Recently released data from the National Bureau of Statistics (NBS) showed that Nigeria’s capital importation moderated by 77.88%, quarter-onquarter, to USD1.29 billion in Q2 2020 (and fell on a yearly basis by 78.60%).
A breakdown of the Q2 2020 capital imports showed that Foreign Portfolio Investments (FPI), which accounted for
29.76% of the total inflow, declined q-o-q by 91.06% to USD0.39 billion (and fell 91.14% y-oy).
Similarly, Foreign Direct Investments (FDIs), which constituted 11.47%, registered a q-o-q decrease of 30.65% to USD0.15 billion (and fell by 33.41% y-o-y). Other investments (mainly comprised of Foreign Loans and other claims),
which constituted 58.77%, tanked q-o-q by 42.81% to USD0.76 billion (and fell by 48.60% y-o-y).
A more detailed analysis showed that capital inflows from Equities FPIs dipped by 91.68% q-o-q (and fell y-o-y by 89.30%) to USD0.06 billion in Q2 2020. While there were no FPIs investment in Bonds, investment inflows by FPIs in Money market instruments tumbled by 90.34% q-o-q (and tanked by 90.61% y-o-y) to USD0.33 billion in Q2 2020. Meanwhile, Foreign Loans rose by 29.69% q-o-q (but fell by 31.96% y-o-y) to USD0.73 billion in Q2 2020.
In another development, Purchasing Managers’ Index (PMI) survey report by Central Bank of Nigeria (CBN) showed that manufacturing and non-manufacturing sectors continued the gradual recovery from contractions as new orders increased. Specifically, the manufacturing composite PMI printed slower contraction to 48.5 points in August (from 44.9 in July) – the fourth consecutive contraction – as new orders index increased to 49.2 in August 2020 (from 43.10 in July 2020). This resulted in higher production as the production index rose to 49.2 (from 44.7).
Producers’ costs of production fell (input prices index moderated to 66.8 from 67.6) but did not really translate to lower selling price (output prices index fell to 58.4 from 58.5).
Supplies of raw materials to manufacturers slowed amid increasing demand from producers – supplier delivery time index fell to 53.0 in August (from 56.4 in July). Given the delay from supplier’s end, manufacturers stocked up raw materials – raw materials/work-in-progress index rose, to 46.1 from 43.2.
We saw stock of finished goods fall amid improvement in new orders – its index declined to 45.6 in August 2020 from 46.0 in July 2020. Notably, contraction in staffing levels in the manufacturing space slowed given the increase in production volume –
employment index rose to 44.6 points (from 40.0 points).
Meanwhile, the non-manufacturing sector also recorded slower contraction as its composite PMI rose to 44.7 points in August (from 43.3 points in July), chiefly on improved business activity – its index rose to 47.4 (from 46.1). Also, incoming business index rose to 44.0 from 43.4. Hence, employment index point increased, to 44.3 (from 41.1).
However, average price of inputs index rose to 53.5 points in August (from 50.9 index points in July). On the foreign scene, WTI crude plunged weekon- week by 3.38% to USD41.37 a barrel amid a 5.71% fall in US crude oil input to refineries to 13.87 mb/d as
at August 28, 2020 (it fell by 20.21% from 17.38 mb/d printed in August 30, 2019).
Similarly, Brent dipped by 3.38% to USD44.06 a barrel while Bonny Light fell by 4.87% to USD42.00 a barrel as at Thursday, September 3, 2020. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell w-o-w by
1.84% to 498.40 million barrels (but rose by 17.83% from 422.98 million barrels as at August 30, 2019)
The drop in capital importation to N1.29 billion was due to COVID-19 pandemic effect and the ridiculously low yield environment.
However, we expect equities FPIs to improve in Q3 2020 as economic activity picks amid further ease in lockdown. Notably, slower contraction in August PMIs signals an economic recovery is underway.