As the National Bureau of Statistics (NBS) has reported a decline in the country’s capital importation figures during the second quarter of the year, there are rising fears that the worst may not be over yet for the economy, as financial analysts predicted a further decrease in the inflows.
NBS had reported, last week, that capital importation into Nigeria declined by 12.53 per cent in the second quarter of 2018 to stand at $5.51 billion.
However, financial analysts at Cordros Capital, at the weekend, said capital importation would decline further because of both internal and external factors.
In an e-mail message to investors, the Investment and stockbrokerage house wrote: :we believe capital importation will decline further, with portfolio inflows, which constitute the bulk of capital imports, expected to slow down amidst uncertainty ahead of the 2019 general elections, monetary policy normalization across developed markets, and global trade war fears.”
The NBS report released had stated that the quarter-to-quarter decline was as a result of a decline in portfolio and other Investments, which declined by 9.76 per cent and 24.07 per cent respectively.
However, the capital inflows into the country in the second quarter translated to a 207.62 per cent increase compared to the second quarter of 2017.
A breakdown, however, showed that the largest amount of capital importation by type was received through portfolio investment, which accounted for 74.7 per cent ($4.12billion) of total capital importation, followed by other Investment, which accounted for 20.5 per cent ($1.13 billion) of total capital, and then Foreign Direct Investment (FDI), which accounted for 4.7 per cent ($261.4m) of total capital imported in the second quarter.
Capital Importation can be divided into three types: Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI) and Other Investments, each comprising various sub-categories.
Since 2017 Q2, Portfolio Investment has been expanding faster than the other two categories; although the absolute value of Portfolio Investment declined in the second quarter on a quarterly basis, falling from $4.57 billion in first quarter, 2018 to $4.12 billion in Q2, 2018, it remained the largest component of the total Capital Importation in the quarter under review. This was followed by Other Investments, and then FDI, according to NBS.
But giving the basis for their position, Cordros Capital stated: “The National Bureau of Statistics’ (NBS) capital importation report for the second quarter of 2018 shows that total capital imported during the period stood at $5.51 billion, representing a 207.62 per cent year-on-year(y/y) increase from the $1.79 billion recorded in Q2-17. However, on a quarter-on-quarter (q/q)basis, total capital importation fell 12.53 per cent (vs. N6.30 billion in the first quarter(Q1 of 2018) – the first q/q decline since Q1-2017.