10, 2020 / 11:43 AM / by FBNQuest Research / Header Image
recently released its latest report on Nigerian Capital Importation, which
covers Q2 2020. The data were obtained from the CBN and compiled using
information on banking transactions from all registered financial institutions
in Nigeria. The total value of capital imported in Q2 was estimated at
US$1.3bn, representing decreases of -78% q/q and -79% y/y. The data are gross,
and not adjusted for capital exports.
category referred to as other investment inflows accounted for the largest
share (59%) of total capital importation; its core driver were loans while
other claims represented just 5% of the inflows from this category.
portfolio investment inflows, there was a q/q decline of -91% in Q2. Money
market instruments accounted for 86% of total portfolio investment but
contracted by -90% q/q. The sharp decline in inflows can be attributed to
reversal of capital flows following the COVID 19 pandemic, and a weaker
macroeconomic outlook. Meanwhile, there were no contributions from bonds to
portfolio investments in Q2.
Demand for equities was low in Q2. Equities accounted for 14% (US$53m)
of total portfolio investments, representing decreases of -92% q/q and -89%
y/y. Although the market has clawed back some of the losses since April, stocks
are still cheap based on our fair value estimates. Equities may benefit from
the large pool of liquidity from maturing fixed income instruments this year.
by type (US$ m)
Sources: National Bureau of Statistics (NBS)
; FBNQuest Capital Research
Foreign direct investment (FDI) inflows declined by
-31% q/q to US$149m in Q2. They represented just 11% of total capital
importation, compared with 4% the previous quarter. Following the economic
downturn triggered by the ongoing pandemic, there has been a strong downward
trend in greenfield investment projects. We do not expect a significant
improvement in FDI inflows in the short to medium term.
Based on trading activities to date this quarter, we
expect the Q3 report when published to see a slight pickup in portfolio
investments inflows compared with Q2 levels.
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