Buharinomics: NBS Says Foreign Investment Into Nigeria Is Drying Up

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The National Bureau of Statistics has released its 2016 Q1 capital importation report which details the total amount of foreign capital imported into the country. According to the report,  total of $711 million was imported into the country in the quarter ending March 2016. This is the lowest level since they started collecting the data in 2007 and a decline of about 74% year on year.

The report confirms the economic realities in Nigeria, as foreign investors have basically withheld any major form of investment into the country. This follows the capital controls imposed by the CBN which basically limits the amount of cash that can be repatriated from the country. This has increased the risk of investing in Nigeria as foreign investors will not invest of they do not see a possible exit.

An excerpt of the Bureau’s report is below.

The total value of capital imported into Nigeria in the first quarter of 2016 was $710.97 million, the lowest level since the series began in 2007. This represents a decline of 54.34% since the final quarter of 2015, and a year on year decline of 73.79%. Both the quarterly and year on year declines were also the lowest recorded since the series began. As a result of these changes, total capital importation has fallen by 89.13% since its peak level in the third quarter of 2014.

The scale of the decline in capital importation in the first quarter of 2016 is symptomatic of the challenging period that the Nigerian economy is going through following the fall in crude oil prices. Although there a number of reasons why the amount of capital imported in recent years may have been higher than usual (such as the inclusion of Nigerian in the JP Morgan Bond Index, and globally low interest rates triggering a search for higher yields over this period) the fact that the amount of capital imported has dropped to a record low suggests that there are further reasons why Nigeria has attracted less foreign investment in recent quarters. Investors may be concerned about whether or not they will be able to repatriate the earnings from their investments, given the current controls on the exchange rate. In addition, as growth has slowed in recent quarters, there may be concerns about the profitability of such investments.

The first quarter of 2016 also saw a large change in the composition of capital imported. Following a quarterly decline in portfolio investment of 71.55% (also the largest quarterly fall on record) portfolio investment accounted for 38.12% of total capital imported, compared to 61.18% in the previous quarter. However, it remained the largest component, as Other Investment also recorded a sharp quarterly decline, of 44.84%, which prevented its share from rising higher than that of portfolio investment. Whereas Other Investment accounted for 30.91% in the final quarter of 2015, this share had risen to 37.34% in the first quarter of 2016. Foreign Direct Investment remained the smallest component at 24.54%, despite being the only component to record a quarterly increase in investment (of 41.65%).

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