Nigeria’s Capital Importation Drops 48.21% in Q3

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  • Nigeria’s Capital Importation Drops 48.21% in Q3

Harsh economic condition and growing uncertainties continued to impact investors’ interest in the Nigerian economy.

The total value of capital importation into the Nigerian economy dropped by 48.21 percent from the second quarter to $2,855.21 billion in the third quarter of 2018. A 31.12 percent decrease when compared to the same quarter of 2017, the National Bureau of Statistics reported.

Portfolio investment received the largest amount of capital importation, $1,723.05 billion or 60.5 percent during the quarter, followed by the category called other Investment, which accounted for $601.53 billion or 21.07 percent of the total fund imported. The remaining $530.63 billion or 18.58 percent of the total capital importation goes to Foreign Direct Investment (FDI).

Equity investment (FDI and Portfolio Investment) dominated the Q3 2018 capital importation, receiving $1,667.76 billion of the total fund.s

The United States tops the list of capital investment in Nigeria during the third quarter, investing 31.91 percent or $911.33 million of the total capital inflow.

Nigeria’s capital inflow plunged following surged in interest rates in developed economies that rendered Central Bank’s 14 per cent rate unattractive to foreign investors due to high risk associated with emerging economies.

However, analysis has shown that foreign inflows into emerging economies like Nigeria may start picking up in 2019 as the U.S. Federal Reserve is likely to slow down on rate hike.

Still, experts believe the Nigerian nation may not really benefit from the projected capital outflow from the U.S. due to the uncertainty surrounding the forthcoming national election and the nation overexposed to crude oil.

With global oil demand predicted to fall in 2019 and price expected to trade lower than 2018, revenue generation is expected to drop in 2019. Meaning, it will take high-interest rate to lure foreign investors that are more likely to jump into Euro-area after European Central Bank announced it will put an end to asset buying program in January 2019 and may commence rate hike.

Despite the economy growing at 1.81 per cent in Q3, 2018, the unemployment remained high, jumping to 23.1 per cent from 18.8 percent with more 9 million unemployed people. Suggesting that businesses are not expanding to absorb job seekers.

Similarly, inflation rate tick higher from 11.26 percent to 11.28 per cent in November, indicating rising price pressure.

The central bank will need to sustain capital inflow to offset the possible drop in oil revenue in order to sustain the foreign exchange market in 2019.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: samed@investorsking.com.

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