Earlier, a fresh report from the National Bureau of Statistics indicated that total capital imported into Nigeria in Q3-18 faltered to its lowest level since Q2-18, after recording a 31.1% y/y decline to $2.9bn.
A deeper dive into the report shows that FPI flows, which continue to dominate capital imported into the country (accounting for 60.3%), tumbled, down 37.7% y/y to $1.7bn. Similarly, Other Investments, the next biggest contributor to capital importation, declined 52.3% to $0.6bn.
On the contrary, FDI flows reported a surprising but cheery acceleration, expanding 3.0x to $0.5bn. However, this was masked by its paltry contribution to total capital imported into the country.
In our view, the downtrend in FPIs is not surprising owing to the risk-off sentiment across emerging and frontier market during the period. This was triggered by policy normalization in the US which spooked investors away from emerging markets assets generally in the better part of the quarter. More so, political tension in Nigeria added to volatilities in the global space, further unnerving investors.
Evidently, FPI inflow into equity, bonds and money market instruments trended southwards in the quarter even as the NSE relayed a 44.3% slowdown in Foreign Inflow to The Exchange between Q2-18 and Q3-18.
Our expectations for Q4-18 remains tepid amid unrelenting uncertainties. Relatedly, we believe capital flows are unlikely to rebound in Nigeria until the 2019 election outcome is clear.