Capital importation into Nigeria in the fourth quarter has declined by 15 per cent relative to the third quarter and a fall of 0.52 per cent of the same quarter in 2015.
According to data released by the National Bureau of Statistics (NBS), the decline relative to the previous quarter was entirely due to a decline in portfolio investment; Foreign Direct Investment (FDI) and Other Investment both increased. The quarterly decline in portfolio investment was mainly due to base effects; there were large investments in money market instruments and bonds in the third quarter, which were not matched in the final quarter.
Overall, in 2016, capital importation fell by 46.86 per cent, from $9.64 billion in 2015 to $5.12 billion. This was the lowest value since the series started in 2007, which reflects the numerous economic challenges that afflicted Nigeria in 2016. The weakening of the naira may have had an impact: a weaker naira means more can be purchased with each dollar, and therefore investment projects requiring naira payments cost less in dollar terms. Portfolio investment fell the most, by 69.81 per cent. This investment type, whereby investors seek quick returns rather than control of management in companies, is most likely to be affected by current market conditions.
In the final quarter of 2016, other investment was the largest component of imported capital and accounted for $920.03 million, or 59.40 per cent.
The second largest component of capital importation in the final quarter of 2016 was Foreign Direct Investment (FDI). This investment type accounted for $344.63m, or 22.25% of the total. This represented growth of 1.17 per cent relative to the previous quarter, and of 179.83 per cent relative to the same quarter of the previous year, the first year on year growth rate in five quarters.
In the fourth quarter, the value of share capital imported was $228.24m, which represents a decrease of 64.68 per cent relative to the previous quarter. This led to a large decline in the percentage of capital importation accounted for shares, from 35.47 per cent to 14.74 per cent, the lowest recorded.
Banking was the sector to import the largest value of capital in the previous quarter, but following a quarterly fall of $394.22m, or 70.96 per cent followed by oil and gas sector which recorded a large increase of $155.67million or 90.70 per cent to reach $327.30million.
Lagos state imported the most capital into Nigeria in the final quarter of 2016 because it is the commercial and financial capital of Nigeria, and home to Nigerian Stock Exchange where shares are traded.