Total capital importation to the country fell by a whopping 59.7 per cent year-on-year (y/y) from $23.9 billion in 2019 to $9.7 billion by the end of 2020, the Capital Importation Report for 2020 has revealed.
The disaggregated full year data shows that Foreign Portfolio Investment (FPI) was the largest source of capital import at $5.1 billion in 2020. Notwithstanding, FPI declined 68.6 per cent y/y to reach the weakest level since 2017.
“We attribute the weakness in FPI inflows to the bleak external conditions and Nigeria’s currency crisis which reduced investors’ participation”, said analysts at Afrinvest.
Also, capital import from Other Investments declined 47.5 per cent y/y to $3.5 billion from $6.7 billion, weakened by the 49.2 per cent y/y contraction in capital import from Loans.
Foreign Direct Investment (FDI) inflows was the only bright spot as it increased 10.1 per cent y/y, though still below 2014 level.
“We believe FDI weakness reflects the volatile macroeconomic environment and weak medium to long-term economic prospects. Going forward, we expect foreign investment to remain weak due to the weak prospects of an improvement in the external environment and the currency challenges”, said Afrinvest.
During the fourth quarter of 2020, total capital imported into Nigeria dropped 71.9 per cent y/y and 26.8 per cent quarter-on-quarter (q/q) to $1.0 billion, same level as recorded in the second quarter of 2016.
The q/q decline was across all the key components of the total imported capital excluding Other Investments which rose 22.5 per cent q/q to $783.3 million (-52.9 per cent y/y). FPI recorded the worst contraction on record, down 91.4% q/q and 98.1% y/y to $35.2m.
FDI was down 39.4 per cent q/q and 2.3 per cent y/y, with equity flows accounting for 99.0 per cent. The decline in capital importation is mainly attributed to the heightened risks brought by the COVID-19 which resulted in weak sentiment in emerging markets and foreign capital outflows.
