Analysts have blamed declining capital importation into the country on poor management of Foreign Exchange (forex) and the inflation rate as at September 2021.
The importation of capital in the first nine month of 2021 dropped by $4.08 billion (N1.68 trillion).
During this period, Foreign Portfolio Investment (FPI) contributed the most significant amount to capital inflows, accounting for $4.31 billion or 73.61 per cent of the total capital importation, followed by ‘other investments,’ which accounted for $1.33 billion or 22.73 per cent; then the Foreign Direct Investment (FDI) which accounted for 3.66 percent or US$214.25 million.
In terms of sectors, the banking industry led the chart by contributing $2.99 billion to the total capital importation in Q1 2020.
But analysts at Proshare said, “Capital Importation in 2021 dipped substantially due to the upward trend in inflation, which averaged 17 per cent in the year, exceeding the single-digit inflation target of the CBN; with the threat of capital depletion, investors are forced to consider climes with more excellent price stability.
“The management of foreign exchange (forex) in Nigeria by the CBN, mainly the choice of maintaining multiple exchange rates, has been identified as a significant factor responsible for falling capital importation. As it relates specifically to FDI, Insecurity, policy inconsistency, and the weakness of Institutions are responsible for the absence”.
In the second quarter of 2020, the aggregate capital inflow fell by 77.8 percent to US$1.29bn when compared to the preceding quarter. The most significant amount of capital importation by type was received through ‘other investments,’ which accounted for 58.77 percent ($761.03 million) of the total capital imported, followed by FPI which accounted for 29.76 per cent ($385.32 million); and then the FDI which accounted for 11 per cent ($148.59 million) of the total capital imported in the second quarter (Q2) of 2020.
By sector, capital importation by shares dominated in the second quarter of 2020, reaching $464.57million of the total capital importation.
Capital importation, however, rose to $1.56 billion in the third quarter of 2020, representing an increase of 12.86 percent compared to Q2 2020. The 93 per cent quarter-on-quarter (Q-O-Q) rise in capital inflows in Q3 was driven mainly by other kinds of investments besides the FDI and the FPI, the Nigerian Bureau of Statistics (NBS) said.
According to the Bureau, ‘other investments’ accounted for 43.75 per cent ($639.44 million) of the total capital importation, while the FDI and the FPI contributed $414.79 million and $407.25 million, respectively. Further analysis showed that in Q1 2021, the total value of capital importation was US$1.90bn, which represented a decline of $3.95 billion when compared to the same quarter in 2020.
Capital importation, however, declined to $875.62 million in Q2 201, representing a decrease of $415 million compared to the $1.29 billion recorded in Q2 2020.
Capital importation into Nigeria had declined by 54 per cent Q-o-Q to settle at $875.62 million in Q2 2021, compared to $1.91 billion recorded in Q1 2021. In both periods, Capital importation was dominated by Portfolio Investment of $974.14 million (51 per cent) and $551.37million (63 per cent), respectively.
In Q2 2021, lower capital importation occurred despite capital investment by the Stanbic Group in Stanbic IBTC Bank plc had accounted for the overall growth in capital importation.
