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

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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%. 

  • 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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