By Jeph Ajobaju, Chief Copy Editor
Foreign portfolio investments (FPIs) in Nigeria dropped from $4.31 billion in Q1 2020 to $974.1 million in Q1 2021. This was a 1,635 per cent rise against $56.15 million in Q4 2020 which itself had risen from $1.46 billion in Q3 2020.
Overall, however, figures published by the National Bureau of Statistics (NBS) show that the rate has been falling since after the FPI high watermark of $8.48 billion in Q1 2019 which was 216.3 per cent greater than the sum for Q1 2018.
Nairametrics explains that FPIs generally consist of securities and alternative foreign financial assets passively held by foreign investors.
They involve an investor purchasing foreign financial assets, such as equities, bonds, derivatives, mutual funds, and guaranteed investment certificates, among other instruments.
Breakdown
The latest data, which Nairametrics obtained from the Central Bank of Nigeria (CBN), shows that investments in money market instruments amounted to $808.57 million or 83 per cent of total FPI in Q1 2021.
Investments in bonds followed with a total $138.7 million (14.2 per cent) invested while $26.88 million was directed towards equity.
February recorded the highest FPI ($503.17 million), followed by March ($440.25 million), and January ($30.72 million).
Trust pensions
The domestic and foreign portfolio investment report of the Nigerian Exchange (NGX) shows that N60.11 billion was recorded as foreign inflows in Q1 2021, a 7.9 per cent decline compared to N65.27 billion Q1 2020.
Foreign outflows surpassed inflows in Q1 2021, with N90.12 billion as foreign outflows and N526.3 billion as domestic transactions.
Reasons for FPI decline
The Nigerian economy has endured a significant downturn in recent times, ravaged by the pandemic, banditry, and insurgency, Nairametrics explains.
The economy has been pushed into stagflation, with unemployment rate at 33.3 per cent as of Q4 2020. In April 2021, headline inflation was18.12 per cent and food inflation 22.72 per cent.
The 2020 Doing Business report of the World Bank ranks Nigeria 131st globally, with a score of 56.9 in terms of ease of doing business.
Besides, the Nigerian Exchange market has witnessed a bearish performance since the beginning of the year, with the All-Share Index recording a year-to-date decline of 4.83 per cent as of May 14.
The decline was caused by huge sell offs in the banking and industrial goods sector.
Mutual funds recorded a bearish performance in Q1 2021 as only 25 out of 118 listed funds posted positive growth in the period.
Since the lockdown and crash in oil prices, Nigeria has attracted fewer FPIs – going from $4.3 billion in Q1 2020 to $385 million Q2 2020 and $407 million in Q3 2020 before recording $56.15 million in Q4 2020 and $974.1 million in Q1 2021.
The decline in foreign investments is attributed to the condition of Nigeria’s economic and business space, as well as by insecurity and structural and policy problems.
Both Abuja and business stakeholders need to take innovative steps to attract foreign investments (FPI and Foreign Direct Investment, FDI) to ensure speedy economic growth.