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Nigeria received $5.36 billion capital inflows in Q3 2019, as major sectors witness decline

Nigeria received $5.36 billion capital importation (inflows) in the third quarter (Q3) of 2019, compared to $5.82 billion in the second quarter (Q2). This is the lowest amount of capital importation received in the year.

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capital importation, Nigeria spends N1.9 trillion on goods from China in H1, up by 88% , Capital importation jacks by 5.7% (YoY) as banks attract $4.74 billion , Capital flows to Nigeria down for the second consecutive quarter by 7.8% q/q 

Nigeria received $5.36 billion capital importation (inflows) in the third quarter (Q3) of 2019, compared to $5.82 billion in the second quarter (Q2). This is the lowest amount of capital importation received in the year.

According to the latest capital importation report released by the National Bureau of Statistics (NBS), $5.36 billion capital importation received in the third quarter represents a -7.78% contraction from the total amount ($5.82 billion) received within the second quarter (Q2). Meanwhile, year-on-year, capita inflows rose by 87.99%.

Capital Inflows by Type

Nigeria’s capital importation is categorized into three investment types, and these include Portfolio Investment, Foreign Direct Investment (FDI) and Other Investment.

In Q3 2019, the largest amount of capital importation by type was received through portfolio investment, which accounted for 55.88% ($2.99 billion) of total capital importation, followed by Other Investment, 40.39% ($2.16 billion) of total capital, and then Foreign Direct Investment, which accounted for 3.73% ($200.08 million ) of total inflows within the period.

Foreign Direct Investment (FDI): FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. In the latest report, FDI constituted only 3.73% ($200.08 million) of total capital inflows in Q3 2019, this represents the lowest across all forms of capital inflows in the country. The breakdown of FDI shows that investment in equity amounted to $196.38 million, while other capital stood at $3.70 million.

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[READ: Finance Minister, Zainab Ahmed identifies the capital market as key driver for economic growth]

The Portfolio Investment: During the period under review, the largest amount of capital importation by type was received through portfolio investment, which accounted for 55.88% ($2.99 billion) of total capital importation in Nigeria.

Under the portfolio category, investment in money market instruments remains the largest recipient of capital inflows with a total of $2.54 billion, followed by $196.36 million in equity, while investment in bonds stood at $91.60 million.

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Other Investment: According to the NBS report, other investment is broken down into four categories which include Trade credits, Loans, Currency deposits and other claims. However, the bureau only provided details for loans and other claims. In the third quarter of 2019, other investments recorded the second-largest capital importation, accounting for 40.39% ($2.16 billion) of total capital importation.

Capital inflows by Sectors

Further analysis of the capital importation shows that ten major sectors of the sixteen sectors recorded a decline in capital importation. The sectors (nature of business) that witnessed major decline within the quarter include Shares, Agriculture, Banking, Brewing, Construction, Consultancy, Financing, Fishing, Hotels, Production, Servicing and Transport.

On the positive side, major sectors that recorded growth in capital inflows within the quarter include consultancy, electrical, marketing, oil and gas, telecoms and transport.

In aggregate, the top five sectors with the biggest capital inflows received within the quarter are Banking ($1.75 billion), Financing ($1.47 billion), Telecoms ($884.85 million), Shares ($774.69 million) and production ($153.77 million).

Capital inflows by origin

The United Kingdom remains the biggest source of capital investment in Nigeria. In Q3 2019, investment from the U.K amounted to $2.01 billion (37.4%) down from $3.13 billion received in Q2 2019 and $4.53 billion in Q1. This accounted for 53.40% of the total capital inflow in Q3 2019.

The top five countries that accounted for the biggest capital inflows in Nigeria within the quarter include U.K ($2.01 billion), U.S ($1.23 billion), South Africa ($$708.77 million), Egypt ($251.1 billion) and Netherlands ($161.12 million).

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[READ: Nigeria’s GDP grew by 2.28% in Q3 2019, as border closure hits trade sector]

What this means for the Nigerian economy

  • The decline in capital importation in Q3 2019 means the amount of foreign capital that investors brought into the Nigerian economy between July and September 2019 dropped when compared to the amount in Q2 2019 (April and June).
  • Meanwhile, this does not necessarily imply a negative trend in the economy, due to the fact the on a year-on-year basis, capital importation into the economy improved significantly by 87.99%.
  • This is further strengthened by the latest GDP data, which shows that the economy grew by 2.28% in real terms, in the third quarter of 2019, up from 1.81% growth recorded in the third quarter of 2018.
  • As earlier published on Nairametrics, expectations are high for the Nigerian economy as the World Bank’s 2.1% annual growth forecast for 2019 may eventually be surpassed.
  • However, the latest capital importation report shows a worrying trend.
  • For instance, the inflow of FDI into the economy dropped further, and this is not good for the economy. In Nigeria, FDI remains abysmally low.
  • Analysts have stated that the low inflow of FDI is not good for the economy as other forms of capital importation has very low potential to drive the economy as FDI does.

 

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Consumer Goods

Floods disrupt operations in Flour Mills’ Sugar Estate 

Heavy floods at Flour Mills’ Sunti Golden Sugar Estate has disrupted its operations.

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Flour Mills of Nigeria Plc, 2018 FY: Flour Mills’ shareholders unanimously endorse N4.92 billion dividend , FMN redeems N1 billion pledge to CACOVID relief fund, donates $1.5 million worth of medical supplies

Sunti Golden Sugar Estate (SGSE), owned by Flour Mills, has suffered some disruptions to its operations as floodwater breached the Sugar Estate. 

This information was gathered by Nairametrics from a notification sent to the Nigerian Stock Exchange and signed by the Company’s Secretary, Umolu Joseph A. O.  

