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Africa’s 2 Largest Economies Diverge on Central Bank Policy

Central bankers in Africa’s two largest economies are taking diverging policy stances, even as they get slammed by similar headwinds of low growth and high unemployment.

While Nigeria seems to be combining monetary policy with a developmental bent similar to fiscal policy, South Africa just made a fresh vow to erect an impenetrable wall between the two to ensure they never collide.

The South African Reserve Bank and finance ministry issued a joint statement Thursday where both institutions vowed to respect each other’s independence.

The Reserve Bank will focus on the primary mandate of any central bank and steer clear of interfering with fiscal policy matters while the finance ministry will not meddle in areas of monetary policy.

The South African arrangement which shares similarities with the structures in place in developed economies has little semblance with the arrangement in neighbouring Nigeria.

In Nigeria, the central bank is gradually taking the role of a de facto development bank that is stimulating economic growth and employment.

“Central banks can occasionally provide support for fiscal authorities but this should not be seen as the norm,” a research head at a Lagos-based pension fund who pleaded anonymity told BusinessDay. “In our case, it has gone on for four straight years and shows no sign of slowing.”

The source said that the CBN runs the risk of becoming an extension of the Federal Government.

“The problem is the Senate has not tried to plug that gap. How much is the CBN lending to the FG? The Senate should be auditing the number every year because the CBN would have to curtail the pressure it is facing,” the person said.

But the Central Bank of Nigeria’s new burden has been borne out of necessity, Johnson Chukwu, founder and CEO of Cowry Asset Management Limited, posited.

“The reason we are seeing this in the Nigerian economy is that the fiscal authorities have been relatively silent and nature abhors vacuum,” Chukwu said.

He explained that although the resources of the monetary authorities are being stretched, the availability of a finance minister active on carrying out the fiscal mandate would allow the CBN return to its core function.

The apex bank has since 2014 devoted itself to programmes such as the Anchor Borrowers’ Programme, Real Sector Support Facility (RSSF), Electricity Market Stabilisation Facility, Creative Industry Financing Initiative and several others.

The bank regulator, which has become more intent on interventions in key sectors to grow the economy, facilitate job-creation, and create credit, says the pursuit has been in a bid to “ensure that the CBN is more people focused”. Godwin Emefiele, CBN governor, said this in June while outlining the apex bank’s policy thrust over his second term.

The central bank would still remain committed to the same over the next five years. But the situation though with its perks is not without downsides.

Experts warned that central bank’s development mandate could crowd out the real sector.

“What happens is there is distortion in the market when the CBN has to lend at single digit to certain sectors while official interest rate is at double digit to curb inflation,” a BusinessDay source said.

The central bank last Thursday released the guideline on regulatory measures to improve lending to the real sector of the Nigerian economy. The policy mandates all Deposit Money Banks to maintain a minimum Loan to Deposit Ratio (LDR) of 60 percent by September 30, 2019.

The bank said it would penalise non-compliance with a levy of additional Cash Reserve Requirement (CRR) of up to 50 percent of the lending shortfall of the target LDR.

Although the policy aims at boosting real sector growth by making credit available to businesses, experts fear the unintended consequences of increasing banks’ bad loan books as infrastructural challenges which have been a drag on company performance remain.

Source: businessdayng

Foreign Investors are Avoiding these Sectors like a Flea

Foreign Investment into Nigeria in the first quarter of 2019 rose to $8.4 billion compared to $6.3 billion in the same period of 2018. Whilst most of the inflows were focussed on foreign portfolio investments, it is pleasing that Nigerian experienced an investment growth especially when you consider that we had the national elections within this quarter.

The government has over the years embarked on several strategies in its bid to attract foreign investments into the country. They have offered tax incentives, provided intervention funds, erected trade barriers all for the sole purpose of attracting investment.

