Nigeria's Portfolio and Foreign Direct Investment Flows Fall of Sharply as Investors Sit on The Sidelines

Other data which came out in Nigeria included the Capital Importation figures which showed that Portfolio Investment in the second quarter of 2016 dropped by a substantial 88.8% from a year ago (the figure was -9.49% in the previous quarter). Portfolio Investments in Nigeria went from $2.18 Billion in the second quarter of 2015 to $245.3 million in the second quarter of 2016. Foreign Direct Investment has also fallen significantly by 37% (-23.75% in previous quarter) in the same period. Other investments dropped by 1.22% (1.24% increase in previous quarter). In total capital flows in the second quarter of 2016 fell by 75.7% in Nigeria from a year ago, the largest decrease on record. The total figure $647.1 million imported is also the lowest level of capital imported on record.

Wtihin Portfolio investments, investments into Bonds was practically non-existent in the second quarter from $50.5 Million in the same period a year ago. A year before that it was as high as $731.7 Million.

Portfolio investment is usually the largest component of capital importation dwarfing the other components but it is now second to other investments. Portfolio Investments represents 37.9% of total capital imported compared to other investments at 41.53% and Foreign Direct Investment at 20.56%. On a sectoral basis, telecommunications experienced the highest increase

The Capital Importation Data provided by the Nigeria National Bureau of Statistics can be erratic and at times provisional however it does provide preliminary details before the Central Bank releases the more comprehensive data.

The results are not surprising as news of a change in foreign exchange policy started doing the rounds in the second quarter until the currency was eventually free-floated in the second quarter. Investors are still anxious about the Nigerian economy with some showing skepticism of the true flexibility of the exchange rate as well as its short term trajectory. Therefore the likelihood is high that it might take longer for capital to flow back in the economy. The Central Bank of Nigeria is trying to attract more capital by hiking rates and aiming for positive real rates. This will be difficult to do in an economy deep in recession whilst facing decade-high inflation rates. Please follow our regular economic updates on twitter @lingskevin

Please follow our regular economic updates on twitter @lingskevin

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