Shares of Nigerian companies still remain the preferred investment choice of foreign investors investing in Nigeria; data released by the National Bureau of Statistics (NBS) on 4 May has shown.
Recent steep falls in the share price of many Nigerian blue chips means that they still remain attractive for foreign investors that may want to buy cheap now and wait long enough for the Nigerian economy to turnaround to sell.
The investors are hoping that the capital gains that will be made from a potential rebound in the Nigerian capital market will outweigh the loss that may be made if the Nigerian naira is eventually devalued.
Foreign investors brought in $201.69 million to buy the shares of Nigerian companies in the first quarter of 2016, representing 74.41% of total portfolio investment inflow in the first quarter and 28.37% of the total foreign investment inflow of $710.97 million.
“Equity has been the largest part of portfolio investment in every quarter since 2007” according to the NBS.
Despite it being the largest component of investment inflow into the country, it also contributed most to the decline in investment inflow.
“Equity investments recorded a quarterly decline of 74.54% and a yearly decline of 82.30%” which is not surprising since many foreign investors exited the capital market after the ejection of Nigeria from the JP Morgan and Barclays Index.
Foreign investors also brought in $67.85 million to buy money market instruments but spent just $1.5 million or 0.55% of their funds on Nigerian government bonds. Bonds lost their attraction following a steep fall in yields.
Other investments, mainly loans to Nigerian companies attracted total foreign inflow of $265.48 million, representing 37.34% of total imported capital but even this showed a decline of 42.54% when compared to the last quarter of 2015 and 60.86% when compared to the same quarter of 2016.
There was some good news however, as Foreign Direct Investment (FDI), which represents foreign investment aimed at expanding a domestic company’s operations or establishing new companies increased by 41.7% to $174.46 million, representing 24.54% of imported capital.
“The total value of capital imported into Nigeria in the first quarter of 2016 was $710.97 million, the lowest level since the series began in 2007. This represents a decline of 54.34% since the final quarter of 2015, and a year on year decline of 73.79%. Both the quarterly and year on year declines were also the lowest recorded since the series began. As a result of these changes, total capital importation has fallen by 89.13% since its peak level in the third quarter of 2014” according to the NBS report.
