In today’s chart we highlight the investment flows on the balance of payments. These are gross flows (ie those in the reporting economy before investment by Nigerian residents offshore). Most striking is the strength of portfolio flows in H1 2013, when Nigeria was still basking in the glow of its inclusion in the JP Morgan government bond indices (since withdrawn). These have fallen dramatically since the slide in the oil price in mid-2014 and the resulting fx scarcity (since cured).
Direct investment picked up from US$3.1bn to US$4.5bn in 2016, equivalent to 4.4% of GDP. If Nigeria is to rise up the league table of world economies, it will have to do much better. China, which is not the most appropriate measure, regularly achieved double-digit ratios in its surge to become the second largest global economy.
The short-term prospects are better for the two other components. The Eurobond issuance, we assume, explains the improvement in other investment in Q1 2017, and is likely to be repeated. The launch of the NAFEX window by the CBN in late April augurs well for portfolio investment.
When we adjust for the assets on the capital account (Nigerian investment offshore) in Q1, all three components are still positive on a net basis: direct investment of US$530m, portfolio investment of US$440m and other investment of US$740m.
We have focused on the investment components because they tell a story. For the record, the broader picture in Q1 2017 shows a current-account surplus of US$2.91bn, a capital/financial-account deficit including the movement in reserves of –US$1.28bn, and net errors and omissions (negative) of –US$1.63bn. The last item is subject to above-average revision.