Stanbic IBTC Bank Plc has received the highest capital into Nigeria in the third quarter (Q3) of 2023 with $222.84 million (34.04 percent), followed by Citibank Nigeria Limited with $190.03 million (29.03 percent) and Zenith Bank Plc with $83.04 (12.68 percent).
This according to analysts, underscores the role of Nigeria’s banking institutions in attracting foreign investments and also driving economic growth.
The most recent update on capital importation published by the National Bureau of Statistics (NBS) shows that in the third quarter of 2023, Nigeria witnessed a substantial decline in capital importation, a noteworthy 36.45 percent decrease from the preceding quarter, amounting to $654.65 million.
This downward trend also marked a 43.55 percent reduction compared to the same period in the previous year when capital importation stood at $1.16 billion.
Capital importation inflow into Nigeria’s economy has failed to rebound to the pre-pandemic quarterly average of N5 billion.
Although, this decline according to analysts from Cory Assets Management Limited, signals significant fall across the three broad categories in the third quarter, it raises concerns and prompts a closer examination of the factors contributing to this significant downturn in foreign investment into the economy.
Also, the concerns have continued to hover around policies on foreign exchange liquidity as well as other macroeconomic challenges that are likely to continue to hamper the sustainable inflow of investments.
Breaking down the categories of capital importation, the majority was attributed to Other Investment, constituting 77.56 percent or $507.77 million of the total inflow during the quarter, followed by Portfolio Investment at 13.31 percent or $87.11 million, and Foreign Direct Investment (FDI) at 9.13 percent which is equivalent to $59.77 million.
This breakdown suggests a prevailing inclination towards short-term investments and debt instruments, while Foreign Direct Investment (FDI) remains relatively subdued.
Analyzing the sectoral distribution of the capital inflows into Nigeria, Cowry Assets Management Limited said, provides broad insights into the areas that foreign investors find most promising within the Nigerian economic landscape.
According to the firm, for context, the production/manufacturing sector emerged as the most attractive, garnering 42.70 percent ($279.51 million) of the total capital, signaling potential for economic diversification.
Financing secured the second-largest share at 19.54 percent valued at $127.93 million, followed by shares at 13.06 percent or $85.49 million.
“Geographically, we analyzed based on sources and saw that the Netherlands emerged as the primary source of foreign capital, contributing $175.62 million or 26.83 percent, indicating its significant role in financing trade and investments in Nigeria.
“Singapore and the United States followed in the pecking order with capital inflows worth $79.15 million and $67.04 million or shares of 12.09percebt and 10.24percent, respectively. These underscore the interconnectedness of the global economy and the sources from which Nigeria attracts foreign capital during the period, “it stated.
Delving into the destination of these investments, Lagos maintained its position as a top destination of foreign investment, capturing $308.83 million or 47.18percent of the total capital inflow.
Lagos’s dominance as a destination highlights its pivotal role as a financial and economic hub within the economy of Nigeria. Abuja (FCT) and Abia followed with shares of 29.73 percent and 22.93 percent valued at $194.66 million and $150.09 million, respectively.
According to the analysts, the declining trend in capital importation as well as the failure to rebound to the pre-pandemic era paints a picture of concern.
While the decline in capital importation is concerning, it is imperative to contextualise it within broader global economic trends and Nigeria’s specific challenges, such as security concerns.
The NBS report also sheds light on positive aspects, including a focus on the production/manufacturing sector and the diversification of investment sources.
Going forward, analysts believe that addressing security challenges, implementing economic reforms, and actively attracting long-term FDI will be paramount to rejuvenating capital inflows and fostering sustained economic growth in Nigeria.
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