The National Bureau of Statistics (NBS) has released its latest report on capital importation for Q1 ’22. 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 Q1 ‘22 was estimated at USD1.6bn, representing a decline of 28% q/q and 17.5% y/y. The capital importation data is gross, and not adjusted for capital exports.
The category referred to as portfolio investment accounted for the largest share (60.9%) of total capital importation in Q1 ’22. On a q/q basis, portfolio investment increased by 49% in Q1. Money market instruments accounted for 64% of total portfolio investments and increased by 10% q/q.
Coronation Merchant Bank partly attributed the q/q increase to investors seeking safe short-term instruments. Meanwhile, bonds accounted for 32% of total portfolio investments, increasing by 575% q/q and 124% y/y.
Demand for equities was relatively low in Q1 ‘22. This asset class accounted for 3% (USD31.8bn) of total portfolio investments. Data from NGX show the ratio of local to foreign investment participation at 81:19 in Q1 ‘22. We note that the NGX-ASI posted a positive return of 10% in Q1 ’22.
In the quarter under review, foreign direct investment inflow declined by -57% q/q to USD155m. On a y/y basis, there was a marginal increase. There has been a downward trend in greenfield investment projects. Given the direct correlation with investment attractiveness, ease of doing business and FDI flows, reforms that improve national security, reduce the country’s infrastructure deficit, and support a conducive business environment are critical.
China and Singapore were able to boost their respective FDI and facilitate economic transformation by providing value-add via affordable and skilled labour. Through reforms, South Korea deliberately created a motivated and educated populace in addition to spurring their country’s technological boom, these attracted increased FDI.
The FGN’s commitment to improve Nigeria’s ease of doing business ranking from 131 to 100 by 2025, is laudable. However, this requires well-targeted capital expenses as well as proper fiscal discipline. FDI inflow accounted for only 10% of total capital importation in Q1 ’22.
From a sector perspective, the banking sector received the highest inflow (USD819m) in Q1, accounting for52%of total capital importation. The second-largest recipient was production (USD224m), which we assuming falls under the manufacturing sector.
Capital importation by country of origin shows that the United Kingdom was the top source of capital imported in Q1with a value of USD1bn, accounting for 65% of total capital inflow during the period. This was followed by South Africa (USD118m) and the United States (USD82m).
At its last meeting held in May, the MPC/CBN hiked the monetary policy rate by 150bps to 13%. This is in an attempt to provide incentives for foreign capital inflow. In addition to moderating the speed of capital flow reversal, ease inflationary pressure and exchange rate depreciation, among others. This could attract investments into the domestic fixed income market. However, given that central banks across advanced economies are tilting towards tightening this year, a slowdown in capital inflow to emerging markets, notably Nigeria is likely.
Based on trading activities to date this quarter, we expect the Q2 report when published to show a further decline in inflows from portfolio investments.
This projected underperformance can be partly linked to fx repatriation concerns, flight to safety following interests rate hikes by policies makers globally, political uncertainty and the lingering conflict between Russia and Ukraine.
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Nigeria’s Presidential CNG Initiative Allocates N100bn for CNG Buses and EV Adoption
The Presidential Compressed Natural Gas (CNG) Initiative has allocated N100 billion to expedite the deployment of CNG buses nationwide, according to a statement released on Wednesday.
The initiative, designed to catalyze an Auto-gas and Electric Vehicle (EV) revolution in mass transit and transportation, aims to enhance sustainability and cost-effectiveness.
The statement revealed that the fund would be instrumental in supporting the adoption of auto-gas and electric vehicles, signaling a commitment to a more sustainable and economical future in the transportation sector.
The Presidential CNG Initiative plans to leverage over 11,500 CNG and electric-fueled vehicles, along with the deployment of 55,000 conversion kits.
This strategic approach is intended to reduce transportation costs for Nigerians and mitigate the challenges posed by the rising cost of living.
Under the Renewed Hope Agenda, the Presidential CNG Initiative is dedicated to realizing the President’s vision, guided by its steering committee led by FIRS Chairman Zacch Adedeji.
The statement highlighted recent achievements, including strategic technical partnerships and the ongoing commissioning of CNG Conversion centers in key states such as Lagos, Abuja, Kaduna, Ogun, and Rivers.
Several more centers are slated for commissioning in the coming weeks, reflecting the initiative’s momentum and commitment to achieving its objectives.
Nigeria’s Power Transformation: 53 Projects Worth N122bn on Track for May 2024 Completion
The Central Bank of Nigeria (CBN), in collaboration with the Transmission Company of Nigeria (TCN) and power distribution companies, is set to complete 53 power projects by May next year.
Valued at N122 billion, these projects aim to add over 1,000 megawatts to TCN’s wheeling capacity.
During a recent tour of three ongoing projects in Lagos, TCN’s Programme Coordinator, Mathew Ajibade, assured that the projects were not abandoned, refuting speculations.
He confirmed that work is progressing smoothly and is expected to be completed by May 2024, as initially planned.
Assistant Director/Head of Infrastructure Finance Office at the CBN, Tumba Tijani, highlighted the CBN’s support for the power sector, revealing that the bank released a loan at a 9% interest rate in August last year for the projects.
The funding, part of the Nigeria Electricity Market Stabilisation Facility-3, amounts to N122,289,344 and aims to address transmission/distribution bottlenecks, enhance supply to end-users, and unlock unutilized generation capacity.
Tijani disclosed that N85.43 billion has been disbursed into the Advance Payment Guarantee account of the 53 contractors responsible for executing the projects.
The comprehensive project list includes the delivery of power transformers, re-conductoring existing transmission lines, upgrading existing substations, and constructing 33KV line bays.
The initiative reflects a concerted effort to enhance Nigeria’s power infrastructure and meet growing energy demands.
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