Decline in Capital Imports, Decreases by 72% YoY in Q4 2020

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The NBS recently released its latest report on Nigerian Capital Importation, which covers Q4 ’20. The data were obtained from the CBN and compiled using the information on banking transactions from all registered financial institutions in Nigeria.

The total value of capital imported in Q4 was estimated at USD1.1bn, representing decreases of -27% q/q and -72% y/y. When we consider the full-year data, total capital imported into Nigeria stood at USD9.7bn in 2020 compared with USD23.7bn recorded in 2019. The data are gross, and not adjusted for capital exports. 

Capital importation by type (USD m)

Decline in Capital Imports, Decreases by 72% YoY in Q4 2020 Brandspurng
Source: National Bureau of Statistics (NBS); FBNQuest Capital Research

The category referred to as other investment inflows accounted for the largest share (73%) of total capital importation; its core driver were loans, while other claims represented 15% of the inflows for this category.

As for portfolio investment inflows, there was a q/q decrease of -91% in Q4. Money market instruments accounted for 49% of total portfolio investments but contracted by -95% q/q. Similar to Q2 and Q3, there were no contributions from bonds to portfolio investments in Q4.

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Portfolio investment inflows have been generally low. Since the lockdowns and the steep decline in oil prices, Nigeria has attracted fewer foreign portfolio investments. We have seen a steady decline from USD4.3bn in the first quarter to USD385m in Q2, USD407m in Q3 and then USD35m in Q4.

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Demand for equities remained low in Q4. The asset class accounted for 51% (USD18m) of total portfolio investments; inflows declined by -59% q/q and -95% y/y. Although the equities market has since bounced back, the recovery is largely due to a reinvigorated domestic market, driven by low-interest rates in the fixed income market.

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The United Kingdom was the top source of capital investments (USD237m) in Nigeria in Q4 ’20. It accounted for 22% of the total capital inflow. The Netherlands, Singapore and the United States accounted for 12.2%, 16.9% and 10.7% respectively.

By destination, as expected, the Lagos state emerged as the most preferred (USD829m), accounting for 78% of the total. Abuja received capital investments worth USD223m.

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Foreign direct investment (FDI) inflows declined by 39% q/q to USD251m. They represented 23% of total capital importation, compared with 28% the previous quarter.

The decline in total capital importation can be attributed mainly to the heightened risks triggered by the pandemic, concerns about the naira and investors’ inability to repatriate funds.

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Decline in Capital Imports, Decreases by 72% YoY in Q4 2020 - Brand SpurDecline in Capital Imports, Decreases by 72% YoY in Q4 2020 - Brand Spur

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Decline in Capital Imports, Decreases by 72% YoY in Q4 2020 - Brand SpurDecline in Capital Imports, Decreases by 72% YoY in Q4 2020 - Brand Spur

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