Nigeria’s Investment Flows Need Major Lift—FBNQuest

By Modupe Gbadeyanka

Analysts at FBNQuest Research have disclosed that investment flows into Nigeria need a major lift.

In its daily Good Morning Nigeria posts, the FBNQuest Research said data released recently by the National Bureau of Statistics (NBS) showed that direct, portfolio and other investment were again positive in the second quarter of this year.

Investment flows are gross flows (ie those in the reporting economy before investment by Nigerian residents offshore).

According to a chart released by the agency, portfolio flows peaked above $4 billion in Q2 2013, when Nigeria was still basking in the glow of its inclusion in the JP Morgan indices for local currency, emerging sovereign debt.

Direct investment in 2016 amounted to $4.5 billion, equivalent to 1.1 percent of GDP. This is pitifully low. The numerous structural flaws in the economy and the investment climate are barriers for the direct investor although they are not always the preoccupation of the offshore portfolio community.

“The short-term prospects are better for the two other components. The Eurobond issuance, we assume, explains the improvement in other investment in Q1 2017, and is set to be repeated this quarter. We should shortly see the impact of the NAFEX experiment on portfolio investment.

“When we adjust for the assets on the capital account (Nigerian investment offshore) in Q2, all three components remain positive on a net basis: direct investment of $580 million, portfolio investment of $1.48 billion and other investment of $2.58 billion,” FBNQuest Research said.

It added that, “We focus on the investment components because they provide a narrative. For the record, the broader picture in Q2 2017 shows a current-account surplus of $1.41 billion, a capital/financial-account surplus including the movement in reserves of $4.34 billion, and net errors and omissions (negative) of –$5.75 billion.

“The last item, which is effectively the balancing item, is often revised: an outflow of – $1.63 billion in Q1 is now shown as – $4.09 billion.

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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