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Total Value of Capital Imported into Nigeria in Q3’16 Estimated at $1,822.12 mln

Proshare

Monday, November 07, 2016 8:45 AM / NBS

Summary
The total value of capital imported into Nigeria in the third quarter of 2016 was estimated to be $1,822.12 million, which represents an increase of 74.84% relative to the second quarter, and a fall of 33.70% relative to the third quarter of 2015.

The highest level of capital imported was in August, when $894.00 million was imported, the highest level since July 2015. In September $649.76 million was imported, which was still more than any month in the first and second quarters.

In contrast with the previous quarter, where Other Loans explained the majority of the increase, a number of investment types contributed to the quarterly increase.



Much of the quarterly increase in the value of capital importation came from debt financing. Of the total quarterly increase, 85% was accounted for by increases in Portfolio investment in Bonds and Money Market Instruments; the latter of which comprises short-term funding securities such as treasury bills and commercial bills from CBN.

Quarterly growth in FDI equity was also strong, although Portfolio equity continued to decline. FDI investments have a longer-term interest, and are therefore less likely to reflect short term challenges than Portfolio Equity.

Nevertheless, each type of investment (FDI, Portfolio and Other) recorded quarterly increases, of 84.84%, 172.84% and 7.80% respectively. The relatively strong growth in Portfolio Investment meant it regained its position as the largest investment type, and it accounted for 50.51% in the third quarter, compared to 18.69% and 30.80% for Other Investment and FDI respectively. Year on year growth rates remained negative; FDI,

Portfolio and Other Investment declined by 52.54%, 8.80% and 45.05% respectively compared to the third quarter of 2015. In the case of FDI and Other Investment however, this was partly the result of a base effect, as there was a spike in value of FDI Equity in the third quarter of 2015.

Nevertheless, it is also possible that the weaker growth in the economy in the first half of 2016 has had an impact on the value of capital importation.

Capital Importation by Type
Capital Importation can be divided into three main investment types: Foreign Direct Investment (FDI), Portfolio Investment and Other Investments, each comprising various sub-categories.

In the third quarter of 2016, Portfolio Investment was the largest component of imported capital and accounted for $920.32 million, or 50.51%. Although Portfolio Equity declined by 28.12% relative the previous quarter, this is outweighed by large increases in other types of Portfolio Investment.

Bonds increased from zero in the second quarter, to $369.00 million in the third, and Money Market Instruments increased from $57.50 million to $350.20 million over the same period, an increase of 509.03%.

This is the first quarter since 2007 Q2 in which Equity was not the largest part of Portfolio investment; at $201.12 million this type of Portfolio Investment remains considerably subdued relative to previous highs of $4930.55 million in the first quarter of 2013, and $3875.35 million in the second quarter of 2014.



The second largest component was Other Investment, which accounted for $561.61 million, or 30.80%. As in each quarter in the last year, no capital was imported in the form of Currency or Trade Credits.

In addition, Other claims decreased further to $0.06 million, which represents only 0.01% of Other

Investment, and a decline of 99.98% relative to the same quarter of the previous year. Therefore, this investment type is now dominated by Loans, which increased by 7.86% compared to the previous quarter, to $561.10 million. Year on year this represents a decline of 19.43%.

As in each quarter over the past two years, FDI accounted for the smallest share of imported capital. A total of $340.64 million was imported within this component, or 18.69% of the total. This was the first quarter on record in which no capital was imported in the form of FDI – Other capital, even if in previous quarters the amount was not significant. As a consequence, only Equity was recorded within the FDI component.



Capital Importation by Sector
Capital is either imported in the form of shares, or directly imported by different sectors of the economy.

In the third quarter of 2016 the value of share capital imported was $646.28 million, which represents an increase of 85.72% relative to the previous quarter.

This is slightly larger than for the total value of capital imported, and as a result share capital increased the share it accounted for from 33.39% in the previous quarter to 35.47% in the current, which although less than in previous years, is still more than any individual sector.

Year on year however, share capital imported declined by 65.57%, and in the third quarter of 2015 shares accounted for 63.19% of capital imported.

The banking sector regained its position as the sector to import the largest value of capital, and imported $555.52 million, or 30.49% of the total. In over half of the quarters since 2007, the banking sector has imported the most capital, but in the previous quarter of 2016 it accounted for only the fourth most.

This changed in the current quarter following an increase of $447.42 million, which accounts for over half of the increase in total capital imported. Compared to the same quarter of 2015, the value also increased – in contrast with most sectors – by 127.45%.

The sector to import the second largest amount was Telecommunications, which is also usually one of the key sectors involved in capital importation. The value of capital imported by Telecommunications was $244.80 million, or 13.34% of the total.

This represents an increase of $126.09 million, or 106.21%, relative to the previous quarter. However, compared to the previous year this is still a decline of 33.75%.

The Oil and Gas sector maintained a high level of capital importation; although it decreased by 14.4% relative to the previous quarter, it is still elevated relative to previous periods at $171.63 million.

This sector is characterised by isolated periods of high capital importation, and it is therefore unusual that the level has remained high for two consecutive quarters. This sector accounted for the third highest amount in the third quarter of 2016.



There were four sectors to record no capital importation in the third quarter of 2016 (Marketing, Hotels, Tanning and Weaving), one less than in the previous quarter.

However, there were a further two sectors to record a value of less than $1 million, which were Drilling and IT Services. Eight out of 20 sectors recorded a decline in the value of capital importation, the largest of which was in Servicing, which recorded a decline of $83.20 million relative to the previous quarter, or 69.48%. 

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