Foreign Direct Investment Into Nigeria Shrinks to $669m in 2016Foreign Direct Investment Into Nigeria Shrinks to $669m

Foreign Direct Investment Into Nigeria Shrinks to $669m in 2016

The level of investment inflow into Nigeria suffered a huge decline of $4.51bn from the $8.08bn in the first nine months of 2015 to $3.57bn in 2016

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Foreign Direct Investment Into Nigeria Shrinks

The level of investment inflow into Nigeria suffered a huge decline of $4.51bn from the $8.08bn in the first nine months of 2015 to $3.57bn in the same period of 2016 according to the capital importation report of the National Bureau of Statistics.

The report showed that the 55.2 per cent drop in investment was due to the harsh economic climate.
A breakdown of the inflow showed that $710m investment was indicated in Q1 2016, while the Q2 and Q3 had $1.04bn and $1.82bn, respectively.

These are against the $2.67bn, $2.66bn and $2.74bn recorded in the corresponding periods of 2015.
The reason the report attributed to the huge decline in capital importation is the challenging period that the Nigerian economy was going through due to fall in crude oil prices.

Investor Sentiments

Investors may be concerned about whether or not they will be able to repatriate the earnings from their investments, given the current controls on the exchange rate and this may affect the profitability of such investments.

The composition of the investment inflow showed that the largest component of capital importation in the nine-month period was portfolio investment, attracting $1.52bn.

Other investments attracted $1.35bn, and foreign direct investment into Nigeria, $699.39m.
The $1.52bn portfolio investment was broken down into equity accounting for $682.6m; bonds, $370.5m; and money market instruments, $475.55m.

The relatively strong growth in portfolio investment implied that it regained its position as the largest investment type, and it accounted for 50.51 per cent in Q3 2016, compared to 18.69 per cent and 30.80 per cent for other investments and the foreign direct investment into Nigeria, respectively.

Year-on-year (YoY) growth rates remained negative; the foreign direct investment into Nigeria, portfolio and other investments declined by 52.54 per cent, 8.80 per cent and 45.05 per cent, respectively compared to the third quarter of 2015.

Regarding foreign direct investment and other investments, however, the decline was partly the result of a base effect, as there was a spike in the value of the FDI equity in the third quarter of 2015.

Notwithstanding, it is also a possibility that the weaker growth in the economy in the first half of 2016 has had an impact on the value of capital importation.

– National Bureau of Statistics

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