In the initial quarter of 2024, the majority of capital flowing into Nigeria consisted of debt instruments, accounting for 94% of total inflows. According to statistics released by the National Bureau, Nigeria received a significant increase in capital inflows of $3.38 billion during the first quarter of 2024, showing a staggering 198% growth compared to the previous year. Foreign Portfolio Investments (FPIs) dominated the Investment landscape, surging by 220% to $2.08 billion in the past year. FDI also experienced significant growth, increasing by 150% to $119.18 million. Additionally, other investment inflows saw a substantial rise of 172% to $1.18 billion.
The Nigerian economy’s leaders have made foreign debt a key element of their fiscal and monetary strategies. Throughout the initial three months of the year, the breakdown of capital entering the market has demonstrated this trend. The NBS data reveals that foreign Investors favour loans when investing in the country, with purchases of Bonds and money market instruments totalling over $2 billion. Nigeria’s central bank, under the leadership of CBN Governor Yemi Cardoso, has implemented a strategy of increasing interest rates significantly, raising them by 750 basis points from 18.75% to 26.25%. This approach has been key in the central bank’s efforts to control Inflation and shape its forex policy.
There has been a resurgence of interest from FPIs in the Nigerian market.
This has led to a sharp increase in the popularity of short-term financial tools such as bonds, treasury bills, and OMO bills. The NBS announced a significant surge in money market instruments, with a remarkable 11-fold increase from $125.9 million to $1.61 billion year over year. This amount is also approximately 274% greater than the combined money market-related inflows of $428.9 million reported for all of 2023. Foreign investments in Nigerian bonds surged by 40% in the latest quarter, reaching $420.81 million compared to the previous year’s $301.08 million.
Furthermore, Nigeria experienced a significant increase in loans on the fiscal front, with a rise of 165.3% from $433 million in the first quarter of 2023 to $1.15 billion in the same period this year. In Q1 2024, Nigeria received a significant $3.18 billion in foreign capital inflows through debt instruments, accounting for 94% of the total capital importation of $3.38 billion during that period. In February 2024, Yemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), revealed that there has been a resurgence of interest from foreign portfolio investors (FPIs) in the Nigerian market.
Foreign portfolio investment inflows in Q1 2024 totalled ₦93.37 billion.
Cardoso stressed the significance of utilizing current resources to draw in more foreign direct investment and portfolio inflows, highlighting the crucial issues related to foreign exchange and investment. Despite the common belief of foreign portfolio investments being volatile, the governor considers them vital elements for a well-rounded foreign exchange portfolio, whether at the sovereign or corporate level. In March of 2024, the Central Bank of Nigeria revealed a substantial increase in the Nigerian Economy with an inflow exceeding $1.5 billion.
More so, in a statement, Mrs. Hakama Sidi Ali, who is filling in as the Corporate Communications Department Director at the Bank, pointed out that the increased cash flow is a clear outcome of the Central Bank of Nigeria’s efforts to maintain stability and Market Liquidity in the foreign exchange market. Foreign investors showed a significant increase in interest in Nigeria’s debt instruments during government securities auctions held on March 1 and 6, 2024, as over 75% of bids came from overseas, according to the apex bank. The foreign portfolio investment inflows in Q1 2024 totalled N93.37 billion, showing a significant increase compared to Q1 2023 which stood at ₦18.12 billion.
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Conversely, FPI outflows saw a substantial surge of 237% reaching ₦119.81 billion, up from ₦35.59 billion in the same period of 2023. During the quarter, there was a considerable net outflow of ₦26.44 billion, indicating a pattern of foreign investors withdrawing more funds from the Nigerian economy than they are investing. During the conclusion of the 294th gathering of the Monetary Policy Committee (MPC), the statement was delivered by CBN governor Yemi Cardoso, noting the ebb and flow of investors in the market as a common occurrence.