Securities in the International Financial Market, Affecting Foreign Capital Inflow

The Central Bank of Nigeria (CBN) has disclosed that the depletion of foreign capital inflow in the Nigerian economy is because of the marketability of securities in the international financial market

The CBN revealed this during its monthly economic report (October 2021).

According to reports for the apex bank, Abuja and Lagos state were the highest beneficiaries of capital with US$0.44 billion (or 88.3%) and US$0.06 billion (or 11.7%) of the total.

However, the central bank of Nigeria stated that the attractive nature of the international financial market is discombobulating the inflow of capital into the economy.

Texts from the report “Foreign capital inflow to the domestic economy was adversely affected by the relative attractiveness of securities in the international financial market, particularly in the United States. Consequently, new capital importation decreased by 32.0 per cent to US$0.50 billion in October 2021, from US$0.66 billion in September 2021.”

The apex bank further pointed out that foreign portfolio investment still sustained its ascendancy in terms of total foreign investment despite a 34% decline.

The report said, “Disaggregation of capital importation by type of investment shows that foreign portfolio investment inflow (mainly money market instruments), at US$0.33 billion, decreased by 34.0 per cent, relative to the US$0.50 billion in September 2021. Despite the decline, portfolio inflow remained dominant in total foreign investment, accounting for 65.0 per cent. The inflow of other investments, mostly loans, was US$0.14 billion or 28.2 per cent of the total, a slight increase from US$0.13 billion in September 2021. Foreign direct investment inflow stood at US$0.03 billion and accounted for 6.8 per cent.”

Furthermore, the report further stated that economies which contributed to Nigeria’s capital import includes South Africa led the pack 46.1%, followed by the United Kingdom 16.4%, and Singapore 10.0 %. The Netherlands contributed 9.5%, the US contributed 9.4%, Guinea contributed 2.0 %, Mauritius contributed 1.8%, the UAE contributed 1.0%, the Czech Republic contributed 0.9%, and Denmark contributed 0.9%

Capital importation by nature of business shows that financing was 47.4%, banking 13.8%, shares 12.9%, trading 8.9 %, telecommunication 7.4 %, servicing 3.8%, production/manufacturing 3.6 %, agriculture 2.1 %, while others accounted for the balance.