How Nigeria recorded N23.44trn investment inflows from abroad in 5yrs
…Downturns in economy on reverse mode
Nigeria recorded a total of N23.44 trillion ($64.55 billion) worth of investment inflows from abroad in the last five years.
A five-year capital importation data sourced from the National Bureau of Statistics (NBS) showed that the investment inflows went into portfolio investment, Foreign Direct Investment (FDI) and other investments.
Daily Trust observed that Nigeria recorded slump in capital inflows since 2014 when the country recorded a total of N7.51 trillion ($20.75 billion), being the highest value of capital importation in the last five years.
The 2015 presidential election rattled foreign investors leading to an N4.04 trillion ($11.11 billion) drop in capital inflows from the N23.44 trillion ($64.55 billion) the country attracted in 2014 to N3.50 trillion ($9.64 billion) in 2015.
The international price of oil crashed from 2014 to 2016, also worsening Nigeria’s economic crisis, which eventually led to recession with the country recording a Gross Domestic Product (GDP) growth rate below zero in 2016.
Data from the Central Bank of Nigeria (CBN) showed that foreign reserves dropped from $37.33 billion in June 2014 to $23.81 billion in September 2016 and inflation skyrocketed from 9.2 per cent in June 2015 and peaked at 18.5 per cent in December 2016.
The downward slide in the economy was coupled with exchange rate instability as the Naira lost value in the parallel market, ultimately falling to as low as N520/US$.
These downturns led to the economy dipping into recession by the second quarter of 2016 registering GDP contraction of -1.49 per cent from where it dipped further to -2.34 per cent by the third quarter. However, data sourced from the NBS showed that the country’s GDP has been slowly picking up since the oil price crash of 2014 to 2016 up 1.9 per cent in 2018 from the 0.8 per cent recorded the year before.
Just like the GDP that is already picking up, capital importation is also picking up, indicating investors’ confidence improvement in the economy.
Analysis showed that 2016 when Nigeria’s economy sank into recession was the year the country recorded the least investment inflows in the last five years under review, amounting to N1.86 trillion ($5.12 billion).
Compared to 2015, Nigeria lost a total of N1.64 trillion ($4.52 billion) in a single year from low capital inflows from the N3.50 trillion ($9.64 billion) to N1.86 trillion ($5.12 billion) recorded in 2016.
Just like improvements seen in GDP and the economy generally in the last two years, investments inflows are on the rise again as the country recorded a total of N4.44 trillion ($12.22 billion) in 2017 and N6.11 trillion ($16.81 billion) in 2018.
Analysis shows that the difference in the value of capital importation into the country between 2017 and 2018 represents 37.49 per cent growth yearon-year.
The largest amount of capital importation by type was received through Portfolio investment, which accounted for 70.20 per cent ($11.80 billion) of total capital importation, followed by Other Investment, which accounted for 22.69 per cent ($3.82 billion) of total capital, and then Foreign Direct Investment FDI, which accounted for 7.11 per cent ($1.20 billion) of total capital imported in 2018.
By sector, Capital importation by shares, which is closely related to Equity investment (FDI and Portfolio Investment), dominated 2018 reaching $10.43 billion of the total capital importation in 2018.
The United Kingdom emerged as the top source of capital investment in Nigeria in 2018 with $6.01 billion and this accounted for 35.74 per cent of the total capital inflow in 2018.
Daily Trust also observed that stability has been restored in the Exchange Rate Market bringing near convergence between the interbank rate (NIFEX) and the autonomous rate (NAFEX) over the past 12 months. There is sustained accretion to External Reserves from $23.81 billion in September, 2016 to $43.042 billion as at February, 2019.
The economy has witnessed sustained positive trade balance since the end of 2016, as the value of Nigeria’s export continue to exceed imports. As at third quarter of 2018, Nigeria’s trade balance stood at N681.27 million as against a deficit of N135.96 million in the corresponding quarter of 2016.
A measure of the impulse of the economy is also the Manufacturing Purchasing Managers’ Index (PMI), which in January 2019 stood at 58.5 index points, indicating expansion in the manufacturing sector for the 22nd consecutive month.
Speaking on how Nigeria reversed the downturn in the economy in the last two years, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, said the Federal Government had to take immediate steps to stop the economic drift and reverse the collapse.
Senator Udoma said some of the urgent steps taken included establishment of Investors’ and Exporters’ FX window by the Central Bank of Nigeria to deepen the market, boost liquidity and accommodate all FX requirements and setting up the Presidential Enabling Business Environment Council (PEBEC), which initiated and completed a 60-Day National Action Plan across many reform areas to improve the country’s Ease of Doing Business ranking.
Other measures included establishment of Nigeria Industrial Policy and Competitiveness Advisory Council as a vehicle for partnering with the private sector on the industrialization agenda; partnering with the private sector on infrastructure development through various models such as Road Trust Fund Scheme, Concessions arrangements; Public, Private Partnerships (PPPs); and introduction of Social Investment Programme to take care of the poor and venerable, build skills, and support small business enterprises with N500 billion allocation in annual budgets every year.
There was also improved capital expenditure releases, in spite of revenue constraints - N1.2 trillion from 2016 budget, N1.58 trillion in 2017 budget and N1.23 trillion from the 2018 budget - as at January 10, 2019.
The Federal Government also supported agriculture with over N120.6 billion disbursed to more than 800,000 farmers under the Anchor Borrower’s scheme, including the revitalization of 11 fertilizer blending plants and the setting up of special presidential committee on key commodities such as rice and tomato. With downturns in the economy now on a reverse mode, the 2019 election may, however, also pose danger to the economy.
For instance, there is a downward trend in the value of investment inflows quarter-on-quarter in the build-up to the 2019 elections.
The total value of capital importation into Nigeria stood at $2.14 billion in the fourth quarter of 2018, representing a decrease of 25.05 per cent compared to Q3 2018 and 60.24 per cent decrease compared to the fourth quarter of 2017.