The largest miller by market capitalization, explains that the floods were as a result of the long rainfalls recorded recently at the northern and central parts of the Niger basin, as the floods were triggered by severe downpours at the Sokoto Rima basin, and as a consequence, the Kainji and Jeba dams witnessed an upsurge in the lateral flow of water. 

The Management stated that SGSE has suffered some disruptions to operations, as the resulting high inflows in the downstream Niger River caused a breach to the extensive and properly designed dyke systems at Sunti Golden Sugar Estates (SGSE). 

This development is expected to delay the expansion project, geared towards increasing the area under cultivation to 4,000 hectares by mid-2021. 

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The Miller assures stakeholders, that there is no immediate threat to the earlier indicated earnings projections of FMN, as immediate safety protocols have been instituted to safeguard employees, property and equipment. Hence the breach is not foreseen to impact the overall performance of the Group. 

The company informs investors and other key stakeholders that the actual state of damage to the current sugarcane crop at Sunti, can only truly be assessed once the floodwater subsides, and ensures that it will release further details in due course as the need arises. 

Shares of Flour Mills at the end of the trading session on Friday closed at N21.50, and this is 6.70% higher than the market opening price for the day, 8.59% higher than the market opening price for the week, and 14.36% higher than the market opening price for the month. While the YTD gains stood at 9.14%. 

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Flour Mills shares are currently trading in the overbought zones, going with the agreement of Technical Momentum  Indicators, like the William Percentage Range, the Relative Strength Index and its stochastic variant, as the shares of the company are driven by strong fundamentals. 

In like manners, the company shares currently trade at 21.15x earnings per share (EPS), and 0.57x book value per share (BVPS), with a Market capitalization of N81.628 billion.  

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Hospitality & Travel

Aviation Unions threaten to shut airspace on Monday, as NLC insists on strike

All aviation workers are directed to withdraw their services at all aerodromes nationwide on 28th September 2020.

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Major aviation unions in Nigeria have threatened to shut the nation’s airspace in support of the Organised Labour nationwide industrial action expected to commence on Monday, September 28, 2020.

The unions are the National Union of Air Transport Employees, National Association of Aircraft Pilots and Engineers, Air Transport Services Senior Staff Association of Nigeria and the Association of Nigeria Aviation Professionals.

This was disclosed by the General Secretary of the National Union of Aviation Employees, Aba Ocheme, in a statement, according to Vanguard.

The unions reportedly asked their members to withdraw services from all aerodromes nationwide indefinitely.

He said, “As such all workers in the aviation sector are hereby directed to withdraw their services at all aerodromes nationwide as from 00hrs of 28th September 2020 until otherwise communicated by the NLC/TUC or our unions. All workers shall comply.”

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Meanwhile, the Nigeria Labour Congress on Friday also insisted that it will go on with its planned mass action scheduled for Monday, September 28.

In a communique by its General Secretary, Comrade Emmanuel Ugboaja, the NLC asked its members across the nation to come out in large numbers to protest the increase in fuel and electricity prices.

The order was given despite a fresh court order obtained by the Federal Government, barring the NLC and the Trade Union Congress from embarking on their planned strike scheduled to commence on Monday.

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Ugboaja explained that the NLC has asked all National Leadership of affiliates in Abuja to mobilise at least 2,000 of their members to Unity Fountain, Abuja for the mass rally which takes off at 7am.

Also, affiliates are expected to mobilise the same number of members to the NLC Sub-Secretariat, 29, Olajuwon Street, Yaba, Lagos, which is the take-off point for the Lagos action at 7am also.

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Business

It would be difficult to find loans to finance rail to Niger Republic – Cheta Nwanze

Finding loans to finance rail to the Niger Republic would be difficult, says Cheta Nwanze.

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It would be difficult to find loans to finance rail to Niger Republic- Cheta Nwanze

Cheta Nwanze, Lead Partner at socioeconomic research firm, SBM Intelligence, says that it would be difficult to find loan financiers for the proposed $1.9 billion rail project from Kano to Maradi in Niger republic.

Cheta, in an interview with Nairametrics on Friday, explained that it appears that Nigeria is more keen on the project than Niger Republic.

Back story: Nairametrics reported this week that the Federal Executive Council has approved the disbursement of $1.96 billion, for the railway line from Kano in Nigeria to Maradi in Niger Republic.

According to the report, the President is also expected to commission the Warri-Itakpe standard gauge rail line, running through Kogi, Edo, and Delta States.

“Nigeria is investing so much in this rail line, given that we are Niger’s 4th largest trading partner,” Cheta said.

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He added that Niger, although being landlocked already, has an existing infrastructure for its imports and export services, which is much better utilized than Nigeria’s export infrastructure.

“The majority of their imports from France, China, and the USA come in via the port of Lome, precisely because the port in Lome works, and the rail link in Togo is much better than ours.

“Nigeria, on the other hand, has let its Apapa port to become a wreck, while transportation between Lagos and Kano/Jibia is a nightmare, if we’re being charitable with words.”

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(READ MORE: Trade and Investments, a way out of Nigeria’s economic troubles – Fola Fagbule)

According to him, with the reality of the Apapa congestion and other factors, finding fund for such project, when debt to service ratio is high and amidst reduced oil revenue, will be difficult.

“With these realities in mind, I find it difficult to imagine who will extend such a loan to Nigeria, especially since, as far as all the information available to me indicates, Niger does not seem as keen on pushing this as Nigeria does,” he added.

However, the media aide to President Buhari, Garba Shehu, disclosed that the Federal Government is not constructing a rail line from Nigeria linking Kano-Dutse-Maradi into the Niger Republic, as it will only stop at the designated border point.

Maradi is 55km from the Katsina border Town of Jibia.

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