Anxiety as Capital Inflow drops 79% to $1.29bn in Q2

Admin 04-Sep-2020 Business

Anxiety as Capital Inflow drops 79% to $1.29bn in Q2

There is anxiety among analysts as to the prospect of economic recovery and overall growth trajectory as foreign investors shy away from the Nigerian economy.

The concern mount as data shows that foreign inflow into the economy dropped by about 79% in the second quarter of fiscal year 2020 to USD1.29 billion.

As a result, Analysts are expressing concern over level of foreign currency needed to support Naira as international flight sets to resume.

Low foreign investment into the economy, according to analysts, would raise balance of payment challenges.

Currently, the nation’s external reserve valued at below $36 billion covers just 4.7 months of import bills. 

Meanwhile, the apex bank is planning a weekly foreign exchange intervention sales to Bureau De Change in order to stem widening gap between official and parallel market FX rates.Anxiety as Capital Inflow drops 79% to $1.29bn in Q2

Unfortunately, foreign investors are not savouring government instrument due to low return, trending below average inflation rate charts.

Data from the National Bureau of Statistics shows that total value of capital inflows in the second quarter of 2020 settled at USD1.29 billion.

Comparing with the equivalent period in 2019, this translates to 78.60% decline from Q2:2019. On quarter on quarter basis, inflow into the Nigerian economy declined 77.88% from Q1:2020. 

Strikingly, analysts at Meristem Securities said these figures represent the lowest levels of capital inflows in over twelve quarters since the economy exited recession.

Meristem said in a note that a marked drop in Foreign Portfolio Investment (FPI) by 91.14% year on year or 91.06% quarter on quarter, to USD385.32 million was largely responsible for this decline.

In similar fashion, Foreign Direct Investment (FDI) fell by 33.41% or 30.65% quarter on quarter to USD148.59 million.

Meanwhile other investment inflows dipped by 48.60% year on year or 42.81% quarter on quarter to USD761.03 million.

Meristem stated that this significant decline in capital inflows have exacerbated balance of payment challenges, sparking a continuous decline in external reserves and a dearth of FX liquidity, given the CBN’s managed float FX regime.

Anxiety as Capital Inflow drops 79% to $1.29bn in Q2

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