Research Document: NESG 2022 Q2 Capital Importation Alert, September 2022

Posted Mon, Sep 5, 2022 9:40 PM

Overall Investment inflows into Nigeria jumped by 71 percent in 2022 Q2

According to the National Bureau of Statistics (NBS), foreign investment inflows into Nigeria rose sharply by 71.3 percent (year-on-year) to US$1.5 billion in the second quarter of 2022 from US$875.6 million in the corresponding period of 2021 (see Figure 1). However, the overall investment inflows dropped by 6.3 percent (quarter-onquarter) relative to US$1.6 billion recorded in the first quarter of 2022. In the first half of 2022 (H1’2022), foreign investment inflows stood at US$3.1 billion, representing a 10.7 percent increase when compared with US$2.8 billion recorded in the first half of 2021 (H1’2021).

The improvement in foreign investment inflows in 2022 Q2 was driven by increases in all its components, including foreign portfolio investment (FPI), foreign direct investment (FDI) and the “other investments” category (OIC). Meanwhile, Nigeria’s capital importation profile shifted towards OIC from FPI, with the former and the latter accounting, respectively, for 41 percent and 49 percent of the total foreign investment inflows in 2022 Q2, compared with 28 percent and 63 percent, respectively, in 2021 Q2 (see Figures 2a and 2b). In addition, the share of FDI inflows rose slightly to 10 percent in 2022 Q2 from 9 percent in 2022 Q1.

FPI inflows spiked by 74 percent year-on-year in 2022Q2

Total FPI inflows in 2022 Q2 stood at US$757.3 million, 37.3 percent above its level in 2021 Q2 (US$551.4 million). However, the current FPI inflows represent a decline of 20.9 percent when compared with US$957.6 million recorded in 2022 Q1 (see Figure 3). FPI inflows stood at US$1.7 billion in H1’2022, 13.3 percent higher than their level in H1’2021 (US$1.5 billion). A further breakdown of the FPI shows improved foreign participation in Nigeria’s bond market. However, the involvement of foreign investors in the equity and money markets was low in the quarter. According to the Nigerian Stock Exchange, foreign participation in the Bourse fell to 18 percent in 2022 Q2 from 11 percent in 2021 Q2.