Friday, May 11, 2018 /09:00 AM / NBS
The first quarter in 2018 saw a continuous growth in total Capital Importation into Nigeria, the fourth consecutive quarterly increase since Q2 2017. The total value of capital imported in the quarter stood at $6,303.63 million, which is a year on year increase of 594.03% and a 17.11% growth over the figure reported in the previous quarter. This increase in capital inflow in Q1, 2018 was driven mainly by Portfolio Investment, which grew from $3,477.53 million in the previous quarter to $4,565.09 million, accounting for 72.42% of the total Capital Importation during the quarter.
Figure 1: Capital Importation (2015 Q1 - q2 2017Q3)
Capital Importation can be divided into three main investment types: Foreign Direct Investment (FDI), Portfolio Investment and Other Investments, each comprising various sub-categories. Since 2017 Q2, Portfolio Investment has been expanding faster than the other two categories, remaining the largest component of capital imported in Q1, 2018 at 35% of total capital imported. Foreign Direct Investment and Other Investment accounted for 3.91% and 23.67% of total Capital Importation into Nigeria in the quarter under review.
Figure 2: Capital Importation Composition 2017 Q1 & 2018 Q1
In the first quarter, Foreign Direct Investment stood at $246.62 million, falling by 34.83% from the figure reported in the previous quarter, and growing by 16.67% on a year-on-year basis. Foreign Direct Investment in Nigeria was still weak when compared to Portfolio Investment and Other Investment, representing only 3.9% of total capital imported. Equity Investment, a sub-category under FDI contributed ($246.61 million) or 99.9% of FDI during the quarter, while Other Capital under FDI contributed less than 0.001%.
Portfolio Investment remained the largest component of total capital inflow into Nigeria in the first quarter of 2018. The total value of Portfolio Investment was $4,565.1 million, which is a 1,355.66% growth compared to Q1, 2017 and a 31.27% growth compared to the figure reported in Q4, 2017. The strong growth of Portfolio Investment was mainly due to the increase in Money Market Instruments which recorded a figure of $3,527.60 million, accounting for 77.27% of total Portfolio Investments in the first quarter. This sub-category (Money Market Instruments) has grown quite significantly in the past three quarters, recording quarterly growth rates of 603% in Q3, 2017, 203% in Q4, 2017 and in 62% in Q1 2018. Portfolio Investment in the form of Equity and Bonds only recorded $701.61 million and $335.88 million respectively in the quarter under review.
Figure 3: Portfolio Investment by Sub-category - (2015 Q1- 2018 Q1)
Other Investment recorded $1.49 billion in the first quarter of 2018, declining by 2.29% from the previous quarter, however, growing by 289.25% compared to the corresponding period of 2017. This category accounted for 23.67% of total Capital Importation in the first quarter of 2018. As in previous periods, Other Investment was dominated by Loans ($1,27 billion), which accounted for 85.02% of Other Investments. This was followed by Other Claims ($223.49 million), which accounted for 14.98% of the category of Capital Importation. Trade Credits and Currency Deposits posted no inflow in the quarter.
Figure 4: Other Investment by Sub-category - (2015 Q1- 2018 Q1)
Capital is either imported in the form of Shares or directly imported by different sectors of the economy. Share capital investment, which is closely related to Equity investment (FDI and Portfolio Investment) dominated Capital Importation into Nigeria during the quarter. Capital inflow in the form of Shares in the first quarter increased by 3.05% from $3.68 billion reported in Q4, 2017 to $3.79 billion in Q1, 2018. This component has recorded a steady rise since the first quarter of 2017, with Q1, 2018 being the fifth quarter of its consecutive rise. The percentage share of Shares investments to total Capital Imported however, decreased from 68.37% in the previous quarter to 60.17% in the first quarter of 2018.
