New Telegraph

November 29, 2023

Analysts: Insecurity, naira weakness, others hinder Nigeria’s capital inflows

Analysts at Cowry Asset Management Limited have attributed the decline in the total value of capital imported into Nigeria in the second quarter of this year to investors’ concern over insecurity in the country, the weak naira and rising inflation.

 

Commenting on the latest capital importation data published by the National Bureau of Statistics (NBS) last week, the analysts also cited activities ahead of the general election next year as part of the reasons why the value of capital imported into the country in Q2’22 dropped compared with the previous quarter.

 

The analysts stated: “The recent capital importation data published by the National Bureau of Statistics showed that during the second quarter of 2022, the total value of capital imported into Nigeria soared 75.3 per cent year-on-year and printed at $1.54 billion from $875.62 million in the same period last year.

 

“This translates to encouraging growth, but a look at the numbers from the first quarter of 2022 showed a decrease of  2.40 per cent ($37.8 million) from $1.57 billion.

 

Consequently, the inflow during the period was highest through portfolio investment which accounted for more than 49 per cent or $757.3 million of the total and was supported by investors’ interest in money market instruments ($422.6 million) and Bonds ($322.04 million) during the quarter.

 

Trailing this category was Other investment with $630.9 million where loans ($595.9 million) and other claims ($35 million) drove the performance while foreign direct investment (FDI) was just $147.2 million resulting from investment into the equities space.”

 

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They further stated: “We believe the reported decline for the second consecutive quarter since the last quarter of 2021 ($1.9 billion) resulted from the growing guardedness of investors  around mounting insecurity concerns, rising global inflation trends and rates hikes. This is not, without, mentioning the unabating pressure on the local currency in the foreign exchange market consequential to further weakening of the naira and the dynamics in play on the road to electioneering activities across the country.”

 

However, the analysts pointed out that despite the decline in capital imported into the country in the second quarter of this year, “Nigeria still remains a bride for investors as capital inflow from various origins places the United Kingdom as the top-ranked source with more than 50 per cent of the total and a value of $781.05 million.”

 

It also noted that the country succeeded in attracting capital from nations such as Singapore and South Africa, with capital inflow valued at $138.58 million and $122.26 million respectively. Similarly, according to the NBS data, Nigeria imported $103.9 million from the UAE and $80.20 million from the United States during the period under review.

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