Despite these laudable efforts, foreign investors continue to shun some sectors like a flea. Some of these sectors employ thousands of Nigerians and are a cause to worry if you are anyone in government circles. Here are some of the pertinent ones by our reckoning.

Brewery Sector: According to the data, Nigeria’s brewery sector, one of the most competitive sectors in the country attracted zero foreign investments in the first quarter of 2019. The sector attracted just $4.8 million in the whole of 2018, according to data from the National Bureau of Statistics.

What this means

  • Nigeria’s brewery sector is largely dominated by the likes of Nigeria Breweries, Guinness and International Breweries.
  • These sectors have received a considerable amount of investments in the last 5 years so we assume investments here have peaked.
  • However, data from the NBS suggest capital importation in this sector is a combined $90 million since 2014. So could this be a reporting challenge?
  • Investors are probably now looking for returns of and on investments.
  • Government policy towards this sector has also been negative, especially with the increase in excise duty for alcoholic products.

Hotels & Hospitality: Despite the array of hotel constructions littered all over the country, the NBS report picked zero investments in the country’s hotel sector.

What this means

  • While the official NBS data reported zero capital importation, it is likely that some investments did inflow into this sector.
  • Most hotel investments in Nigeria are owned by Nigerians. And where they are not, investments in here come from revenues already being generated by the companies.
  • Foreign participation in this sector is also via hotel management which means they export capital rather than import.
  • Hotels employ thousands of Nigerians and their services are constantly in high demands. Unfortunately, the government hasn’t had a targeted policy for the hospitality sector in general.
  • To attract significant investment here, Nigeria will have to look beyond hotels to drive investments. A coordinated approach to tourism development will probably be best suited.
  • For now, investors will continue to shun this sector even though we have seen a 4% plus GDP growth rate.

Training: Nigeria has a huge human capital development challenge and has been recognized even in more advanced sectors like the financial services sector. However, foreign investment in this sector continues to be nonexistent.

  • In the first quarter of 2019, Nigeria received just under $500k investments in the sector. We also attracted zero investment in 2018 and the years before.
  • It could well be that the data is not properly being reported so the NBS may not be capturing all that has been received.
  • Nevertheless, for a sector that is critical to nation building and central to human capital competitiveness the level of foreign investment in this sector is too small.

Others of note:

  • Drilling
  • Consultancy
  • Electrical services
  • IT services

Source: nairametrics

CBN 5-Year Policy: Experts List Implications for Financial Market

Experts at the FSDH research have noted that with the implementation of Central Bank of Nigeria’s 5year agenda, more funds will be available to finance non-oil export-led sectors which will  create new businesses, reduce import dependency and grow foreign exchange earnings.

It will also ensure stable exchange rate and possibly cause the value of the currency to remain stable to appreciate, they added. The head of research, Ayodele Akinwunmi, disclosed this at the monthly Economic and Financial Market Report with journalist at the weekend.

The Central Bank of Nigeria (CBN) had released its policy thrust for the next five years with four key macroeconomic economic targets for 2019-2024: double-digit growth rate in the Gross Domestic Product (GDP), single-digit inflation rate,  foreign-exchange rate stability and accelerating employment rate.

In order to achieve the key targets, the CBN has the following five key priorities:  preserve domestic macroeconomic and financial stability,  create robust payment system infrastructure, work with the Deposit Money Banks to improve access to credit for smallholder farmers, Micro, Small & Medium Enterprises, (MSMEs) consumer credit and mortgage facilities for bank customers, grow external reserves and support efforts at diversifying the economy through intervention programmes in the agricultural and manufacturing sectors Akinwumi said: “We expect growth in non-oil exports from Nigeria and reduction in the cost of exporting goods from Nigeria, therefore making exportation more profitable than before.”

He also said there may be a reduction in the country’s import bill, a reduction in the cost of inputs for manufacturing companies and the development of agro-allied industries. He added that the CBN may propose moral suasion programmes and specific industry/product limit arrangements to channel bank loans towards agricultural and manufacturing sectors.

