Further decline in capital imports

The NBS recently released its latest report on Nigerian Capital Importation, which covers Q4 2016. The data was obtained from the CBN and compiled using information on banking transactions. The total value of capital imported into Nigeria in Q4 2016 was estimated at US$1.5bn, representing declines of 15% q/q and 0.5% y/y. Monthly imports within the quarter were relatively constant although December recorded marginally the highest level (of US$555m).

On an annual basis, capital importation fell by 47% from US$9.6bn recorded in 2015 to US$5.1bn. We gather that this is the lowest level since the inception of the series in 2007.

By type of investment, portfolio transactions were the smallest component of imported capital, at US$284m (18% of the total). Within this category, equity investment totaled US$176m.

By sector, telecommunications imported the largest share of capital, at US$554m. This represented 36% of the total, followed by the oil and gas sector, at US$327m (see chart below).

Generally portfolio investors tend to shy away from volatile markets because of the potential risks, notably the low returns and high transaction costs associated with exchange-rate uncertainty. Delayed repatriations have become a Nigeria-specific disincentive.


Further decline in capital imports Sources: CBN; FBNQuest Research

Feedback from portfolio investors in one jurisdiction tells us that a devaluation and bona fide two-way trading are the minimum conditions for re-entry.

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