- CBN says situation happening worldwide due to Covid-19 and under control
The Central Bank of Nigeria (CBN) has urged Nigerians not to fret as the total value of capital importation into the country fell drastically to $1.29 billion in the second quarter of the year (Q2 2020), compared to $5.85 billion in the preceding quarter.
The capital importation figures for Q2 2020, released yesterday by the National Bureau of Statistics (NBS), showed a contraction of 78 per cent compared to Q1 and by 79 per cent when compared to Q2 2019.
Speaking with THISDAY, the Director, Corporate Communications, CBN, Mr. Isaac Okorafor, said the loss of foreign portfolio flows in Q2, though unfortunate for Nigeria, was no peculiar to the country.
Okorafor explained that since the fourth quarter of 2019, all emerging markets had been recording drop in capital inflow, adding that the Nigerian challenge is also being experienced globally due to Covid-19, and under control by the CBN.
“The oil producing countries lost flows because of the drop in oil prices from around the fourth quarter of 2019. But this became worse during the first and second quarters of 2020 as a result of the COVID-19 pandemic.
“From charts made available by the Institute of International Finance, a global body which tracks capital flows, you will see that India, China, Turkey, South Africa, Nigeria and other emerging markets have lost large sums of flows. These investors actually recalled flows and have kept them in their own vaults, waiting to see when things eventually settle. Also, we can see that growth has decelerated in practically all economies of the world.
“Today, there is recession in the United States, England and indeed in China.
So, COVID-19 has had its impact on growth and the drop in crude oil prices has had its impact on not only flows, but also on growth. We believe that as the uncertainty in the global economy due to the pandemic reduces, flows would pick up,” Okorafor said.
Data from the Institute of International Finance showed that COVID-19 triggered non-resident portfolio outflows of around $90 billion from across emerging market countries in Q1 and Q2 of 2020.
The fall in inflows was more significant between March and April 2020. This was sharper and deeper than any other stress episode, including the global financial crisis. While outflows reduced, emerging market countries have not witnessed significant inflows and equity flows are still down about $55 billion, the data from the global body showed.
For Nigeria, according to the NBS’ Capital Importation, Q2 2020 report, only six states of the federation, namely Lagos, FCT, Anambra, Kano, Niger and Ogun attracted capital inflow, leaving 31 others without value in terms of foreign investments, during the period.
Lagos maintained its lead as the top destination of capital investment in Q2 with $1.13 billion or 87.30 per cent of the total investment during the period.
The FCT recorded $145.30 million, Anambra $1.16 million, Kano $0.13 million, Lagos $1.13 billion, Niger $6.86 million and Ogun $11 million.
According to the NBS, “other investment types” accounted for the largest capital inflow with $761.03 million or 58.77 per cent of total capital imported.
This was followed by portfolio investment, which accounted for $385.32 million, representing 29.76 per cent of inflows, while Foreign Direct Investment (FDI), which accounted $148.59 million or 11.47 per cent of total capital imported within the review period.
Capital importation by shares dominated the Q2 results with $464.57 million.
However, among the top 10 investors, the United Kingdom maintained its lead as the top source of capital investment to the country with $428.83 million or 33.12 per cent of the total capital inflow in Q2.
Investment from South Africa accounted for $149.29 million, United Arab Emirates (UAE) $145.15 million, the Netherlands $141.30 and Singapore $137.40.
Others include United States $126.08 million, Hong Kong $33.78 million, British Virgin Islands $24.27 million, China $21.48 million and Mauritius $16.53 million.
The NBS further stated that Standard Chartered Bank Nigeria Limited emerged at the top of capital investment with $425.21 million, representing 32.84 per cent of total capital inflow in Q2.
