Investment Flows In Need Of a Major Lift


Thursday, October 19, 2017 9:28 AM / FBNQuest Research

On Monday we commented on the current account in the balance of payments (BoP) for Q2 2017. Today it is the turn of the capital/financial account, and the investment flows in particular. These are gross flows (ie those in the reporting economy before investment by Nigerian residents offshore).

Direct, portfolio and other investment were again positive on this basis in Q2. The chart shows portfolio flows peaking above US$4bn in Q2 2013, when Nigeria was still basking in the glow of its inclusion in the JP Morgan indices for local currency, emerging sovereign debt.

Direct investment in 2016 amounted to US$4.5bn, equivalent to 1.1% of GDP. This is pitifully low. The numerous structural flaws in the economy and the investment climate are barriers for the direct investor although they are not always the preoccupation of the offshore portfolio community.

The short-term prospects are better for the two other components. The Eurobond issuance, we assume, explains the improvement in other investment in Q1 2017, and is set to be repeated this quarter. We should shortly see the impact of the NAFEX experiment on portfolio investment. 

When we adjust for the assets on the capital account (Nigerian investment offshore) in Q2, all three components remain positive on a net basis: direct investment of US$580m, portfolio investment of US$1.48bn and other investment of US$2.58bn.  

Proshare Nigeria Pvt. Ltd.

We focus on the investment components because they provide a narrative. For the record, the broader picture in Q2 2017 shows a current-account surplus of US$1.41bn, a capital/financial-account surplus including the movement in reserves of US$4.34bn, and net errors and omissions (negative) of –US$5.75bn. The last item, which is effectively the balancing item, is often revised: an outflow of -US$1.63bn in Q1 is now shown as -US$4.09bn. 

Proshare Nigeria Pvt. Ltd.

Related News
1.       We See Headline Rate at 15.9% in October 2017 – FBNQuest
2.      Inflation Flattens Out in September to 15.98%
3.      Another Sticky Movement in General Price Levels
4.      Annual Inflation Flat Despite Hefty Monthly Decline
5.      CPI Drops to 15.98% in Sept 2017, 0.03% Lower Than 16.01% August Rate
6.      Evaluating The Adequacy of Nigeria’s External Reserves Level
7.      The Need to Invest in Nigeria's Infrastructure
8.     Lower Current-Account Surplus due to MCP
9.      FBN Merchant Bank Partners with NESG at the 23rd Nigerian Economic Summit
10.  Credit Allocation to Favour the Few
11.   Monthly Economic and Financial Market Outlook: Time for Portfolio Realignment
12.  Big Data Economy: Driving the Economy through Data Science
13.  FG setting up focused labs to drive public, private sector partnership, Udoma tells Senate
14.  Headline Inflation to Taper Off At 15.99% in September

Related News