Choppiness of portfolio investment


Thursday, April 23, 2015 8:35 AM / FBN Capital Research

The CBN’s External Sector Development Report for Q4 2014 shows a weaker performance on the capital account.

Aggregate capital inflows (gross) stood at US$2.64bn, a sharp decline from US$6.79bn in the previous quarter and US$4.46bn in the corresponding period in 2013.

Direct investment amounted to US$1.03bn while there were outflows of US$770m from portfolio investment. Other investment inflows (i.e. loans) totalled US$840m.

The reversal of portfolio inflows in Q4 2014 can be linked to domestic macro challenges created by the slide in the oil price and the conclusion of the quantitative easing programme by the US Federal Reserve.

While sentiment has been boosted by the result and successful conduct of the national elections, liquidity in the fx market remains poor as a consequence of the CBN’s monetary policy. However, since the elections a few offshore investors have returned to the equities and debt markets.

In Nigeria, as elsewhere, direct investment inflows follow a more stable trend. Marked fluctuations are unusual, and the flows have ranged between US$1.03bn and US$1.38bn over the past four quarters. The “Africa is rising” narrative is firmly the majority view, and has been reinforced by the Nigerian elections.

The net inflow positions for 2014 (full year) were US$3.08bn and US$1.85bn for direct and portfolio investment respectively. They are adjusted for assets on the capital and financial account (ie the movements of Nigerian residents).


The ECB’s expanded programme of asset purchases began last month with a ceiling of €60bn per month. Similar to the Fed’s QE programme, we see the flow of some funds from the sellers of the bonds (banks and pension funds, mostly) to high yielding assets in frontier and emerging markets.



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