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)
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.