Data from the Central Bank of Nigeria on foreign investments have shown a 77.4% year-on-year decline in the first quarter of 2021 to stand at $974.1 million.
The report revealed that portfolio investments dropped from $4.31 billion recorded in Q1 2020 to $974.1 million in Q1 2021.
Quarter on quarter, however, this was a 1,635% increase compared to $56.15 million recorded in the previous quarter (Q4 2020).
FPIs generally consist of securities and alternative foreign financial assets that are passively held by foreign investors. It involves an investor purchasing foreign financial assets, such as; equities, bonds, derivatives, mutual funds, and guaranteed investment certificates, among other instruments.
The breakdown showed that investments in money market instruments stood at $808.57 million, accounting for 83% of the total foreign portfolio investments in the review period.
Similarly, investments in bonds followed with a total of $138.7 million (14.2%) invested while $26.88 million was directed towards equity.
In terms of monthly investments, the highest FPI was recorded in February with $503.17 million, while January and March portfolio investments stood at $30.72 million and $440.25 million respectively.
The domestic and foreign portfolio investment report of the Nigerian Exchange (NGX) revealed that a sum of N60.11 billion was recorded as foreign inflows in the first quarter of 2021, representing a 7.9% decline compared to N65.27 billion recorded in the corresponding period of 2020.
Meanwhile, foreign outflows surpassed inflows in the period, with a total of N90.12 billion recorded as foreign outflows while domestic transactions stood at N526.3 billion.
The reason for the decline was because the Nigerian economy has endured a significant downturn in recent times, ravaged by the covid pandemic, banditry, and insurgency to list a few.
Consequently, the economy has been pushed into stagflation, with Nigeria’s unemployment rate at 33.3% as of Q4 2020. Headline inflation was at 18.12% in April 2021 while food inflation stood at 22.72% in the same month.
According to the 2020 doing business report of the World Bank, Nigeria ranks 131st with a score of 56.9 in terms of ease of doing business.
Also, the Nigerian Exchange market has witnessed a bearish performance since the beginning of the year, with the All-Share Index recording a year-to-date decline of 4.83% as of May 2021.
The decline was caused by huge sell-offs recorded in the banking and industrial goods sector.
