Capital importation dips 12.3% YoY
By Jeph Ajobaju, Chief Copy Editor
Capital importation in the 11 months between January and November 2022 (M11 2022) was $4.89 billion, a 12.3 per cent slash against $5.89 billion in M11 2021.
Central Bank of Nigeria (CBN) figures show capital inflows have been slow following the coronavirus pandemic in 2020 and other economic headwinds.
Foreign investment in Nigeria fell from $23.71 billion in 2019 to $9.68 billion in 2020 and to $6.7 billion in 2021, the lowest in five years.
The sums for M11 2022 break down as follows:
- Loans – $1.97 billion (40.2 per cent of total). Up 26.8 per cent from $1.55 billion in 2021.
- Foreign direct investment (FDI) – $421.64 million (8.6 per cent of total). Down 27.4 per cent on 2021.
- Foreign portfolio investment (FPI) – $2.4 billion. Down 25.8 per cent on $3.24 billion in M11 2021. FPI accounted for most inflows at 49 per cent.
- FDI slashed 27.5 per cent to $416.63 million.
- FD in form of other capital dropped 19.2 per cent to $5.01 million
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Impact of reduced foreign inflows
Nairametrics writes the lack of foreign inflows is a major strain on foreign exchange (forex or FX) rate. Naira depreciated 23 per cent in 2022 to N735/$1 despite starting the year at an average N565/$1.
The exchange rate grew weaker at the official Investors and Exporters (I&E) window by 5.7 per cent to close at N461.5/$1.
The CBN continued in 2022 its forex interventions which saw external reserves lose $3.44 billion, falling below the $37 billion mark.
Between January and September 2022, the CBN supplied $11.82 billion in FX value to the economy, short of $13.16 billion disbursed in 2021, and even worse compared with $17.11 billion in 2020.
Background
Capital importation is one of the major areas by which the economy accesses forex, which is in high demand, especially as oil export earnings are dwindling.
The ripple effects from the Covid-19 pandemic, low interest rate in the first half of 2022, and exchange rate volatility have discouraged foreign investors from bringing their money into the Nigerian economy.
If inflows remain low amid low export earnings and crude oil earnings, this could cause a further forex supply gap that would pile more pressure on naira.