A Modest MoM Rise in Net Capital Inflow in July 2021


Tuesday December 07, 2021 / 08:45 AM / by FBNQuest Research / Header Image Credit:  FBNQuest


According to the CBN's most recent monthly economic report, net capital inflow (after adjusting for capital exports) into the Nigerian economy improved to USD0.06bn in July '21, compared with a net capital outflow of c.-USD0.2bn in June '21. On a y/y basis, however, the capital influx was more than 90% lower than what was recorded in July '20. It is important to keep in mind that the data is preliminary, and that there are often variances between the CBN's data series and the series published by the NBS.


With respect to inflows, the total (gross) capital imported into the country increased 29% m/m to USD0.62bn in July '21, but was down by c.-34% y/y. Foreign portfolio investments (FPI) with inflows of USD0.48bn accounted for the largest share at over 76% of total.


The report does not provide sufficient data to make meaningful m/m and y/y comparables. However, we see that capital inflows for bond purchases and money market instruments accounted for c.60% and 33% of total FPI inflows respectively, or c.USD0.29bn and USD0.16bn.


We assume that the balance of FPI inflow of just over 6% was for investment in listed equities. The data confirms the waning interest of the offshore investment community in shares of quoted companies due to the fx liquidity crunch which worsened in Q2 '21.


Capital outflow declined by 17% m/m to USD0.56bn. However, on a y/y basis, the outflows were c.81% higher. Again, this is understandable given the significant backlog of FPIs waiting to repatriate funds.


We presume that such FPI outflows made up most of the segment classified as "outflow in the form of capital" which accounted for c.51% of total capital outflows.


Dividend repatriations accounted for nearly a third of capital outflows, with the telecoms sector accounting for 31.2% of all dividend payments.


A case in point is MTN Nigeria, which has managed to upstream about ZAR6.3bn (c.USD380m) in the first nine months of this year to MTN Group, its parent company in South-Africa.


According to CBN data, total capital inflow and outflow for the year to July were c.USD3.4bn and USD3.3bn respectively, implying a net capital inflow of barely USD0.1bn over the period.



Capital flows through the economy (USD bn)                     

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Sources: CBN; FBNQuest Capital Research

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