Nigeria’s foreign investment landscape has seen a dramatic turnaround, with capital inflows reaching their highest level in four years during the first quarter of 2024. This positive development, highlighted in the latest report by the National Bureau of Statistics (NBS), is a welcome sign for the country’s economy.
The report reveals a significant increase in foreign capital inflow, reaching $3.38 billion in Q1 2024. This marks a staggering 210.2% rise compared to the previous quarter ($1.09 billion) and a 198.1% year-on-year jump from $1.13 billion recorded in Q1 2023.
Portfolio Investment Leads the Charge
The report dives deeper into the composition of foreign investments. Portfolio investment emerged as the top category, attracting $2.08 billion, which represents 61.5% of the total capital inflow. This category primarily focuses on short-term investments like stocks, bonds, and other financial instruments.
Notably, money market instruments within portfolio investment witnessed a massive increase of 592.7% compared to Q4 2023, reaching $1.61 billion in Q1. This trend indicates a strong investor appetite for Nigerian securities due to attractive returns.
Other Investment and Foreign Direct Investment
“Other Investment” followed closely behind with a capital inflow of $1.18 billion, accounting for 34.9% of the total. This category encompasses various non-equity investments, such as loans and trade credits. However, Foreign Direct Investment (FDI), which reflects investments into businesses with long-term operational goals, remained relatively low at $119.2 million (3.53%) in Q1.
Banking, Trading, and Manufacturing Sectors See Highest Inflows
The NBS report further breaks down the sectoral distribution of foreign capital. The banking sector received the largest share of inflows, attracting $2.07 billion, representing 61.2% of the total. This signifies investor confidence in Nigeria’s financial institutions. The trading sector followed with $494.9 million (14.7%), while the production/manufacturing sector secured $191.9 million (5.68%).
UK, South Africa, and Cayman Islands Lead Investment Origins
The report sheds light on the geographical origins of foreign investment. The United Kingdom emerged as the leading source, contributing $1.81 billion, which translates to 53.5% of the total capital inflow.
This is followed by the Republic of South Africa with $582.3 million (17.3%) and the Cayman Islands with $186.2 million (5.52%).
Lagos Dominates as Investment Destination
Interestingly, only three out of Nigeria’s 36 states recorded foreign capital inflows during the quarter. Lagos emerged as the clear frontrunner, attracting a staggering $2.78 billion, which accounts for 82.4% of the total inflow. This highlights Lagos’ status as Nigeria’s commercial and financial hub.
Abuja, the Federal Capital Territory (FCT), followed with $593.6 million (17.6%), while Ekiti State received a minimal inflow of $0.01 million.
Stanbic IBTC Bank Tops Beneficiaries
The report also identifies the top recipients of foreign capital inflows. Stanbic IBTC Bank Plc secured the highest inflow at $1.26 million (37.2%).
Citibank Nigeria Limited followed closely with $547.7 million (16.2%), and Rand Merchant Bank Plc came in third with $528.7 million (15.7%).
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CBN Reforms Attract Investors
Analysts credit the recent reforms implemented by the Central Bank of Nigeria (CBN) as a key driver behind this positive development. These reforms include:
Harmonization of the foreign exchange rate market: This move aimed to create a more transparent and efficient forex market, boosting investor confidence.
Clearance of forex backlogs: Addressing the backlog of pending foreign exchange requests signaled the CBN’s commitment to facilitating international transactions.
Naira devaluation: While potentially impacting import costs, the devaluation made Nigerian exports more competitive in the global market, attracting foreign investment.
Increased interest rates: Following inflation hikes, the CBN raised interest rates to 600 basic point making Nigerian investment instruments more attractive to yield-seeking investors.
Not leaving out the subsequent rise in returns on FGN bonds and CBN Treasury bills during the period fueled investor interest in Nigerian securities. This trend indicates a renewed confidence in the Nigerian
