Foreign Direct Investments to Nigeria Fell by 20 percent

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Foreign Direct Investment (FDI) flows to Nigeria in eight months slumped to N470.2 billion, that’s a 20 percent decline, a Foreign Portfolio Investments report revealed.

The latest FPI report which was released on Thursday shows that the reduction in total foreign portfolio transactions moved from N594.46 billion in 2019 to N470.2 billion by August 31, 2020, that’s a decline of N124.3 billion.

The report also showed that Nigerian FPIs remained in deficit with more outflows than inflows, a clear indication that more foreign investors were selling than those buying.

Total FPIs included both inflows and outflows. While inflows and outflows indicate direction of portfolio transactions, total FPI measures the momentum and level of participation.

The report also revealed the FPI net deficit quadrupled to –N147.58 billion for the eight-month period ended August 2020 as against –N37.92 billion recorded in comparable period of 2019.

Foreign Investment outflows and inflows stood at N308.89 billion and N161.31 billion respectively by August 2020 as against N316.19 billion and N278.27 billion respectively in corresponding period of 2019.

The FPI report, coordinated by the Nigerian Stock Exchange (NSE), included transactions from nearly all custodians and capital market operators and it is widely regarded as a credible measure of FPI trend.

The report uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.

FOREX CRISIS COMPOUND INVESTORS’ WOES
Some Industry analysts have blamed the continuing decline in foreign investments and increasing outflows on foreign exchange restrictions placed by Central Bank of Nigeria (CBN)’s capital controls programme.

According to Afrinvest Securities, the introduction of capital controls amid foreign exchange illiquidity has left foreign investors stuck in the market and made Nigeria less attractive as an investment destination.

Afrinvest said: “The wide premium between exchange rates at the parallel market and the Investors & Exporters (I & E) window also suggests a mispricing of the currency, which makes investors and businesses reluctant to bring in capital,”.

Earlier, the half-year report had shown that for every naira invested, foreign portfolio investors took out two naira in the first half of this year.

Foreign portfolio outflows had risen to N266.68 billion in first half of 2020 as against inflows of N129.95 billion, representing a net FPI deficit of N136.7 billion.

The deficits of N136.7 billion in first half 2020 represented 31.1 per cent increase on N104.29 billion recorded for the whole of 2019.

Total FPIs for the six-month period ended June 30, 2020 stood at N396.63 billion. Total FPIs during the first half of 2019 had stood at N472.78 billion with outflows and inflows at N257.81 billion and N214.97 billion respectively.
Total FPIs for the seven-month period ended July 31, 2020 dropped to N431.22 billion with outflows and inflows of N287.57 billion and N143.65 billion respectively, compared with total FPIs of N530.57 billion, including outflows and inflows of N287.22 billion and N243.35 billion, recorded in comparable period of last year.

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