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Nigeria’s Capital Importation Declines by 30.6% Year-on-Year

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Naira Dollar Exchange Rate - Investors King

The National Bureau of Statistics (NBS) has released its latest report on capital importation for Q4 ’21. The data was obtained from the CBN and compiled using information on banking transactions from all registered financial institutions in Nigeria. The total value of capital imported in Q4 ‘21 was estimated at USD2.2bn, representing a rise of 26.4% q/q and 109.3% y/y. However, for FY ‘21, the total value of capital imported was estimated at USD6.7bn, representing a decline of 30.6%y/y from USD9.7bn recorded in 2020.

The capital importation data is gross, and not adjusted for capital exports. The category referred to as portfolio investment accounted for 29.4% and 50.5% of capital importation in Q4’21 and FY’21 respectively. Portfolio investments recorded a decline of 47.2% q/q to USD642.9m in Q4 ’21. For FY ’21, it declined by 34.1% y/y to USD3.4bn in 2021.

In Q4 ‘21, money market instruments accounted for 86.9% (USD558.9m) of total portfolio investments but declined by 29.8% q/q from USD795.7m recorded in Q3 ’21. For FY ’21, it accounted for 77.2% (USD2.6bn) of total portfolio investments. However, this is a 37% decline from the USD4.2bn recorded in 2020.

Similar to Q1, Q2, and Q3, there was relatively lower contribution from bonds to portfolio investments in Q4. Bonds contributed 7.1% (USD45.9) to total portfolio investments but declined by 87.4% q/q. For FY ’21, it accounted for 16.7% (USD564.1m) of portfolio investments and this was a y/y increase of 144% from the USD231m recorded in 2020.

Based on the data release, inflow via equities was low in Q4. This asset class accounted for just 5.9% (USD38m) of total portfolio investments. Equities segment declined by -32.7% q/q for Q4 ’21 and -72.6% y/y for FY ’21. The NGX All Share Index (ASI) posted a positive return of 6.1% for FY ’21. Data from NGX show the ratio of local to foreign investment participation at 81:19 in December ‘21.

Foreign direct investment (FDI) inflow grew by 232.3% q/q to USD358.2m in Q4 ’21 but posted a y/y decline of -65.1%. FDI inflow accounted for only 16.4% of capital importation in Q4 ’21 and 10.4% in FY ‘21. Strengthening institutional infrastructure and governance will play a critical role in attracting FDI.

From the data release, we noticed that from a sectorial perspective, capital importation into tanning recorded the highest inflow of USD645.6m, accounting for 29.5% of total capital imported in Q4 ‘21. Total foreign capital inflows into the sector totalled USD1m between Q1 ’13 – Q3 ’21.

Prior to Q4 ‘21, the relatively poor inflow into the sector could be attributed to infrastructural challenges, resulting in reduced competitiveness of domestic products. This has partly led to dumping into local markets from advanced economies across Asia and Europe. Capital inflow into the production sector and electricals sector followed with USD360.1m (16.5%) and USD325.6m (14.9%) respectively.

For FY ’21, capital imported into the banking sector was the largest at USD1.5bn and accounted for 21.8% of total capital imported in 2021. Meanwhile, capital importation by country of origin show that Mauritius ranked top as a source of capital imported into Nigeria in Q4 ‘21 with a value of USD611.5m, accounting for 27.9% of total capital inflows during the period. We note that capital inflow from the United States and South Africa followed with USD321.0m (14.7%) and USD285.8m (13.1%) respectively. For FY ’21, the largest capital inflow came from the United Kingdom with USD2.3bn and accounted for 34.2% of total capital imported in 2021.

Overall, the decline in capital importation in 2021, can be attributed to national security challenges, inadequate infrastructure and elevated headline inflation rate resulting in relatively lower real yields.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Federal Government Halts Cooking Gas Export to Lower Local Prices

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cooking gas cylinder

In a bid to stabilize domestic prices and meet rising demand for cooking gas within Nigeria, the Federal Government has announced a temporary halt on the exportation of Liquefied Petroleum Gas (LPG), commonly known as cooking gas.

This decision follows a significant surge in the cost of cooking gas, which has placed a strain on consumers across the country.

According to reports, the halt in LPG export aims to increase the availability of the commodity within Nigeria’s borders, thereby reducing its local price.

The move is part of broader efforts to address the challenges faced by consumers grappling with the high cost of living.

In recent years, the demand for cooking gas has steadily increased in Nigeria, driven by urbanization, population growth, and a shift towards cleaner energy sources.

