Nigeria receives $9.68 billion capital inflows in 2020, lowest in 4 years

Nigeria received a sum of $9.68 billion from capital inflows in 2020, as against $23.99 billion received in 2019. This is according to the latest capital importation report released by the National Bureau of Statistics (NBS).

According to the report, the inflows of $9.68 billion represent 59.6% decline when compared to $23.99 billion recorded in 2019 and 42.4% reduction compared to $16.81 billion recorded in 2018.

Checks by Nairametrics, shows that Nigeria recorded its lowest capital inflows in the past four years in 2020. The last time Nigeria recorded inflows less than $9 billion was 2016 when it received $5.12 billion in foreign capital inflows.

READ: Nigeria received capital inflows worth of $33.27 billion in 17 months

Key highlights

• The largest amount of capital inflows by type was received through portfolio investment ($5.14 billion), which accounted for 53.1% of the total capital imported in 2020.
• Other investments followed with a total of $3.51 billion, representing 36.3% of the total.
• Foreign direct investment in the period under review was $1.03 billion.
• The banking sector received the giant share of $3.75 billion, which accounted for 38.75% of the total inflows.

Capital inflows by type

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

Portfolio Investment (FPI): Formed the highest type of capital investment into Nigeria with a total inflow of $5.14 billion, representing 53.1% of the total inflows.

The breakdown shows that $4.15 billion was received through Money market instruments, $755.1 million in form of equity while $231 million was received in form of bond investments.

READ: FPI and FDI drop to $68 million and $18 million respectively in April, lowest since 2016

Other Investment: In the year 2020, $3.51 billion was received in form of other investments, accounting for 36.3% of the total inflows. A cursory look at the breakdown shows that $2.58 billion was received through loans, $934.6 million from other claims, $820,000 as currency deposits while $50,000 from trade credits.

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. The report shows that 10.6% of the total inflow was in form of foreign direct investment.

The breakdown shows that $1.03 billion was in form of equity while $2.95 million was received in form of other capital.

READ: Nigeria working to attract more foreign direct investments to prepare for AfCFTA – Trade Minister

Capital inflows by sector

Further analysis of capital inflows shows that only three sectors recorded positive growth in the value of inflows, 17 sectors recorded a decline while only one remain unchanged.

Meanwhile, the banking sector recorded the highest inflows with $3.75 billion worth of foreign inflows, accounting for 38.75% of the total inflows. Financing followed with inflows of $1.89 billion while “shares” received $1.85 billion in 2020.

Others on the list of top 5 include; production sector with inflows worth $913.88 million and Telecomms with a total of $417.48 million inflows.

READ: CBN Governor discloses why they amended procedures for receipt of diaspora remittances

Capital inflows by origin

The United Kingdom was the biggest source of Nigeria’s capital inflows, with a total investment of $3.74 billion followed by the Netherlands with a total investment of $890.58 million.

A total of $875.89 million was received from the Republic of South Africa, $754.29 million was received from the United Arab Emirates while $615.89 million came into the country through the United States.

Bottom line

The decline in capital inflows can be attributed to disruptions caused by the covid-19 outbreak, which affected most economies in the world due to travel restrictions and halt in business activities. Nigeria will hope to turn things around by boosting its foreign inflows especially in terms of direct investments in order to drive the economy positively.