Macroeconomic Report & Economic Updates

The total value of capital importation into Nigeria amounted to US$ 8.49 billion in the first quarter of 2019¹. This represents a significant increase of 216% relative to 2018Q4 and   about 35% growth when compared to the corresponding quarter in 2018. The largest amount of capital importation by type was received through portfolio investment, which accounted for 84% (US$ 7.15 billion) of total capital importation. Other investments and foreign direct investments also increased during the quarter and accounted for 13% (US$ 1.10 billion) and 2.86% (US$ 243.36 million) of total capital imported in 2019Q1. In the months following the end of election period, there seems to have been a build-up in investors’ confidence in the macro economy, as partly evidenced in portfolio investment QOQ increase of 306% – from US$ 1.4 billion to US$ 7.1 billion. However, the agriculture and manufacturing sectors, that are expected to deliver inclusive growth and sustainable development, have not attracted the majority of the investment. To attract capital into these sectors, the cost of local production will need to be lowered by building competitive infrastructure and reducing import protection such as the removal of the Import Prohibition List.

Foreign and domestic investors consolidated their portfolio investments in May 2019 by increasing the value of their buy orders for Nigerian equities by about 50%. Compared to April 2019, total portfolio investments increased from N148.91 billion to N221.13 billion in May 2019¹. This makes it the second month of increase in the second quarter, indicating improvements from previous months of decline in the first quarter of 2019. The increases were triggered by greater investments from domestic investors, as the total value of transactions executed by domestic investors significantly outperformed transactions executed by foreign investors by 30%. However, improvements in both the domestic and foreign portfolio investments may be connected to limited uncertainties and a boost in investors’ confidence in the economy, following the end of the election periods. At the minimum, we expect that the portfolio inflows will be sustained. However, increments in portfolio investment will depend on the extent to which inflation is curbed, maintaining stability in the foreign exchange market and the friendliness of the overall investment climate

Foreign Direct Investment (FDI) flows into Nigeria contracted substantially in 2018. Figures from the United Nations Conference on Trade and Development (UNCTAD) show that FDI inflows dropped by a significant 43% to $2 billion in 2018¹, ripping Nigeria off the top position as the largest FDI recipient in West Africa, in favor of Ghana. Evidence shows that in 2018, foreign investors treaded cautiously, and may have withheld or withdrawn their scheduled investments in view of risks arising from government’s conflicts with multinationals and investment precariousness connected with Nigeria’s elections. For instance, the review year saw the giant telecoms company, MTN, remain entangled in legal disputes with the government over profit repatriations². In addition to fold-up of companies, two of the largest global banking and financial services institutions, HSBC and UBS, closed their local representative offices in Nigeria in 2018³. Despite these obvious capital flight during the year and contrary to UNCTAD’s stance, the Nigerian government through the CBN has refuted claims of FDI declines in 2018⁴. FDI is expected to rebound in 2019 with the relatively peaceful conduct of the general elections dousing uncertainties. Going forward, the government needs to improve its policy coherence and avoid conflicting efforts that seek to promote FDI on one hand and curb business excesses via heavy-handed regulation on the other hand.

In the first quarter of 2019, total foreign trade increased to N8.24 trillion¹. This figure is 2.5% higher compared to 2018Q4 and 7.5% higher relative to the corresponding quarter in 2018 (2018Q1). The boost in trade resulted from increased values of both imports and exports. The value of total imports increased to N3.70 trillion, representing a 3.39% rise relative to 2018Q4. Similarly, export value was recorded at N4.54 trillion, which signifies a 1.78% rise compared to the fourth quarter of 2018. Improvements in both imports and exports retained the balance of trade in the positive terrain: at N831.6 billion. The quarter’s trade advancements may be attributed to export promotion policy, and more imports of agricultural products compared to the previous quarter. With the US$30 billion export-financing deal signed by the Nigerian government in February 2019², setting up special economic zones in Abia, Katsina, and Lagos, external trade is expected to increase significantly in the coming years. An important step in improving international trade is addressing non-trade barriers that undermine the country’s ability to extensively participate in trade such as inadequate infrastructure and inefficient and opaque border administration procedures.

The NBS National outcome report on Water, Sanitation and Hygiene (WASH), suggests improvements in achieving SDG 6 (clean water and sanitation) in Nigeria. Accesses to the three WASH areas is indicated to have advanced in five years, up until 2018. In 2013, 56.9% of Nigeria’s population had access to improved and safe drinking water; by 2018, those who had access increased to 73.4%¹. Similarly, although about 24.4% of Nigerian household members still practice open defecation, access to improved sanitation enhanced from 35.7% in 2013, to 57.4% in 2018. In terms of hygiene, about 91.4% of household heads were reported to have knowledge of at least two critical times for hand-washing. The remarkable advancements and progress in achieving the SDG 6 may not be unconnected to policy collaborations and structured multi-sectored partnerships between the Nigerian government and international partners like UNICEF. For instance, the Federal Ministry of Water Resources and National Open Defecation Free (ODF) road maps², and the PEWASH (Partnership for Expanded Water Supply and Sanitation) policy introduced in 2016³, have provided coordinated framework, strategies, and projects responsible for the recent progress and towards 100% achievement of goal 6 by 2030. Going forward, more exchanges with other African countries on progress, challenges, and needs in the critical areas of the use of data and technological advances is key to better implementation and monitoring.