By Francis Ogwo
The second quarter of 2020 recorded a call in the foreign inflow of capital into the banking sector to as low as $140 million making it the lowest inflow since 2017.
This figure, according to reports, is in contrast with the $2.9 billion inflow reported in the first quarter this year.
According to a report contained in the Capital Importation report published by the National Bureau of Statistics, the country has suffered foreign currency shortages since the crash in oil prices.
This caused an outflow of foreign portfolio investments out of the country.
There was also the devastating effect of the outbreak of the Covid-19 Pandemic, which affected foreign investments into emerging markets like Nigeria as investors flee to the safety of the risk-free assets in the United States.
Some of the outflows have also been redirected to the United equities markets which have surged on the back of a tech bubble despite the Covid-19 pandemic.
Reports revealed that the drop in inflow into the banking sector could be as a result of the global economic crisis, which has limited banking sector requirement for foreign investments either as debt or equity.
Experts also argued that the drop in inflow into the sector also correlates with the drop recorded in the money markets and equity.
For example, inflows into these sectors fell to $533.9 million in the second quarter from $4.5 billion reported in the previous quarter.
In contrast, banks have resorted to commercial papers and bonds taking advantage of the low-interest-rate environment to raise capital.
Another reason is the foreign currency risk associated with foreign currency-denominated capital in a deteriorating economy that is exposed to further devaluation and credit risks.
