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Healthy Capital Inflow for 2017

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Wednesday, March 14, 2018 /09:06 AM / FBNQuest Research

The NBS recently released its latest report on Nigerian Capital Importation, which covers Q4 2017. The data was 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 Q4 was estimated at US$5.38bn, representing an increase of 30% q/q. 

The increase was driven by portfolio investment. When we consider the full year data, total capital imported into Nigeria stood at US$12.2bn in 2017 compared with US$5.1bn recorded in 2016. The data are gross, and not adjusted for capital exports.    

Portfolio investment increased by 21% q/q and accounted for the largest share, 65% of total capital importation. Investment in money market instruments was the primary driver; it represented 63% of the total. Although since Q3 2013 money market flows surpassed equities once (in Q3 2016), the scale of the flows in Q4 2017 was significant at US$2.2bn. Equities (c.US$1bn) accounted for 28% of total portfolio investment. 

Investment sentiments have improved significantly due to the more stable fx environment as well as a relatively positive macroeconomic outlook. 

Although foreign direct investment (FDI) inflows surged by 222% q/q to US$378m, it only accounted for 7% of total capital importation in Q4. A steady increase in FDI rests upon the government’s ability to solve the structural issues within the country.

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In terms of origination of inflows, the United Kingdom had the largest share at US$1.6bn, or 30% of the total. The US, Singapore and UAE represented 18.6%, 7.7% and 4.1% respectively. 

Based on trading activities so far this quarter, we expect the Q1 report when published to show steady inflows from portfolio investments. The monthly turnover for January and February on the NSE were US$197m and US$106m respectively, with foreign participation accounting for about 43%. 

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