However, despite being a major producer of LPG, Nigeria has struggled to meet its domestic demand due to insufficient local production and distribution infrastructure.

Data from the Nigerian Midstream Downstream Petroleum Regulatory Authority reveals that while the total consumption of cooking gas in Nigeria has been on the rise, the country has relied heavily on imports to bridge the supply gap.

The recent decision by the government underscores its commitment to prioritizing the domestic market and ensuring that Nigerians have access to affordable cooking gas.

Consumers have been grappling with escalating prices, with reports indicating a significant increase in the cost of refilling a 12.5kg cylinder of cooking gas in major cities like Abuja, Lagos, and Kano.

The decision to halt LPG exports signals a proactive measure by the government to mitigate the adverse effects of rising prices and alleviate the financial burden on households across the nation.

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Economy

Manufacturing Sector Records 7.70% Quarter-on-Quarter Growth in Q4 2023

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German manufacturing

In the fourth quarter of 2023, Nigeria’s manufacturing sector grew by 7.70% year-on-year, according to the National Bureau of Statistics (NBS).

The surge in growth reflects a significant uptick from the preceding quarter and underscores the resilience of the manufacturing industry amid economic challenges.

This growth trajectory indicates positive momentum and signals potential opportunities for economic recovery and development.

The manufacturing sector, comprising thirteen key activities ranging from oil refining to motor vehicles and assembly, demonstrated notable dynamism across various subsectors.

This growth surge is attributed to increased production, enhanced operational efficiencies, and strategic investments across the manufacturing value chain.

Despite facing headwinds such as supply chain disruptions and regulatory uncertainties, the sector’s robust performance underscores its pivotal role in driving economic diversification, job creation, and industrialization efforts in Nigeria.

Moving forward, sustaining this growth momentum will require continued policy support, investment in infrastructure, and efforts to address key bottlenecks hindering the sector’s expansion.

By fostering an enabling business environment and promoting innovation and technology adoption, Nigeria’s manufacturing sector can further catalyze inclusive economic growth and contribute significantly to the nation’s development agenda.

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Economy

Nigeria’s GDP Grows by 3.46% in Q4 2023, Driven by Services

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Nigeria’s Gross Domestic Product (GDP) grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, according to data released by the National Bureau of Statistics (NBS).

The GDP expansion though slightly lower than the 3.52% recorded in the same period of 2022, reflects a positive trajectory for the Nigerian economy amid ongoing challenges.

The growth rate surpassed the 2.54% recorded in the preceding quarter, indicating a rebound in economic activity.

The services sector emerged as the key driver of growth expanding by 3.98% and contributing 56.55% to the overall GDP.

This sector’s resilience underscores its pivotal role in Nigeria’s economic landscape, encompassing diverse industries such as telecommunications, finance, and real estate.

Also, the agriculture sector experienced growth, expanding by 2.10% compared to the same period in 2022.

Meanwhile, the industry sector recorded a notable improvement, growing by 3.86%, a stark contrast to the -0.94% contraction observed in the fourth quarter of 2022.

On an annual basis, Nigeria’s GDP expanded by 2.74% in 2023 compared to 3.10% in the previous year, reflecting sustained but moderated growth.

The positive trajectory in GDP growth reflects resilience in the face of various economic challenges.

However, sustaining and accelerating growth will require continued efforts to address structural bottlenecks, foster investment, and promote inclusive economic policies across sectors.

Nigeria’s Oil Sector Growth

During the fourth quarter of 2023, Nigeria’s oil sector posted a real growth rate of 12.11% year-on-year, signifying a significant improvement from previous periods.

This was driven by the surge in average daily oil production to 1.55 million barrels per day (mbpd), a positive shift in the sector’s performance.

Despite challenges such as global market fluctuations and production constraints, the oil sector contributed 4.70% to the nation’s total real GDP in Q4 2023.

Nigeria’s Non-Oil Sector

Nigeria’s non-oil sector sustained growth momentum, posting a 3.07% real growth rate in Q4 2023.

This growth was primarily attributed to key industries including finance, telecommunications, agriculture, manufacturing, and construction.

Accounting for 95.30% of the nation’s GDP in the same quarter, the non-oil sector continues to drive economic diversification efforts and reduce dependence on oil revenues.

Despite facing challenges, such as infrastructure deficits and regulatory bottlenecks, the sector’s resilience underscores its pivotal role in fostering sustainable economic development and inclusive growth agendas.

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