06 July 2018 ( Lagos ) :The financial account in the balance-of-payments (BoP) for Q1 2018 highlights the attraction of Nigeria to foreign portfolio investors (FPIs). Their gross inflows (ie before investment by Nigerian residents offshore) rose from US$3.79bn the previous quarter to US$5.14bn, the highest since Q1 2013 when Nigeria had been put on the radar screen for the first time for fixed-income players by the JP Morgan listing. They were however second to other investment of US$6.64bn in Q1, which may be viewed as the balancing item.
Direct investment in Q1 amounted to US$810m, equivalent to 0.9% of GDP. Notwithstanding some welcome steps up the league table in the World Bank Group’s Ease of Doing Business 2018, the FGN has far to go in selling the Nigeria story to long-term investors.
Prospects for portfolio inflows have been transformed of course by the combination of NAFEX and the attractive returns on offer. They have been dulled on the fixed-income side to an extent by the normalization of monetary policy in the US and the resulting EM wobbles.
That said, these inflows at the NAFEX window amounted to US$1.14bn in the month to 22 June, and were surpassed only by US$1.17bn from local corporates (other than exporters).
When analysts adjust for the assets on the financial account (Nigerian investment offshore) in Q1, two of the three components remain positive on a net basis: direct investment of US$470m and portfolio investment of US$5.14bn.
There was a net outflow of US$8.58bn on other investment due to assets of US$15.22bn. This unusually high figure consisted of currency, deposits and trade credits totaling US$12.84bn, and may be revised in the next BoP quarterly data.
Source : Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.
Reporting for EasyKobo on Friday, 6 July 2018 in Lagos, Nigeria