Nigerian Capital Importation Q2 2017

Total capital imported in Q2’17 grew by 95.0% QoQ

According to the data released by the National Bureau of Statistics (NBS), total value of capital imported into Nigeria in Q2’17 grew substantially by 95.0% QoQ and 43.6% YoY to $1.8 billion from $908 million in Q1’17 and roughly $1billion million in Q2’16. Within the quarter, the month of May recorded the highest amount of capital importation at $616.5 million, followed by June ($612.6 million) and April ($563.3 million). Looking at capital importation by types, the main driver of the quarterly growth in capital imported was foreign portfolio investments (FPI), which grew by 145.7% QoQ to $770.5 million (Q1’17: $313.6 million) and contributed 43.0% to the aggregate total capital imported in Q2’17. Foreign portfolio investment in Q2’17 flowed mostly into equities instruments which accounted for 79.7% ($614 million) of FPI while money market and bond instruments accounted for 12.8% ($98.6 million) and 7.5% ($57.9 million) respectively. “Other investments” and foreign direct investment in Q2’17 stood at $747 million and $247 million – a 95.0% QoQ and 29.8% YoY growth, and contributed 15.3% and 41.7% respectively to total capital imported.

 

Figure 1: Total Capital Importation (Q1’16 – Q2’17)                                        Figure 2: Capital Importation by type (Q1’2016 – Q2’2017)
                       

Source: NBS

 

Oil & Gas sector attracted the largest capital while Nigeria imported most of the capital from the United Kingdom

By sector, excluding shares, the Oil & Gas sector attracted the largest capital imported at $190.4 million, which represents an 88.4% QoQ growth and 10.6% contribution to the total. Telecommunications, servicing and production sectors also attracted sizeable capital during the quarter with respective contribution of 9.7%, 8.1%, and 7.9% to aggregate total capital imported. Lagos state continued to import the most capital into the country as it accounted for 97.1% ($1.74 billion) of total capital, followed by Akwa-Ibom ($34.1 million) and Abuja ($16.6 million). In Q2’17, Nigeria imported the most capital from the United Kingdom with a value of $696.7 million and contribution of 38.9% to the total. This was closely followed by United States, with a value of $287.8 million (16.1% contribution).

 

Investor and Exporter window the main contributory factor for growth in capital imported

We attribute the remarkable growth in total capital imported in Q2’17 to the introduction of the Investors and Exporters FX (IE) window in April, which was implemented to boost liquidity in the FX market as well as attract foreign investors who previously had concerns regarding timely repatriation of dividends and capital. The IE window also allows investors to trade the Naira at a market determined rate which encouraged participation of foreign portfolio investors during the quarter. We highlight that prior to the introduction of the IE window, capital imported in March stood at $243 million, as compared to an increase of 131% to $563 million in April. Given further improvement in transparency at the IE window (disclosure of daily volume on FMDQ and NAFEX rate Bloomberg) we expect sustained capital inflows for the rest of the year.

Stocks, Bonds and Treasury Bills

A “Stock” is a capital market instrument that represents an ownership stake in a company. They are also called “Shares” and “Equity”. Stocks are issued to the public via Initial Public Offerings or Public Offers or Rights Offerings (for existing shareholders) as a means to raise capital, and in return offer a stake in the issuing company. Stockholders can then go on to share in the profits of these companies if any when dividends (portions of profits made) are paid. These stocks can also be bought and sold on a recognized stock exchange at market-determined prices. Examples of recognized stock exchanges in Nigeria where stocks are traded are the Nigerian Stock Exchange (NSE) and the National Association of Securities Dealers (NASD) OTC Securities Exchange.

 

A bond is a long-term, capital market “Debt” instrument. It is also commonly referred to as a fixed income instrument due to the fact that a bond often (but not always) promises the holder a fixed, steady return over its lifetime (tenor). The lifetime of a bond usually ranges from 2 to 30 years. Bonds are usually issued by capital seekers (a borrower) who pledge to pay a set amount of money (“the Coupon”), as interest, at specific intervals for a specified period of time (the maturity date); upon which the principal is returned. Common issuers of bonds in Nigeria are the State and Federal Governments and large corporate bodies.

 

A treasury bill is a short-term, money market “Debt” instrument with a tenor of less than 1 year. Commonly issued tenors in Nigeria are 91 days, 182 days and 364 days. They are usually issued and backed by the full faith and credit of Federal Governments. In Nigeria, treasury bills are issued twice every month and three times in the month ending each quarter of the year.

