Banks’ foreign capital inflows grow 110% in 6 months
By Jeph Ajobaju, Chief Copy Editor
Banks received $1.47 billion capital inflows in the first half of 2022 (H1 2022), a 109.8 per cent rise above $698.2 million in H2 2021 and 46.5 per cent more than $1 billion in H1 2021.
Newly released figures from the Central Bank of Nigeria (CBN) confirmed banks attracted the highest foreign inflow in H1 2022, attracting 47.1 per cent of the total, compared with other sectors.
Manufacturing had $457.7 million and financing $396.7 million.
A total $3.11 billion capital was imported, mostly in form of foreign portfolio investments. It grew 11.8 per cent, but compared with H1 2021, it was decline of 20.7 per cent.
Inflow highlights
Most of the inflows were foreign portfolio investments (FPI) at $1.71 billion, accounting for 55.2per cent of the total.
Some 33.4 per cent was invested in money market instruments at $1.04 billion, which could include mutual funds, TBills, commercial papers among others.
Others, which include loans, currency deposits, trade credits, and other claims accounted for 35.1 per cent of total inflows, at $1.09 billion. But it was lower than $1.59 billion in H2 2021, according to reporting by Nairametrics.
Foreign direct investment (FDI), which involves the purchase of interest in a company by a foreign investor, accounted for only 9.7 per cent, despite having a strategic impact on economic growth.
FDI declined from $466.04 million in H2 2021 to $302.1 million in H1 2022.
A major factor in the decline is the inability of foreign investors to repatriate their earnings as a result of foreign exchange (forex) scarcity.
The International Air Transport Association (IATA) complained in June that Nigeria is withholding $450 million revenue belonging to foreign airlines.
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Backstory
The banking industry has been growing significantly in recent years, owing to stellar performances by traditional banks as well as new entrants.
Fintechs have also helped spur growth, with most inflows coming through them from international venture capitalist firms or angel investors.
Nairametrics Deals Book tracker shows fintech firms raised $658.4 million in funding in H1 2022 across 23 deals. Other financial services firms recorded deals worth $345.3 million across 12 deals.
And traditional banking giants have visited the international debt market to raise dollar funding in recent years.
Fidelity Bank raised $400 million through Eurobond issuance in 2021 following a similar issue in 2017.
UBA redeemed its $500 million five-year Eurobond in June 2022, Zenith Bank completed the redemption of its $500 million Eurobond in May.
This is an indication of the credit worthiness of the Nigerian banking industry, and possible confidence for foreign investors to be willing to invest in it.