Tuesday, February 02, 2016 07:26 PM / NBS
Summary: Total Capital Importation
The total value of Capital imported into Nigeria in the Third Quarter of 2015 was $2,748.10 million, up 3.07% from the preceding quarter. This was followed by a total of $1,556.95 million in the fourth quarter, a decline of 43.34% from levels recorded in the previous quarter.
The total for 2015 was recorded at $9,643.01 million. This is represents a 53.53% fall on the previous year, when the total was $20,750.76 million. Each consecutive quarter of 2015 saw a larger annual fall than the previous; in the third and fourth quarter, Capital inflows were respectively 58.00% and 65.40% lower than in the same quarters of 2014.
Figure 1 gives a historical perspective, and shows that the level of Capital imported between 2012 and 2014 was markedly higher than in preceding years. This may have been a result of external factors, such as the inclusion of Nigeria in the JPMorgan EM Bond index, and globally low interest rates triggering a search for higher yields from investors over this period.
The drop in 2015 may be partly a result of these factors unwinding, as well as the tougher economic environment in Nigeria resulting from the effect the lower oil price has had on export earnings. Furthermore, the widely anticipated decision to raise interest rates in the US may have played a part in the drop of Capital inflows in the final quarter.
Figure 1: Total Capital Importation ($ millions)
The third quarter also saw a large change in the composition of Capital imported. In every preceding quarter since 2009, Portfolio Investment has been the largest component, however as a result of a large quarterly decline in the third quarter (53.73%) and large quarterly increases in Foreign Direct and Other Investment (239.93% and 275.36% respectively), Other Investment became the largest component and accounted for $1,021.26 million, or 37.16%. This compares with Portfolio Investment worth $1,009.13 million and Foreign Direct Investment worth $717.71 million accounting for 36.72%, and 26.12% respectively.
In the final quarter of 2015, this change was reversed, as although Portfolio Investment fell by 5.61% between the third and final quarters, Other Investment fell by 52.87% and Foreign Direct investment also fell by 82.84%.As a result, Portfolio Investment accounted for 61.18%, Other investment accounted for 30.91%, and Foreign Direct investment accounted for 7.91%.
For the year as a whole, Portfolio investment recorded the biggest decrease, of 59.74%, but remained the largest component, and accounted for 62.28%, compared to 15.00% for Foreign Direct and 22.72% for Other Investment.
Capital Importation by Type
According to categorization by the Central Bank of Nigeria, Capital Importation can be categorised into three main investment types: Foreign Direct Investment (FDI), Portfolio Investment and Other Investments, each comprising various subsectors.
Third Quarter, 2015
In the third quarter of 2015, the largest component of Capital Importation was Other Investment, which accounted for $1021.26 million, or 37.16% of the total Capital imported into the country at the time. The largest subcomponent was Loans, which recorded an increase of 354.45% between the second and third quarter, and consequently accounted for 68.19% of Other investment in the third quarter, and roughly a quarter of total Capital imported. Other Claims and Currency also recorded large increases, of 169.64% and 618.46% respectively compared to the previous quarter.
However the increase in Currency imported was from a low base, of $0.99 million. For the third consecutive quarter, no Capital was imported in form of trade credits. Compared to the same quarter of the previous year, Other Claims declined by 38.34% and Loans increased by 99.01%. No Capital was imported in the form of Currency throughout 2014.
Quarter Three 2015 was the first quarter since 2009 in which Portfolio Investment was not the largest component of Capital Imported into the Country. Each component of Portfolio Investment saw a large decline relative to the second quarter, in contrast with the increases in Direct and Other Investment. Portfolio Investment is dominated by Equity, which accounted for 87.20% in the third quarter, an increase relative to its second quarter share of 84.56% , as although Portfolio Equity investment declined by52.33%, the other subcomponents, Bonds and Money Market Instruments, decline by 59.75% and 62.02% respectively. Equity has comprised the majority of Portfolio Investment in every quarter since 2007.
Figure 2: Composition of Capital Imported in 2015 Q3
Foreign Direct investment, comprising mostly of Equity, remained the smallest component of Capital importation, and accounted for $717.71 million, or 26.12% of the total value of Capital imported in the third quarter. This was despite increasing by $506.58million, or 239.93% relative to the previous quarter. Other Capital remained insignificant relative to Foreign Direct Equity investment; $1.86 million was recorded, which was considerably higher than the $0.13 million recorded in the previous quarter, but still accounts for only 0.26% of total direct investment.
Fourth Quarter, 2015
In the final quarter, Portfolio Investment reverted to being the largest component of imported Capital, accounting for 61.18%. This large change relative to the third quarter emphasises the volatile nature of capital inflows.
Within Portfolio Investment, Equity accounted for 83.16%, slightly less than in the third quarter. This was mainly due to a quarterly decline of 9.98% in Equity, and a quarterly increase of 47.12% in the value of Money Market Instruments, which was the second largest component and accounted for 16.81% of portfolio investment. Investment in the form of bonds nearly stopped entirely, falling by 98.61%, and accounting for an insignificant share of over Portfolio investment.
Other Investment accounted for 30.91% of Capital importation, the second largest share. Only two classes of Other Investment were recorded in the fourth quarter however; Loans and Other Claims. As has generally been the case since 2007, the former comprised the majority, and accounted for 87.44% of the value of Other Investment, slightly more than in the preceding quarter despite a 39.57% decrease. Other claims fell by over twice that amount, by 80.97%.
Foreign Direct investment in the form of Equity declined sharply, by 83.10%, in the final quarter. Despite an accompanying rise of 17.17% in the other Capital component of Foreign Direct Investment, Equity still constituted
Figure 3: Composition of Capital Imported 2015 Q4