Capital inflows to banks rose by 109% in H1 2022 –CBN

By Chinwendu Obienyi

Capital inflows to the Nigerian banking sector rose by 109.8 per cent in the first half (H1) of 2022,from $698.2 million recorded in the second half of 2021 to $1.47 billion, data from the Central Bank of Nigeria (CBN) said.

This figure is 46.5 per cent higher than the $1 billion inflows recorded in the corresponding period of 2021. According to the apex bank, the banking sector recorded the highest foreign inflow in the period under review compared to other sectors of the Nigerian economy, accounting for 47.1 per cent of the inflows into the country.

The manufacturing and financing sectors followed with $457.7 million and $396.7 million respectively.

The data also revealed that a total of $3.11 billion in capital was imported into the Nigerian economy as foreign inflows between January and June 2022, most of which were in the form of foreign portfolio investments (FPIs). In contrast to H1 2021, foreign inflows grew by 11.8 per cent, however, when compared to the second half of 2021, it declined by 20.7 per cent.

Capital inflows into the country recorded a significant decline in H2 2020 following the COVID-19 pandemic, which triggered a downturn in the global economy, with investors wary of moving their monies to Nigeria.

However, since H2 2021, inflows have begun to pick up, albeit very low compared to pre-pandemic levels. The decline in the number of foreign inflows has caused a huge FX supply shortage in the economy, piling more pressure on the exchange rate as demand for FX has outpaced supply leading to a depreciation in the local currency in the official and parallel markets.

Checks by Daily Sun revealed that a dollar is being traded at N678 in the black market as at 1pm yesterday in Lagos. The dollar had traded at N661 when the market opened this week, thus making it 0.17 per cent gain for the US dollar against the Naira this week.

Consequently, there was an inability to grow export earnings from oil export and the non-remittance of proceeds by the NNPC to the apex bank has caused the foreign reserve to fall further from the $40 billion threshold, currently standing at $38.9 billion.

Most of the inflows into the country came in as FPIs at $1.71 billion in H1 2022, accounting for 55.2 per cent of the total inflows recorded in the review period.

A closer look at the data showed that 33.4 per cent of the total fund inflow was invested in money market instruments at $1.04 billion, which could include mutual funds, TBills, commercial papers amongst others.

Others, which include loans, currency deposits, trade credits, and other claims accounted for 35.1 per cent of the total inflows, at $1.09 billion. This is however lower than the $1.59 billion recorded in H2 2021.

Meanwhile, Foreign Direct Investments (FDI) which involve the purchase of interest in a company by a foreign investor accounted for only 9.7 per cent of the total inflows into Nigeria, despite having a strategic impact on the growth of the economy.

This was even as total FDI declined from $466.04 million recorded in H2 2021 to $302.1 million in the review period.