Nigeria’s Capital Import Nosedives, Drops 51% In Q4

Latest capital importation data just released by the National Bureau of Statistics (NBS) show that the amount of investment into the country is on a steady decline as it dropped by 33.02 per cent in the third quarter of 2022 and 51.51 per cent in the last quarter of last year.

According to the data, capital importation to the country which dropped to $1.159 billion in Q3 further declined to $1.06 billion by the end of December 2022.

This represents a 33.02 and 51.51 per cent decline in 2022 Q3 and Q4 compared to the inflow in the comparable period of 2021.

Foreign direct investment into Nigeria plunged by a third last year as a severe dollar shortage deterred global investors from expanding in the country.

Investment fell to $468 million in 2022 from $698 million a year earlier. FDI has collapsed about 90 per cent from a high of $4.7 billion in 2008, the government data shows.

For overseas investors, Nigeria’s multiple exchange rates and the central bank’s rationing of dollars are a big deterrent according to Bloomberg. South Africa’s Nampak Ltd., the continent’s biggest packaging company, in December said it was planning to quit Nigeria and some other companies have already exited.

President-elect Bola Tinubu, who will take over from President Muhammadu Buhari on May 29, has pledged to review the central bank’s foreign-exchange policy. According to Bloomberg, Tinubu will need to move quickly to reassure and attract global companies, halt economic slide and create jobs.

“Absolute clarity on the foreign-exchange policy is critical if we want to encourage foreign capital,” chief economist at KPMG in Nigeria and former head of the nation’s statistics office, Yemi Kale said. The new government needs to undertake “substantial fiscal reforms aimed at reducing deficit finance and improving revenue generation,” he said.

The International Monetary Fund has cited central bank intervention in Nigeria’s foreign-exchange market as a hindrance to capital inflows. The naira, in the official market, has depreciated 57 per cent against the dollar since Buhari came to power in 2015.

Companies have been exiting Africa’s most-populous nation because of the dollar shortage and restrictions on repatriating funds. Emirates Airlines halted flights to the country in August because it can’t get its money out of the country.

The Central Bank of Nigeria is blocking foreign airlines from repatriating at least $802 million, according to data from the International Air Transport Association, IATA.

Declining capital flows mean that the government’s income will reduce, said Mosope Arubayi, an economist at IC Securities Ltd. in Accra, Ghana. “Lower inflows also mean more pressure on the exchange rate of the naira.”

In the Q3 of 2021, the country had recorded a capital importation of $1.731 billion which had further improved to $2.187 billion for the last quarter of 2021. In the second quarter of last year, the country had recorded a capital importation of $1.535 billion, signifying a decline in investments.

At the end of 2021, total capital importation into the country stood at $6.7 billion but had declined by 20.48 per cent to $5.328 billion at the end of last year. The amount of foreign capital inflow into the country had maintained a steady decline momentum since the beginning of last year after the country recorded an inflow of $2.187 billion in the last three months of 2021.

According to data released by the NBS, the country had recorded a $1.573 billion inflow in the first three months of last year, an amount which declined slightly to $1.535 billion in the second quarter.  The decline grew substantially by 24.4 per cent in the third quarter when a capital import of $1.159 billion was recorded. The rate of decline slowed in the fourth quarter to 8.53 per cent as a capital import of $1.060 billion was recorded for the last three months of last year.

In Q3, the largest capital importation in Q3 2022 was received through Other Investment, which accounted for 54.83 per cent with$635.87 million, followed by Portfolio Investment with 38.12 per cent $442.08 million and Foreign Direct Investment (FDI) with 7.05 per cent $81.72 million.

Disaggregated by Sectors, capital importation into banking had the highest inflow of $368.95 million, representing 31.82 per cent of total capital imported in Q3 2022. This was followed by the financing sector, valued at $314.90 million representing 27.15 per cent, and capital importation in shares with $104.58 million representing 9.02 per cent.

Capital Importation by Country of Origin in Q3 reveals that capital from the United Kingdom ranked top in Q3 2022 with $506.87 million, accounting for 43.71. This was followed by Singapore and Hong Kong valued at $184.86 million and $106.39 million respectively. By Destination of Investment, Lagos state remained the top destination in Q3 2022 with $839.71 million, accounting for 72.41 per cent of total capital investment in Nigeria.

This was followed by Abuja (FCT), valued at $303.81 million, while categorization of Capital Importation by Banks shows that Stanbic IBTC Bank Plc ranked top in Q3 2022 with $301.84 million followed by Citibank Nigeria Limited with $274.19 million and Standard Chartered Bank Nigeria Limited with $233.34 million.

For Q4 2022, the largest capital importation was received from Other Investment, which accounted for 65.17 per cent or $691.23 million of total capital imported in Q4 2022. It was followed by Portfolio Investment with $285.26 million representing 26.89 per cent and Foreign Direct Investment (FDI) with 7.94 per cent or$84.23 million.

Sectorial disaggregation showed that capital importation into the production sector recorded the highest inflow of $392.54 million, representing 37.01 per cent of total capital imported in Q4 2022, followed by capital imported into the banking sector, valued at $255.45 million representing 24.08 per cent, and Telecoms with $168.27 million.

Capital Importation by Country of Origin for Q4 2022 reveals that capital from the United Kingdom remained at the top in Q4 2022 with $455.24 million, accounting for 42.92 per cent, followed by the Republic of South Africa and the United Arab Emirates valued at $119.31 million and $116.82 million respectively.

Lagos state remained the top destination in Q4 2022 with $600.54 million, accounting for 56.62 per cent of total capital investment in Nigeria. This was followed by Abuja (FCT), valued at $424.50 million representing 40.02 per cent. Categorization of Capital Importation by Banks shows that Citibank Nigeria Limited ranked top in Q4 2022 with $308.72 million, followed by Standard Chartered Bank Nigeria Limited with $232.45 million and Rand Merchant Bank with $102.00 million.