Capital inflow into Nigeria drops by 28% in Q1 2023

Nigeria’s total capital inflow for the first quarter of 2023 dropped by 28% according to the latest report by the Nigerian Bureau of Statistics.

Capital inflow for the first three months of the year stood at $1.13 billion- a drop of $441 million when compared to the corresponding quarter of 2022. 

Capital importation for the first quarter of 2022 was $1.5 billion.

When compared to the preceding quarter, that is Q4 of 2022, the capital inflow rose by  6.78% from $1.06 billion.  

Portfolio investment accounts for over half of foreign capital

During the first quarter, Nigeria received more capital investments from portfolio investments than from any other sector.

  • The portfolio investments accounted for approximately $649 million, constituting 57.32% of the total capital inflow.
  • Within the portfolio investments category, Nigeria received $301 million from bonds, $222 million from equities, and $125 million from money markets. 

In addition to portfolio investments, Nigeria also attracted foreign capital through other sectors such as trade credits, loans, and currency deposits. 

Capital inflow by country 

The United Kingdom emerged as the leading provider of capital inflow into Nigeria, contributing $673 million, which represents 59.47% of the total capital inflow.

  • The United Arab Emirates followed with $108 million, while the United States of America provided $95 million.
  • South Africa and Singapore contributed $91 million and $69 million, respectively. 

States with the most capital inflow 

Regarding investment destinations within Nigeria, Lagos state received the largest share of capital inflow, amounting to $704 million out of the total $1.13 billion, accounting for 62% of the total investment capital into the country.

  • The Federal Capital Territory (FCT) followed, receiving $410 million. Akwa Ibom, Adamawa, and Anambra completed the top five states, receiving $5.2 million, $4.5 million, and $4.0 million, respectively. 

Capital inflow by sectors 

Analyzing foreign capital inflow by sector, the banking sector attracted the most foreign capital during the first quarter, receiving 26% ($304 million) of the total foreign capital.

  • The production sector closely followed with 22.61% ($256 million), and IT services received 19% ($216 million). 
  • The finance sector recorded a capital inflow of $118 million, while trading received $91 million.
  • The telecoms sector received $22.5 million, and the transport sector attracted $12.94 million. Agriculture received a modest $4.84 million, while shares gained $88 million. 

The oil and gas sectors, brewery, and electricals represented 0.07%, 0.06%, and 0.65% of the total capital inflow, respectively. 

Insights into Nigeria’s economy

Cross-border capital flows offer significant advantages as they allow for risk diversification and higher investor returns.

  • Additionally, they provide recipient countries with funding for accelerated investment, economic growth, and increased consumption. 
  • Despite the decrease in total capital importation, the investments across sectors, countries, and banks provide insights into the trends and preferences shaping Nigeria’s economy in the first quarter of 2023.  
  • The data provides investors, economic analysts, and the government into the lucrative sectors of the Nigerian economy or how foreign investors think they can get returns for their investments 

Foreign investment inflows have slowed in Nigeria in the past years due to tight capital controls, rising insecurity, and poor infrastructure that has made it difficult for external investors.