Data from the recently released Q2 2017 Capital Importation Report by the National Bureau of Statistics (NBS) shows that foreign investors spent $770.5 million on portfolio investments between April-June 2017. A massive 145% increase from the $313.61 million spent in the first quarter of 2017. The equity market received the lion share of the funds with investments by foreign investors moving from $101.99 million in Q1 2017 to $614.05 million in Q2 2017.  The increase was also present year  on year,  with equity investment increasing  from $279.81 million in Q2 2016 to $614.05 milllion in Q2 2017.

Year to date, the Nigerian Stock Exchange (NSE) All Share Index is up 37.54% year to date, one of the best performing in Africa.

Reasons behind the massive inflow

A depreciation of the Naira against the dollar in 2017, has made Nigerian stocks cheaper in dollar terms, so they can buy more stocks with the same quantity of dollars.  The Central Bank of Nigeria (CBN) has also relaxed its foreign exchange policy with the creation of an Investor and Exporter window, thus enhancing entry and exit of foreign exchange.  The influx into the equity market shows investors may also be bullish on the economy, as the nation may emerge from recession soon. A crash in crude oil prices and production volumes pushed the economy into recession last year. In response to this, the apex bank tightened fx supply by banning several items that were hitherto imported.

Oil is a key factor

Nigeria is largely dependent on crude oil for foreign exchange earnings. A drop in crude oil prices or production volumes could force the apex bank to tighten its fx management policy. This would lead to foreign investors rushing to the exit door.

 

Here is a copy of the report.

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