By Etuka Sunday
Data released by the National Bureau of Statistics (NBS) showed that the total capital imported in the third quarter stood at $4.1451 billion, more than double the inflow recorded in the second quarter of this year.
This, also show that the economy continue to recover from recession following its exit in the second quarter of 2017.
NBS said, the increase represents an increased value of 147.5% 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 billion in a quarter.
NBS Q3 report said, the boom in capital importation in Q3 2017 was mainly driven by significant growth in both Portfolio Investment and Other Investment.
Capital Importation by Type
Capital Importation is divided into three main investment types: Foreign Direct Investment (FDI), Portfolio Investment and Other Investments, each comprising various sub-categories.
Portfolio Investment, which was recorded at $2.767 billion in the third quarter of 2017, remained the largest component of capital import and contributed to 67% of the total amount.
This component expanded faster than the other two main categories with a year on year growth rate of 200.7%. Foreign Domestic Investment recorded $117.6 billion which fell by 65.5% year on year while Other Investment increased by 124.55% 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 billion, it remained about 30% of the total capital importation.
Foreign Direct Investment (FDI)
The total amount of FDI during the quarter was recorded at $117.6 million, which declined by 57.14% compared to the previous quarter and 65.48% 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 billion. This figure was 200.7% 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% of the total capital importation in the third quarter of 2017. This category of capital import also grew substantially by 124.55% year on year and by 68.58% quarter on quarter, although not as fast as Portfolio Investment.
The $1.260 billion 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.
Capital Importation by Sector
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% of the total capital importation.
In the third quarter of 2017, among the $4.1451 billion capital investment, $2.745 billion was invested as shares. The amount of Shares investment grew by 324.86% year on year, largely exceeding the already impressive total capital importation growth rate (147.5%).
The proportion of Shares compared to total value of capital importation over the previous quarters.
In the third quarter of 2017, Servicing became the leading sector which attracted the largest value of capital investment.
During the quarter 41.9% foreign capital was invested in servicing sectors, while only 16.07% of the $4145.1 million flowed to Oil and Gas sectors. Capital Investment to Oil and Gas sectors dropped from $190.39 in the second quarter of 2017 to only $16.07 in the third quarter while capital flow to Servicing sectors grew 303.24% quarter to quarter and 1505.95% year on year.
Capital is imported through financial institutions into the country. In the third quarter of 2017, the bank through which the highest share of capital was imported was Standard Chartered Bank, which accounted for 25.49% ($1,666.3 million) of the total share, up from the 18.7% share it recorded in the first quarter of the year.
This was followed by Access Bank, which accounted for 16.62% share or ($459.4 million) of capital importation, also grew from a share of 2.65% as recorded in the second quarter of the year. The top four banks—Standard Chartered Bank, Access Bank, Ecobank Nigeria, and Zenith Bank received over 67% of capital importation in the third quarter.
Other sectors that also recorded increase in capital investments include; IT, Agricultural and Drilling sectors also increased strongly compared to the same quarter last year. However, the absolute values to these sectors remained small.
Capital Importation by State
Lagos remained the state attracting most foreign capital in the third quarter of 2017. Lagos is the commercial and financial capital of Nigeria, and home to Nigeria’s Stock Exchange where shares are traded. As such, it accounted for most of the capital imported into the country ($3,297.0 million in Q3). The percentage dropped from 97.07% in the second quarter to 79.54% in the third quarter although the absolute amount was increasing substantially. This was because capital flow to Abuja (FCT) increased even faster and other states including Akwa Ibom, Edo, Ogun which also started attracting foreign capital investments.
Capital importation by country of origin
The country from which Nigeria imported the most capital was the United Kingdom, which accounted for $1736.58 million, or 41.89% of the total of capital inflow in 2017 Q3. This value represented a 149.26% increase in capital importation relative to the figure in the previous quarter, and a 58.22% growth over the same period in last year.
As well as the existence of an historical relationship between the UK and Nigeria, London (the capital of the UK) is also a key financial centre, which explains the high value of foreign capital was invested by the UK. Since 2010, the UK has accounted for the highest value of capital importation in all but two quarters (both in the second half of 2015).
The country accounting for the second largest value of capital importation was the United States.
Capital Importation by State
Lagos remained the state attracting most foreign capital in the third quarter of 2017. Lagos is the commercial and financial capital of Nigeria, and home to Nigeria’s Stock Exchange where shares are traded. As such, it accounted for most of the capital imported into the country ($3,297.0 million in Q3).
The percentage dropped from 97.07% in the second quarter to 79.54% in the third quarter although the absolute amount was increasing substantially. This was because capital flow to Abuja (FCT) increased even faster and other states including Akwa Ibom, Edo, and Ogun also started attracting foreign capital investments.
The US accounted for $962.1 million in the third quarter of 2017, or 23.21%. The US has also been one of the most important investors in Nigeria, usually either the largest or second largest investor country.
It also shares a language with Nigeria, it has also been historically the largest economy in the world, and is active in foreign investment globally.
The next two largest investors in the third quarter of 2017 were Tanzania (accounting for 7.61%) and Mauritius (5.53%).