Foreign Investors’ Confidence in Nigerian Economy Still Low—Report

By Modupe Gbadeyanka

On Tuesday, the National Bureau of Statistics (NBS) released figures of capital inflow into Nigeria in the first three months of 2019.

Though the capital importation data indicated that foreign investment into the country improved by 34.6 percent year-on-year to $8.5 billion in Q1 2019, bulk of this came from foreign portfolio investment (FPI), not foreign direct investment (FDI).

The difference these two is that while FDIs keep their money in the economy, FPI easily take their funds out whenever there is any panic button is pressed.

In its report, United Capital Research said though the rise in capital importation in Q1 2019 is something to rejoice about, the minute contribution FDIs made to the figures says a lot about their level of confidence in the Nigerian economy.

It was pointed out that the improvement in the capital inflow came despite the jitters that trailed the February general election and its eventual conduct in the period under review.

“As cheerful as this sounds, ‘the fleeting nature’ of the rebound is noticed in the details.

“A deeper dive into the numbers shows that across the three components of capital imported, Foreign Portfolio Inflows (FPIs) accounted for the bulk of expansion observed, surging 56.5% y/y to $7.1bn.

“Foreign Direct Investments (FDIs) and Other Investments remained subdued, sliding1.3% y/y and 26.5% y/y to $243.4mn and $1.1bn respectively.

“A deeper probe into the sections relay that foreign interests in Money Market Instruments surged 67.9% y/y to $5.9bn and single-handedly contributed 69.8% to total capital imported into the country, as carry traders continue to relish the mouth-watering return on government bills.

“Needless to say, the concentration of foreign investor’s interest in portfolio investment, more so,

money market instruments while much needed FDIs continue to languish says a lot about their level of confidence in the Nigerian economy.

“Hence, the need for the current administration to double down on efforts to buoy investor’s confidence and address structural challenges in the system among others concerns,” the report said.