Capital Flows to Nigeria Rebound to $3.4bn in Q1’24 with Surprising Upsides

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The latest report from the National Bureau of Statistics (NBS) revealed a significant rebound in capital importation into Nigeria, with inflows reaching $3.38 billion in the first quarter of 2024.

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This marks a 198.06% year-on-year increase from $1.13 billion in Q1 2023 and a 210.16% quarter-on-quarter rise from $1.09 billion in Q4 2023.

This surge represents the highest inflow since the pandemic peak of $5.85 billion in Q1 2020, driven by enhanced investor sentiment and confidence despite ongoing challenges with foreign exchange policies and currency devaluation.

Over the past sixteen quarters, Nigeria’s capital inflows have struggled to return to the pre-pandemic quarterly average of $5 billion, raising concerns and prompting a closer examination of the factors contributing to the downturn in foreign investment. Key issues include policies on foreign exchange liquidity and other macroeconomic challenges that continue to impede sustainable investment inflows.

The NBS report shows that portfolio investment was the largest component of capital inflows, totaling $2.08 billion and accounting for 61.48% of the total inflow. Investors were particularly drawn to the high-interest-rate environment, with money market instruments ($1.61 billion) and bonds ($420.8 million) becoming more attractive due to higher returns and a positive outlook for the fixed income market. In contrast, investment in equities saw a 77.8% year-on-year decline, despite a 355.7% quarter-on-quarter increase to $49.4 million.

During Q1 2024, the Central Bank of Nigeria’s Monetary Policy Committee raised the benchmark interest rate by 600 basis points to 24.75%, up from 18.75% in 2023. This decision was aimed at curbing inflation amidst expectations of liquidity injections into the economy from policy developments. As a result, rising interest rates made fixed income and money market instruments more attractive to investors. Meanwhile, the equities market experienced a historic 39.8% gain due to robust corporate earnings, dividend declarations, government-led market reforms, and heightened interest from both domestic and foreign investors.

The “Other Investments” category ranked second among the broad categories with $1.18 billion worth of inflows, representing 35% of the total. This was driven by a remarkable 66,806% year-on-year increase in other claims and a 165.3% year-on-year rise in total loans to $30.1 million. Conversely, currency deposits plummeted by 100% year-on-year from $1.84 million, despite a 98.6% increase from the previous quarter. Foreign direct investment (FDI) in Q1 2024 rose by 150.4% year-on-year to $119.2 million but declined by 35.2% from the previous quarter.

The top source of capital inflows was the United Kingdom, contributing $1.81 billion, followed by South Africa ($582.3 million), Cayman Islands ($186.2 million), Mauritius ($179.6 million), and the United Arab Emirates ($101.8 million). Lagos remained the leading destination for investment, attracting $2.78 billion or 82.4% of the total inflow, followed by Abuja with $593.6 million and Ekiti state with $100,000, as investors continued to avoid other regions due to limited investment prospects.

The NBS also highlighted that the banking sector recorded the highest inflow with $2.07 billion, representing 61.24% of total capital imported in Q1 2024. The trading sector followed with $494.93 million (14.66%), and the production/manufacturing sector with $191.92 million (5.68%). Conversely, the oil and gas and drilling sectors saw minimal to no investment, while the marketing, consultancy, and construction sectors received $60,000, $300,000, and $610,000, respectively.

The rebound in total capital inflow to pre-pandemic levels is a positive sign, indicating an improvement in investor confidence. This trend necessitates vigilant monitoring and potential policy adjustments. Nigeria’s economic growth prospects and market potential during the period played a crucial role in attracting investors seeking profitable opportunities amidst sound fiscal and monetary policies and regulatory reforms.

Godwin Okafor, The Naija247news
Godwin Okafor, The Naija247newshttps://naija247news.com
Godwin Okafor is a veteran Financial Journalist, Internet Social Entrepreneur, and the visionary Founder of Naija247news Media Limited. With an extensive career spanning over 16 years in financial journalism, Godwin possesses a wealth of experience that seamlessly bridges both traditional and digital media landscapes. His journey in journalism commenced at Business Day, Nigeria, where he laid the foundation for his prolific career. In 2010, Godwin took a bold step by founding Naija247news Media, a platform that has since become a prominent player in delivering timely and accurate news. Educationally, Godwin Okafor holds a Bachelor's degree in Industrial Relations and Personnel Management from the prestigious Lagos State University, Ojo, Lagos. His commitment to continuous learning led him to the Lagos Business School, where he further honed his skills. Additionally, he is recognized as a Fellow of the University of Pennsylvania, having successfully completed the Wharton Seminar for Business Journalists. Throughout his illustrious career, Godwin has earned acclaim by winning numerous journalism awards, a testament to his dedication to excellence in reporting. Beyond his role as a Financial Journalist, Godwin Okafor wears the hat of the Chairman at Emmerich Resources Limited, the publishing entity behind Naija247news. His visionary leadership has played a pivotal role in shaping the media landscape and establishing Naija247news as a trusted source of information. Godwin Okafor's multifaceted expertise, commitment to journalistic integrity, and leadership in the realm of business journalism underscore his influential presence in both the media and entrepreneurial spheres.

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