Nigeria’s foreign capital inflow has decreased to $770 million in the fourth month of 2024.
This is a decrease of 57.22% from the $1.80 billion recorded in March 2024, according to the April 2024 Monthly Economic Report published by the Central Bank of Nigeria (CBN).
The report attributes the decline in foreign capital inflow primarily to a reduction in investments in money market instruments.
It read: “A lower foreign capital inflow was recorded in the review period, occasioned by lower investments in money market instruments. Capital inflow into the economy fell to US$0.77 billion, compared with US$1.80 billion in March 2024.”
Fall in portfolio investment
Portfolio investment inflow, which saw a decrease to $330 million from $1.16 billion in March, was largely responsible for the drop, as investors shied away from purchasing money market instruments.
Similarly, other forms of investment, particularly loans, also saw a decline, with inflows falling to $430 million from $620 million in the previous month.
Foreign direct investment (FDI) was not spared, as it also dropped to $10 million, down from $20 million in March, following a reduction in equity investments.
In terms of the composition of foreign capital inflows, other investments constituted the largest share at 55.84%, followed by portfolio investments at 42.71%, and direct investments at a mere 1.45%.
This indicates a heavy reliance on non-equity financial instruments and loans, which are often more volatile and sensitive to global financial conditions.
Banking sector dominates
The report further provides a sectoral analysis of capital importation, revealing that the banking sector dominated, receiving 70.46% of the total inflows.
This was followed by trading (12.89%), production/manufacturing (5.77%), telecommunications (4.94%), and shares (4.35%). The remaining inflows were distributed across various other sectors.
Lagos maintains lead
- Geographically, Lagos State was the primary destination for these investments, attracting 83.13% of the total capital inflow, while the Federal Capital Territory (FCT) accounted for the balance.
- When analysing the origin of the capital inflows, the United Kingdom emerged as the largest contributor, accounting for 54.59% of the total.
- South Africa followed with 13.22%, Mauritius with 9.22%, the Netherlands with 6.57%, the United Arab Emirates with 5.77%, and the United States with 3.44%.
What you should know
While there was a decrease in capital inflow, Nigeria recorded an increase in outflow. Also, the amount of outflow was higher than inflow in the inflow in April 2024.
Nairametrics earlier reported that Nigeria witnessed a significant increase in capital outflows, totalling $1 billion in April 2024, an increase of 35.14% from $740 million recorded in the previous month.
This increase was largely driven by capital reversals, which accounted for 78% of the total outflow, equating to $780 million.
Capital reversal refers to the phenomenon where foreign investors withdraw or repatriate their investments from a country, often in response to economic instability, policy changes, or more attractive investment opportunities elsewhere.
This can involve selling off stocks, bonds, or other financial assets and moving the capital back to the investor’s home country or another destination perceived as safer or more profitable.
Nairametrics observed that capital reversals were more than the total foreign capital outflow recorded in May 2024.
However, Nigeria’s total capital importation rose by 210.16% in the first quarter of 2024 from $1.08 billion recorded in Q4, 2023 to $3.37 billion in the period under review. This is according to the National Bureau of Statistics (NBS) capital importation report in Q1 2024.
When compared to the corresponding quarter of 2023, capital importation increased by 198.06% in the first quarter of 2024.
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