The latest capital importation report released by National Bureau of Statistics (NBS) has shown that Nigeria’s foreign direct investment (FDI) declined by 48.7 percent in Q1 of 2015 in relation to the preceding quarter (Q4) 2014.
The NBS report states that FDI showed the lowest year-on-year decline in inflows, at $96.09 million growing at -14.77 percent, while on quarter on quarter basis, the decline was larger at $374.25 million or -48.68 percent.
Nigeria’s total capital imported to the country for the period totalled $2.7 million, giving the lowest value observed over the last two years of review.
A sharp decline of $1.2 million or 31.58 percent was recorded year-on-year. On a quarterly basis, there was an acceleration of the downward trend observed since Q4 with a further drop of $1.8 million or 40.6 percent.
The bureau attributed the decline in the capital imported in Q1 2015 to high levels of uncertainty in the quarter due to a postponed election and depressed oil price.
“Capital Importation is divided into three main investment types: Foreign Direct Investment (FDI), Portfolio Investment and Other Investments, each comprising various subsectors,” the report said.
According to the Wall street journal (WSJ) frontiers and frontier strategy group (FSG) frontier market sentiment index, Nigeria maintained its top spot as the frontier-market economy that is attracting the most attention from American and European multinationals for potential future investments.
The country has held the top spot since the index was launched in June 2014 despite having endured a rough ride for the past few months.
Recent attacks by Boko Haram continue to have a negative impact on perceptions of Nigeria.
For corporations looking beyond the short-term turmoil, the country’s problems may provide an opportunity to buy into Africa’s biggest economy at a discount. “Nigeria is about to enter a world of hurt but these are the times when you can really make a difference – both from investors’ point of view and corporates’,” says Matt Lasov, FSG’s global head of advisory and analytics.
According to the report, the largest source of capital imported into the country continues to be the United Kingdom, with $1,759 million imported in the first quarter of 2015, representing 65.9 percent of the total.
The report stated that a sharp decline was observed in the United States, which is Nigeria’s second largest source of capital, declining by $725.9 million or 67.6 percent to $348.7 million in quarter one of 2015.
For portfolio investment, the report stated that it made up the largest portion of the total capital imported totalling $1,860.7 million in Q1 of 2015.
Year on year, portfolio investment declines were much greater at $1,008.55 million or 35.15 percent.
According to the report, decline in portfolio investment inflows were primarily driven by declines in equity capital, which were lower by $1,120.98 million or 49.59 percent year- on- year, and by $402.69 million or 26.11 percent relative to Q4 of 2014.
The report states that the main driver of the overall drop in capital inflows since Q4 of 2014 was from Other Investments. Other investments declined from a value of $1,727.78 million in Q4 to $416.34 million in the opening quarter of 2015. This shows a decline of $1,311.44 million or 75.9 percent.
This sharp decline was caused by the other claims component of Other Investments, in which inflows were lower by $1,304.40 million or 97.64 percent quarter on quarter.
Josephine Okojie
