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Capital Inflow To Nigeria’s Banking Sector Peaked At $15.8 bln in 5-year ~NBS

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The nation’s banking sector received a total of $15.83 billion in foreign capital between 2017 to December 2021, according to data from the National Bureau of Statistics (NBS).

The data showed that capital flow to the banking sector increased by 23 per cent of the total capital importation into the country in the five-year period.

The NBS data showed that the country pooled $69.39 billion in both foreign portfolios and foreign direct investments (FDIs) during the period.

After investment in equity, banking was the most favoured sector by foreign investors, having secured almost one-fourth of the country’s foreign capital inflow.

Foreign portfolio investment (FPI) is often considered hot or fair-weathered money. Hence, it is considered an unsustainable source of funding growth. Both FPI and FDI, however, are critical injections in determining the health of a country’s balance of payment position.

 

In the five-year period leading to December 2021, about $26.21 billion came into the country via the equity market category. In 2017 and 2018, the sector’s share of the total capital importation averaged 61.5 per cent.

The overwhelming weighted average decelerated to 22 per cent in 2019 and further down to 19 per cent in 2019. Last year, it was 16 per cent. Since 2020, more foreign investment flows into banking than shares or any other sector.

It was 32 to 22 per cent in favour of banks in 2019 and 39 to 19 in that order in 2020. Last year, the banking sector maintained dominance at 22 per cent as against equities 16 per cent.

From an estimated $3.11 billion in foreign capital inflows recorded in the first two quarters of the year (H1), banking accounted for N1.47 billion or 47 per cent, while only N301 million, amounting to 10 per cent went to equities.

In the last quarter (Q2), production and telecommunications also competed strongly with 15.24 and 10 per cent respective shares of the capital importation value. General financing held 12.85 per cent, while trading attracted 3.68 per cent, leaving all-important agriculture with 3.74 per cent of the chunk.

NBS said: “The total value of capital importation into Nigeria stood at $1.535 billion from $875.62 million in the corresponding quarter of 2021, showing an increase of 75.34 per cent. When compared to the preceding quarter, capital importation decreased by 2.4 per cent from $1.573 billion. The largest amount of capital importation was received through portfolio investment, which accounted for 49.33 per cent ($757.32 million).

“This was followed by other investments with 41.09 per cent ($630.87 million) and FDI accounted for 9.58 per cent ($147.16 million) of total capital imported in Q2 2022. Disaggregated by sectors, capital importation into banking had the highest inflow of $646.36 million amounting to 42.1 of total capital imported in Q2 of 2022.”

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