 

 

 

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“Eating Out” vs “Home Cooking”

Every day we are faced with the same simple question: ‘What will I eat today?’ From locally made meals to continental dishes, the possibilities are almost endless. We also ponder on whether to cook at home or to go to a restaurant. In the end, this decision boils down to three major things: money, time and convenience.

Both home cooked meals and take outs can be a bit pricey, and when you are living on a budget, it is important to know how much a meal will cost as well as how it can affect your monthly savings. Let’s put it in perspective:
If we are to compare the standard restaurant price of “Jollof Rice” to a single serving of home cooked “Jollof Rice”, you will find out that it may be cheaper to eat out. This is because you have to factor in the prices of ingredients needed to prepare one meal plus the time and effort put into the cooking which can be quite a difficult task especially if you are a young business professional. However, if ingredients are bought in wholesale with meals prepared over the weekend and refrigerated, cooking at home becomes a cheaper option.

A quick analysis of the cost of eating lunch per month at a standard restaurant for business professionals earning up to N150,000 monthly in Lagos can be as high as N22, 000 (i.e N1, 000/day using 22 working days in a month). Considering that this is just the cost of lunch, you can only imagine what the feeding budget will be in a month. On the other hand, if you budget up to N40,000/month for groceries, and you spend some time cooking at home, you can comfortably eat breakfast, lunch and dinner every day. As long as each cooked meal is to be eaten over a period of time, cooking meals at home may be a smart way to save.

Some are of the opinion that single people do not need to cook since they may not have anyone to share the food with while some do not like eating food that isn’t fresh. When deciding on which option to go for, you will need to consider your marital status as well as how comfortable you are with eating refrigerated food.

There are valid points on both sides; eating out may be more convenient while cooking meals at home may be generally cheaper and healthier. The next time you are trying to decide between going out for lunch and cooking at home, take a minute or two to think about your wallet and your food budget to ensure that your finances doesn’t suffer.

Building An Investment Portfolio

Investing part of your earnings is an excellent decision and now that you have made that decision, this article will shed some light on what considerations you should make while deciding how exactly those investment funds should be allocated.

Building an investment portfolio is not as technical as it sounds. With the advent of technology, most stockbroking firms and asset managers have empowered their clients with the ability to trade online and acquire other investment assets, anytime, and anywhere in the world.

However, every investor should answer a few questions before they begin to invest. What is my time horizon, how old am I, How many years do I have till retirement, how often will I need to make withdrawals for my short-term liquidity needs. Investors also need to be realistic about their risk appetite bearing in mind that, the higher the risk, the higher the potential return.

Defining your investment goals and the time horizon are key factors in building the portfolio that suits you. Investments in stocks are known to be risky as stock prices are volatile and prone to various economic shocks. It, therefore, requires a bit of work and attention. Whether you are a passive investor or not, you need to constantly keep abreast of activities in the stock market, the economy and pay particular attention to the companies you have invested in. Investing in companies with proven track records, solid corporate governance standards and positive outlook on earnings from products or services they offer will, however, guarantee that the portion of the portfolio invested in stocks will be profitable.

Government debt instruments and other fixed-income instruments, on the other hand, are less risky and guarantee a fixed amount of returns on invested funds. Government instruments are effectively risk-free while other corporate entities pay a premium above the government’s lending rate to compensate for the risk that investing with them presents. Other fixed income instruments available are bank deposits, commercial papers and bonds. The key here is to only invest in government debts and instruments issued by companies who have received impeccable ratings and standards and have a track record of paying down their loan obligations.

Depending on how much risk you are willing to take, and how much patience you have with your investment funds, you can choose what percentage of your funds will be allocated to each asset. If you are however confused and still find it all daunting, you can easily call your asset manager and ask to invest in a mutual fund. Mutual funds are collective investment schemes which aggregate client funds and invest in a basket of instruments on behalf of the clients. In this case, fund managers make the investment decisions and allocate your funds on your behalf using their technical expertise to maximise the returns on your investments.

Other investment classes such as real estate and currency investments also exist. They are capital intensive and require extensive research and technical expertise.

Now that you know the different assets you can invest in, check how they fit in with your plans. How much of your money do you want put aside to make more money for you? How long before you need that money to go for an MBA or to buy your dream house? How much risk are you willing to take? If you lose some of the funds, is there enough time to make it back? The answers to these questions are the building blocks upon which your ideal and unique investment portfolio will be built.

How often do you evaluate your investments?
A professional investment adviser is only a phone call away…..reach out to us at (+234) 01–7100433 or visit CardinalStone!