space had separated families and friends, denied people access to hospitals and schools abroad as well as denied them access to their businesses.

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