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HI’21: Total foreign capital flows decline 61.1% to $2.8bn

Foreign investors’ apathy towards Nigeria continued in H1’21 as total foreign capital flows stood at $2.8 billion, which translates to a 61.1 per  cent y/y decline compared to H1:2020 ($7.1 billion) according to Afrinvest report obtained by New Telegraph.

 

The Group Managing Director, Afrinvest West Africa, Ike Chioke, who stated this in Afrinvest’s 2021 Nigerian Banking Sector Report, themed: ‘Resilience Amidst Endemic and Pandemic Constraints,’ noted that “across the three investment flow channels – FDI, FPI, and other investments, we noticed synchronised moderation of 35.9 per cent, 67.5 per cent, and 51.1 per cent y/y respectively to $232.7 million, $1.5 billion, and S$1.0 billion.”

 

Chioke noted that although recent improvements in economic fundamentals and the yield environment had boosted growth outlook, yet “we believe foreign investors may remain on the side-line in the near term, given the lack of clarity on exchange rate policy.”

 

He noted that in over half a decade to 2020, foreign capital flows through Direct Investments (FDI), Portfolio Investments (FPI) and other investment grades (mainly loans & claims) emerged as the thirdlargest source of FX flows into Nigeria behind oil & gas (+$206 billion) and diaspora remittances (+$124 billion).

 

“According to the NBS, Nigeria attracted a total sum of $98.2 billion between 2014 and 2020 from foreign capital flows, with the highest inflow ($23.9 billion) in 2019. However, foreign capital flows contracted sharply by 59.2 per cent y/y in 2020 to S$9.7 billion.

 

“This was driven largely by a 68.6 per cent y/y decline in FPI to $5.1 billion, which over the observed period, accounted for 68.0 per cent of the total foreign capital inflows on average.

 

The trend in 2020 was a “flight-to-safety” by foreign investors as the spill-over effect from the pandemic weakened Nigeria’s macro-fundamentals including the interest and exchange rates.

 

“Besides, the inability of portfolio investors to repatriate over $2.0 billion in Q2:2020 due to FX liquidity management by CBN played a part in the contraction, as investors developed apathy for the Nigerian market,” he said.

 

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