The total value of capital imported into Nigeria in the first quarter of 2017 was estimated to be $908.27 million. Although this was an increase of 27.75% relative to the same quarter of 2016, it was nevertheless 41.36% smaller than the value of capital imported in the previous quarter, and was the second lowest value recorded since 2007.
There was a high-profile sale of (bonds denoted in a non-local currency) during the quarter, but this has not yet appeared in the data; there is a lag between subscription and actual payment, and therefore it is possible that this will show up next quarter.
Capital importation was particularly low in January, at $187.90 million; this was only the fourth month since 2007 in which capital importation was less than $200 million.
The main driver of the quarterly decline was a fall in Other Investment, although Foreign Direct Investment (FDI) also contributed. Portfolio investment was the only category to record an increase relative to the previous quarter.
The fall in FDI comes after four consecutive quarters of increase, and the fall in Other Investment follows three consecutive quarters of increase.
However, the data is volatile and therefore the dip in Q1 may not be sustained. Nearly the entire quarterly fall resulted from declines in capital imported into the Telecommunications and Oil and Gas sectors, which recorded unusually high values in the previous quarter.
Capital Importation by Type
Capital Importation can be divided into three main investment types: Foreign Direct Investment (FDI), Portfolio Investment and Other Investments, each comprising various sub-categories.
Other Investment was the largest component of imported capital in the first quarter of 2017, and accounted for $383.28 million, or 42.20% of the total. This was despite a large quarterly fall of 58.34%, relative to the value of $920.03 million recorded in the previous quarter.
However, last quarter’s value was unusually high, and Other Investment nevertheless recorded a year on year increase of 44.37%. Loans continues to dominate Other Investment, and accounted for 96.35% of this category during the quarter, although marginal amounts of capital were also imported as Currency ($3 million) and Other Claims ($11 million).
The second largest component of capital importation in the first quarter of 2017 was Portfolio Investment, which accounted for $313.61 million, or 34.53% of the total. This represented growth of 10.34% relative to the previous quarter, and 15.71% relative to the same quarter of 2016; this was the only category to record both year on year and quarterly increases, and it was the first year on year increase since the third quarter of 2014.
This was possibly related to recent successes in stabilizing the Naira: during the quarter the Naira halted its continual decline, although it remains to be seen if this lasts. Portfolio investment is likely to be more affected than this than other investment types, due to its short-term nature.
There was a significant change in the composition of Portfolio Investment. Portfolio Equity, usually the largest component, declined from $176.44 million in the previous quarter to $101.99 million, a fall of 42.19%.
By contrast, Money Market Instruments increased from $82.37 million to $211.61 million, an increase of 156.90%. The latter therefore became the largest component, and accounted for 67.48% of Portfolio Investment, compared to 32.52% for Portfolio Equity. No capital was imported in the form of bonds.
FDI was the smallest component of capital importation in the first quarter of 2017, as has generally been the case since 2013. This investment type accounted for $211.38 million, or 23.27% of the total.
This represented a quarterly decline of 38.66%, but a year on year increase of 21.17%. Of the two subcategories, both recorded positive investment, but there was only $1.28 million of investment in the form of Other Capital, and so FDI Equity accounted for $210.10 million, or 99.40% of the total.
Capital Importation by Sector
Capital is either imported in the form of shares, or directly imported by different sectors of the economy.
In the first quarter of 2017, the value of share capital imported was $143.81 million, which represents a decrease of 36.99% relative to the previous quarter, and a decrease of 40.95% relative to the first quarter of 2016. Despite this decline, the proportion of the total value of imported capital accounted for by shares increased slightly, from 14.74% in the previous quarter to 15.83%.
This is still considerably lower than in any quarter other than the previous, which was the lowest on record. Share capital investment, which is closely related to Equity investment (FDI and Portfolio) was responsible for most of the increase in capital importation throughout 2012 – 2014, and accounted for much of fall since. The correspond decline in the proportion of the total accounted for by shares is illustrated in figure 3.
In contrast to the previous quarter, there were no obviously dominant sectors. The two sectors to account for the largest proportions of the value of imported capital were Servicing, which accounted for $146.05 million or 16.08%, and Telecommunications, which accounted for $145.78 million or 16.05%.
This is the first quarter on record in which Servicing has been the largest sector in terms of imported capital, although it has often been a prominent sector. The series is highly volatile, but has gradually become more prominent since 2007.
Telecommunications has generally been one of the key sectors for capital importation; it has been one of the top five sectors in terms of capital importation for all but 5 quarters since 2007.
Nevertheless, in the first quarter of 2017, the value of capital imported in this sector declined by 73.70% relative to the previous quarter. This decline accounted for nearly two thirds of the total decline in capital importation between these two quarters.
Despite also recording decreases, the Banking and Oil and Gas sectors were the third and fourth largest capital importing sectors, accounting for $126.00 million (13.87% of the total) and $101.08million (11.13%) respectively.
Banking has also been a consistently important sector for imported capital, but the Oil and Gas sector has increased in importance in recent periods. Compared to the previous quarters, the Banking and Oil and Gas sector recorded decreases of 21.88% and 69.12% respectively.
There were four sectors to record no capital importation in the first quarter of 2017 (Drilling, Hotels, Tanning and Weaving), one more than in the previous quarter, although IT services recorded less than $1 million. Half of the sectors recorded a decline relative to the previous quarter.
Capital Importation by State
The state to import the most capital into Nigeria in the first quarter of 2017 was Lagos, as in all previous quarters. Lagos is the commercial and financial capital of Nigeria, and home to Nigerian Stock Exchange where shares are traded. As such, it accounts for most of the capital imported into the country.
In the first quarter of 2017 Lagos accounted for 95.32% of capital importation, which represents a slight decrease in its share relative to the previous quarter, when it was 96.38%, but an increase relative to the share in the same quarter of 2016, of 92.53%. Akwa Ibom and Abuja were the states to record the second and third largest amounts of imported capital, recording values of $18.36 million and $14.87 million respectively.
Capital Importation by Country of Origin
The country from which Nigeria imported the most capital was the United Kingdom, which accounted for $302.47 million, or 33.30% of the total. This value represents a decline of 37.36% relative to the previous quarter, a slightly smaller fall than for the total value, which resulted in the share of the UK increasing from 31.18% in the previous quarter.
As well as the existence of an historical relationship between the UK and Nigeria, London (the capital of the UK) is also a key financial centre, which could help to explain the high value of capital importation accounted for by the UK. Since 2010, the UK has accounted for the highest value of capital importation in all but two quarters (both in the second half of 2015).
The country to account for the second largest value of capital importation was the United States. The US accounted for $215.66 million in the first quarter of 2017, or 23.74%. The US has also been one of the most important investors in Nigeria, usually either the largest or second largest investor country. It also shares a language with Nigeria, it has also been historically the largest economy in the world, and is active in foreign investment globally.
The next two largest investors in the first quarter of 2017 were Singapore (accounting for 8.09%) and Mauritius (7.86%). The Netherlands is usually one of the largest investors, but became less important this quarter after a quarterly decline of 96.54%.
Capital Importation By Bank
In Q1 2017, Standard Chartered Bank Plc received the highest share of capital inflows with 25.49% of total capital imported in Q1 2017 followed by Access Bank Plc (16.62%) and Ecobank (14.87%).
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