Figure 5: Proportion of Shares to Total Capital Importation in million $（2013 Q3- 2018 Q1）
In the first quarter of 2018, Banking remained the leading sector for foreign capital Inflow which attracted the most considerable amount of capital investment. During the first quarter, $1.18 billion overseas investment flowed to the Banking sector, which accounted for 18.7% of the total Capital Importation. Financing exceeded Production, Servicing and Telecoms sectors to become the second leading sector to receive capital investment, attracting $485.41 million during the quarter. This was followed by the Servicing sector with $328.15 million, Production sector with $144.09 million and Agriculture with $130.90 million. These five economic sectors mentioned above together attracted more than 90% of foreign capital investment in the first quarter of 2018.
Telecommunications, which ranked fourth in Q4, 2017, only had a total of $87.25 million foreign capital investment in the first quarter of 2018, declining by 54.32% from $191.01 million recorded in the last quarter. Capital inflow to other sectors including Drilling, Electrical, Marketing, Oil and Gas, and Trading increased significantly compared to the fourth quarter of 2017, although the absolute values to these sectors remained smaller than the sectors discussed in the previous paragraph.
Figure 6: Capital Importation by Sector 2018 Q1
In the first quarter of 2018, Abuja remained the leading state to receive foreign capital inflow after it overtook Lagos in the fourth quarter of 2017, recording an amount of $3.54 billion. This was an increase of 32.24% from the figure recorded in the previous quarter, when it reported $2.68 billion. At the same time, capital importation to Lagos increased marginally by 4.59% from $2.55 billion in the last quarter to $2.67 billion in Q1, 2018, while Capital Importation to Akwa Ibom was $43.62 million, which is a decline of 65.05% from the figure reported last quarter ($124.85 million). In contrast, Ogun, Bauchi, and Kano witnessed strong growth in foreign capital inflow in the first quarter, each recorded respective growth rates of 182.06%, 370.59%, and 154.84% on a quarter-on-quarter basis.
Figure 7: Capital Importation Map by Receiving State in $ (2018 Q1)
The United Kingdom kept its leading role in capital investment in Nigeria in the first quarter of 2018, with $2.25 billion capital invested in Nigeria. This inflow accounted for 35.73% of the total of capital inflow in Q1,2018, it was also a 39.89% increase from the previous quarter and a growth of 644.55% over the corresponding period of last year. As well as the existence of a historical relationship between the UK and Nigeria, London (the capital of the UK) is also a principal financial center, which explains the high value of foreign capital from the UK. Since 2010, the UK has accounted for the highest value of capital importation in all but two quarters (both in the second half of 2015).
The country to account for the second most significant value of capital importation was the United States. The US accounted for $1.26 billion in the first quarter of 2018 or 19.99% of the total quarterly capital importation. The US has also been one of the most important investors in Nigeria, usually either the largest or second largest investor country.
The next two largest investors in the first quarter of 2018 were South Africa and Ghana, which recorded $493.22 million and $380.14 million capital inflow into Nigeria in the first quarter respectively. These two country’s capital investment accounted for 7.82% and 6.03% of the total quarterly capital importation in Q1 2018. Capital Importation from South Africa increased by 79.29% from the previous quarter and by 673.19% relative to the first quarter in 2017. The first quarter in 2018 was the first time since 2013 that Ghana made a significant capital investment in Nigeria, which made Ghana the fourth largest Capital Importation source country for Nigeria in this quarter.
Figure 8: Capital Importation Map by Country of Origin in $ millions (2018 Q1)
Figure 9: Capital Importation Bar Graph by Country of Origin in $ millions (2018 Q1)
Capital is imported through financial institutions into Nigeria. In the first quarter of 2018, the bank through which the highest share of capital flowed was Standard Chartered Bank. The amount of capital imported through Standard Chartered Bank accounted for 25.49% of the total foreign capital inflow (up from the 15.1% share recorded in the last quarter of 2017). This was followed by Access Bank, Ecobank, Zenith Bank, Stanbic IBTC Bank and Guaranty Trust Bank, which accounted for 16.62%, 14.87%, 10.48%, 9.12% and 5.32% of the total capital importation in the first quarter of 2018 respectively. A total of 81.90% of the foreign capital in 2018 Q1 was imported through the six banks stated above.
Figure 10: Share of Capital Importation by Bank (2018 Q1)
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