Banking sector capital imports fall by 67.97% on declining FDI
The National Bureau of Statistics (NBS) in November 27, 2017, released its report on Nigerian capital importation for the third quarter of 2017.
It was discovered that the Banking sector recorded a 67.97 percent year-on-year decline in capital imports to USD177.94 million in third quarter 2017 from $555.52 million in the corresponding period in 2016 according to the latest report of the National Bureau of statistics (NBS).
Analysts in the financial services sector last night attributed the development to declining Foreign Direct Investment (FDI).
The NBS report shows that Foreign Domestic Investment recorded $117.6 million which fell by 65.5 percent year on year in the third quarter of this year.
Johnson Chukwu, managing director/CEO, Cowry Asset Management limited told our reporter on phone that the decline banking sector capital import could be as a result of decline in FDI. He said FDI is sporadic unlike the Foreign Portfolio Investment (FPI) which attracts steady inflows.
Portfolio Investment, which was recorded at $2.77 billion in the third quarter of 2017, remained the largest component of capital import and contributed to 67 percent of the total amount, NBS report indicated.
Godwin Emefiele, governor of Central Bank of Nigeria (CBN), had last week promised funding support to any investors or company that to establish business in any part of the country.
Capital import in the form of Equity recorded $117.5 million and remained the majority of total FDI in the third quarter of 2017 while Other Capital fell from 0.3 to 0.13 million dollars from the second to the third quarter.
Ayodeji Ebo, managing director, Afrinvest Securities Limited, said on phone that most of the inflows into the country are as a result of investments in the capital market by foreign portfolio investor rather than FDIs. He said with the declining FDI, banks may not have as much funds to take advantage of.
The bank through which the highest share of capital was imported was Standard Chartered Bank, which accounted for 25.49 percent ($1,666.3 million) of the total share, up from the 18.7 percent share it recorded in the first quarter of the year. This was followed by Access Bank, which accounted for 16.62 percent share or ($459.4 million) of capital importation, also grew from a share of 2.65 percent as recorded in the second quarter of the year. The top four banks- Standard Chartered Bank, Access Bank, Ecobank Nigeria, and Zenith Bank received over 67 percent of capital importation in the third quarter.
Uche Uwaleke, associate professor and head, Banking and Finance Department, Nasarawa State University, said, For several quarters prior to Q3 of 2016, the banking sector’s contributions to the value of capital imported into the country had been significant. The decline recorded in Q3 of 2017 year on year may not be unconnected with the increasing risk profile of many Deposit Money Banks as reflected in high non-performing loans and for some others low Capital Adequacy Ratio. Proactive supervision by the CBN resulting in stronger corporate governance practices will enhance the bottom line of banks, attract favourable assessments by globally acclaimed Rating Services such as Fitch which will no doubt ramp up the level of capital importation through the banking sector.
However, total capital imported in the third quarter was recorded at $4,145.1 million, more than double the inflow in the second quarter of this year, representing an increased value of 147.5 percent on a year on year basis.
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