How Nigeria's Capital Inflow Declined By 78.60%, What Happens Next?

In the second quarter of 2020, Nigeria's capital importation (inflows) declined by 78.60% when compared to the corresponding period of Q2 2019. The country recorded $1.29 billion capital importation in the second quarter of this year, representing a decrease of 77.88% compared to Q1 2020.

In a report released by the Nigerian Bureau of Statistics (NBS), it was gathered that Other Investment contributed $761.03 million, which represents 58.77% of the total capital imported, Portfolio Investment accounted for $385.32 million, which is 29.76% of the capital inflow.

Meanwhile, Foreign Direct Investment (FDI) contributed $148.59 million to the capital inflow, accounting for 11.47% of the 2020 second quarter fund, bringing the total of the capital imported to $1.29 billion.

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States With Highest Inflow: Majority of this fund went to Lagos State with $1.13 billion, followed by Abuja which got $145.3 million, Ogun State was third with $11 million, Niger State accounted for $6.86 million, Anambra State got $1.16 million, and Kano State $0.13 million. AllNews gathered that other states didn't receive any foreign capital inflow in the second quarter of this year.

Countries That Contributed Highest Figure: According to the NBS report, the United Kingdom topped the chart, followed by South Africa, United Arab Emirates, Netherlands, Singapore, with the United States coming behind at sixth, Hong Kong comes next, British Vergin Island, China, and Mauritius made the top ten.

Why The Decline?

The global economy was disrupted in the second quarter of 2020, as businesses were closed due to the outbreak of Coronavirus. The pandemic had forced governments across the world to close their borders and nearly shut down their economy in order to curb the spread of the COVID-19.

This significantly affected the revenue of businesses, and in the long run, affected the income of employees or self-employed individuals who normally transfer funds to households, relatives, or their companies in Nigeria.

In Q2 last year, the total capital inflow into Nigeria was $6 billion, while in Q1 this year, the total capital imported was $5.8 billion. This reflects the huge impact of the pandemic and global lockdown on the purse of individuals who sent funds back to Nigeria in Q2 2019 and Q1 2020 - as some of them lost their jobs, while some had to take a salary cut to keep their jobs, reducing their disposable income.

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What Will Happen Next?

The total capital inflow into Nigeria is expected to rise gradually in Q3 2020, maybe not as much as that of Q1 2020, but the capital imported will climb higher than the $1.2 billion received in the second quarter of this year.

This is due to the gradual easing of global lockdown, and government policies that are meant to reduce the economic fallout on businesses and households. Global trade and businesses are re-opening and returning to normal activities prior to COVID-19.

Despite the job loss and salary cut, the capital inflow is projected to rise slightly going into Q3 and Q4 due to government palliatives to ensure small and medium businesses keep their employees and return to growth.

Click this link to read NBS report on Capital Inflow