Capital inflows decline to $5.51bn in Q2

The capital importation data released by National Bureau of Statistics (NBS) for the second quarter of 2018 showed a 12.5 per cent Quarter on Quater decline in flows to $5.51 billion, reflecting lower foreign portfolio investment (FPI).
But on a yearly basis, capital imports increased by 207.62 per cent .
A breakdown of the second quarter 2018 foreign inflow showed that Foreign Portfolio Investments (FPI) accounted for 74.72 per cent but declined q-o-q by 9.76 per cent.
Other investments , mainly comprised of Foreign Loans and other claims which constituted 20.54 per cent also fell quarter onquarter by 24.07 per cent.
However, Foreign Direct Investments (FDI) which constituted a meagre 4.74 per cent rose q-o-q by 5.97 per cent .
Detailed analysis of the data released by NBS revealed that Equities FPIs grew by 70.73 per cent year-on-year and 49.43 per cent q-o-q to $1.05 billion in second quarter 2018; while FPIs in Money market instruments increased by 2,609.27 per cent year on year and by 24.28 per cent quarter on quarter to $2.67 billion.
However, Bonds FPIs rose year on year by 591.45 per cent to $400.14 million and 19.13 per cent quarteron quarter, suggesting that investors increased duration.
Foreign Loans also increased by 50.06 pear year on-year but dipped by 11.57 percent q-o-q to $1.12 billion in the first half of2018.
A breakdown of capital imports by sector showed that investments in shares accounted for 74.21 per cent or $4.09 billion and grew by 339.78 per cent y-o-y as well as 7.92 per cent q-o-q.
Other sectors which received relatively large inflows include: services which saw a 229.65 per cent y-o-y and 46.23 per cent q-o-q growth in inflows to $479.85 million, accounting for 8.70 per cent of total capital imports and production which recorded a 47.74 per cent y-o-y and 44.99 per cent q-o-q rise in inflows to $208.92 million accounted for 3.79 per cent of total capital imports.
In another development, Central Bank of Nigeria’s depository corporations survey, released during the week, showed a 0.63 per cent month on month increase in Broad Money to N24.97 trillion in July 2018; as a 10.96 per cent month-on-month increase in Net Domestic Assets (NDA) to N7.19 trillion offset the 3.04 per cent month -on-month decrease in Net Foreign Assets (NFA) to N17.79 trillion amid declining external reserves which fell to $47.12 billion in July 31, 2018 from $47.79 billion in June 29, 2018.
On domestic asset creation, the increase in NDA resulted from a 3.27 per cent month on month decrease in other Liabilities (net) to N18.47 trillion in the month under review accompanied by a marginal increase of 0.34 per cent in Net Domestic Credit (NDC) to N25.65 trillion.
Further breakdown of the NDC showed a 3.25 per cent m-o-m increase in Credit to the Government to N3.39 trillion.
Share of credit to Government of NDC rose to 13.23 per cent from 12.85 per cent, accompanied by a slight decrease of 0.09 per cent in Credit to the Private sector to N22.26 trillion but it’s share of NDC fell to 86.77 per cent from 87.15 per cent.
On the liabilities side, 0.63 per cent m-o-m rise in Broad Money Supply followed a 1.35 per cent m-o-m growth in Quasi Money (near maturing short term financial instruments) to N14.30 trillion.
However, Narrow Money fell by 0.31 per cent to N10.67 trillion.
Demand Deposits which rose by 0.20 per cent to N9.20 trillion was offset by a 3.39 per cent drop in currency outside banks to N1.47 trillion in July 2018.
Meanwhile, Reserve Money (Base Money) increased m-o-m by 4.12 per cent to N6.62 trillion as bank reserves rose m-o-m by 8.21 per cent to N4.45 trillion; however, Currency in circulation decreased m-o-m by 3.33 per cent to N1.82 trillion.
Financial analysts said that the quarterly decline in capital inflows in second quarter 2018 was largely reflective of the early negative reaction by foreign investors to the nation’s political uncertainty .
They explained that foreign investments from United Kingdom decreased q-o-q by 21.29 per cent , declining yields on local fixed income assets and the increasing yield environment abroad they noted that the better performance on the yearly capital inflows was due to base effect as the inflows in second quarter 2017 was low amid recovery of the economy from recession.they reiterated the need for government to put in place the right economic policies and legislations that would attract foreign direct investors.