…Foreigners buy $2.75bn shares

By Babajide Komolafe

In apparent confirmation of rising confidence in the Nigerian economy, foreign investment into the country shot up by 147 percent year-on-year (YoY) to $4.1 billion in the third quarter (Q3 2017) from $1.82 billion in Q3 2016.

Mr Godwin Emefiele answering questions during his screening by the Senate for Central Bank Governorship in Abuja on Wednesday

The sharp increase was driven by foreign portfolio investment (FPI) which rose 200.7 percent to $2.8 billion during the quarter .

Nigeria Bureau of Statistics (NBS) disclosed this yesterday in its Capital Importation report for Q3 2017.

At the Monetary Policy Committee (MPC) meeting held last week, Governor, Central Bank of Nigeria (CBN) stated that steady increase in the nation’s external reserve was due to rising investors’ confidence, which was also reflected in the $11 billion over-subscription of the $3 billion Eurobond issued last week, as well as the $18.7 billion turnover in the Investors and Exporters (I&E) window of the foreign exchange market.

This trend was reflected in the Q3 Capital importation report which showed capital importation rising past the $4 billion mark for the first time since 2015.

The report stated: “The total capital imported in the third quarter was recorded at $4,145.1 million, more than double the inflow in the second quarter of this year, representing an increased value of 147.5 percent on a year on year basis.

“This inflow of capital in Q3 2017 is the first time since the beginning of 2015 that capital hit over $4,000 million in a quarter. The boom in capital importation in Q3 2017 was mainly driven by significant growth in both Portfolio Investment and Other Investment.

“Portfolio Investment, which was recorded at $2,767.4 million in the third quarter of 2017, remained the largest component of capital import and contributed to 67 percent of the total amount. This component expanded faster than the other two main categories with a year on year growth rate of 200.7 percent.

Foreign Domestic Investment recorded $117.6 million which fell by 65.5 percent    year on year while Other Investment increased by 124.55 percent compared to 2016 Q3. Although Other Investment in 2017 Q3 more than doubled the value in the third quarter of 2016 from $516.2 million to $1,260.1 million, it remained about 30 percent of the total capital importation.

“The total amount of FDI during the quarter was recorded at $117.6 million, which declined by 57.14 percent compared to the previous quarter and 65.48 percent compared to 2016 Q3 due to the fall in both Equity and Other Capital investment.

This category of capital investment showed a surprising decrease in value when both Portfolio Investments and Other Investment grew strongly over the third quarter. Capital import in the form of Equity recorded $117.5 million and remained the majority of total FDI in the third quarter of 2017 while Other Capital fell from 0.3 to 0.13 million dollars from the second to the third quarter.

“Portfolio Investment in the third quarter more than tripled the figure of the second quarter of the same year, hitting $2,767.3 million. This figure was 200.7 percent    higher than the same quarter in 2016 which was recorded $920.32 million. The boom of Portfolio Investment was driven by strong growth of Equity and Bonds and a dramatic capital investment increase in the form of Money Market Instruments.

“Other Investment accounted for 30 percent of the total capital importation in the third quarter of 2017. This category of capital import also grew substantially by 124.55 percent year on year and by 68.58 percent quarter on quarter, although not as fast as Portfolio Investment. The $1,260.1 million Other Investment was mainly in the form of Loans, which hits $956.7 million in the third quarter. Other Claims also increased notably to $302.9 million.

“Share capital investment, which is closely related to Equity investment (FDI and Portfolio) was largely responsible for huge increase in capital importation during the quarter. The percentage of shares kept increasing since the first quarter of 2017 and by the third quarter it accounted for 66.24 percent of the total capital importation.

“In the third quarter of 2017, among the $4,145.1 million capital investment, $2,745 million was invested as shares. The amount of Shares investment grew by 324.86 percent year on year, largely exceeding the already impressive total capital importation growth rate (147.5 percent).”