Equity, Banking Sectors Attract N31.96trn Capital Inflows In Six Years
Shares, banking and financing attracted the highest share of the N31.96 trillion ($87.96 billion) worth of investment inflows into Nigeria in six years. The Central Bank of Nigeria’s (CBN) guidelines show that capital importation can be done through an authorised dealer; which is usually a commercial bank, or through a debt-equity scheme of the Federal Government.
In Nigeria, every expatriate investing in a local business is required to procure a Certificate of Capital Importation (CCI) on the inflow of foreign currency or raw materials or equipment imported.
Capital importation data sourced from the National Bureau of Statistics (NBS) show that shares attracted 55.67 per cent of the total capital imported from the second half of 2013 to the first half of 2019, being N17.8tn ($48.97bn).
Capital importation for shares hit $5.73bn in 2015. Capital inflows slumped to $1.47bn in 2016 before jumping to $7.5bn in 2017 and $10.43bn in 2018.
During the six-year period, analysis showed that banking distantly followed shares, attracting N3.88tn ($10.66bn) or 12.12 per cent of the total capital importation.
A breakdown showed that banking attracted $913.54m in 2015, $932.51m in 2016, $937.12m in 2017 and $2.02bn in2018. Financing closely trailed banking, attracting N3.81tn ($10.48bn) or 11.92 per cent of the total capital importation within the period.
A breakdown showed that financing attracted foreign capital worth $858.89m in 2015, but this inflow dipped to $95.34m in2016. Capital importation for financing recorded a steady rise in 2017 and 2018, hitting $318.55m and $1.49b respectively.
Key sectors as agriculture, IT, production and trade also attracted foreign capital during the six-year period. Agriculture attracted $952.24m; IT services got $132.13m; production attracted $4.03bn, while trading attracted $1.35bn during the period.
Further analysis indicates that Nigeria recorded a slump in capital inflows since 2014 when the country recorded a total of N7.51tn ($20.75bn), being the highest value of capital importation in the last five years.
The 2015 presidential election rattled foreign investors, leading to a N4.04tn ($11.11bn) drop in capital inflows from the N23.44tn ($64.55bn) Nigeria attracted in 2014 to N3.50tn, ($9.64bn) in 2015.
The international price of oil crashed from 2014 to 2016, also worsening Nigeria’s economic crisis, which eventually led to recession, with the country recording a Gross Domestic Product (GDP) growth rate below zero in 2016.
Data from CBN showed that foreign reserves dropped from $37.33bn in June 2014 to $23.81bn in September, 2016, and inflation skyrocketed from 9.2 per cent in June, 2015, and peaked at 18.5 per cent in December, 2016.
These downward slide in the economy was coupled with exchange rate instability as the naira lost value in the parallel market, ultimately falling to as low as N520/$ These downturns led to the economy dipping into recession by the second quarter of 2016, registering a GDP contraction of -1.49 per cent from where it dipped further to -2.34 per cent by the third quarter.
Capital importation is picking up, indicating investors’ confidence in improvement in the economy. Analysis showed that 2016, when Nigeria’s economy sank into recession, was the year country recorded the least investment inflows in the last six years under review, amounting to N1.86tn ($5.12bn).
Compared to 2015, Nigeria lost a total of N1.64tn ($4.52bn) in a single year from low capital inflows from the N3.50tn ($9.64bn) to N1.86tn ($5.12bn) recorded in 2016.