FSDH Research also expects an increase in the capital base of banks in Nigeria, which would enable the banking system support larger and better viable projects. However, other complementary fiscal measures must be implemented to ensure the success of this initiative.

“There may be mergers and acquisitions in the Nigerian financial industry. Some foreign players may come into the system. In the first few years of implementation, the Return on Equity (ROE) of banks may drop’’, he added. FSDH Research also expects the development of mortgage-backed securities in the market.

This will expand investment securities and trading opportunities in the financial market. More loans may also be channelled to the real estate sector of the economy, creating jobs and shared prosperity in that sector. Akinwumi said the monetary policy stance of the Central Bank of Nigeria (CBN) favours a low interest rate regime in the short-term to the limit that the inflation rate and external reserves can accommodate, except there is any domestic or external shock.

He also disclosed that there may not be any major exchange rate depreciation or devaluation as long as the external reserves remains strong. “The external reserves will remain strong provided Nigeria is able to attract more foreign exchange earnings through Foreign Direct Investments (FDIs), sales of oil and non-oil products. The trigger for a possible depreciation or devaluation in the currency will be when the stock of external reserves is no longer enough to cover more than 6 months of imports.”

Source: dailytrust

CBN Rolls Out Guidelines to Boost Bank Lending to Real Sector

…Banks to maintain minimum loan to deposit ratio of 60% …Defaulting banks’ CRR to rise by 50% of shortfall

The Central Bank of Nigeria (CBN) on Wednesday rolled out new guidelines to deposit money banks (DMBs) aimed at boosting bank lending to the real sector.

In a circular to all banks with reference number BSD/DIR/GEN/MDD/01/045, dated July 3, 2019 and signed by Ahmad Abdullahi, director, banking operations of the CBN, the apex bank required all DMBs to maintain a minimum Loan to Deposit Ratio (LDR) of 60 percent.

Loan to deposit ratio (LDR) is a ratio between a bank’s total loans and its total deposits. The ratio is generally expressed in percentage terms. If the ratio is lower than one, the bank relied on its own deposits to make loans to its customers without any outside borrowing.

The circular titled ‘Regulatory Measures to Improve Lending to the Real Sector of the Nigerian Economy’, as seen by BusinessDay, said “all DMBs are hereby required to maintain a minimum Loan to Deposit Ratio (LDR) of 60 percent by September 30, 2019”. It said the ratio “shall be subject to quarterly review”.

The CBN said these measures were intended “to ramp up growth of the Nigerian economy through investment in the real sector”.

“To encourage SMEs, retail, mortgage and consumer lending, these sectors shall be assigned a weight of 150 percent in computing the LDR for this purpose. The CBN shall provide a framework for classification of enterprises/businesses that fall under these categories,” it said.

The apex bank warned that failure to meet the stipulated minimum LDR by the specified date “shall result in a levy of additional Cash Reserve Requirement equal to 50 percent of the lending shortfall of the target LDR”.

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

It added that the CBN would continue to review developments in the market with a view to facilitating greater investment in the real sector of the Nigerian economy.

It said the letter was “with immediate effect”.

The CBN has in recent times been somewhat desperate to increase lending to critical sectors of the Nigerian economy but analysts say an economy fraught with risks has tamed lending appetite.

Source: businessdayng

Kenya Gets $750 Million World Bank Loan, and Eyes Another One

The lender has released the funds, that were approved in May, according to Hafez Ghanem, the World Bank’s vice president for Africa. It will help to finance affordable housing, agriculture and other development projects. These are part of the government’s Big Four agenda, which also aim to boost manufacturing and improving health care.

“It is a very common source of financing, it is just that we had not done this sort of financing for Kenya in a long time,’’ Ghanem said Wednesday in an interview in Nairobi, the capital. “What changed? The government and the bank reached agreement on what we consider to be a very strong and credible economic program.’’

Ghanem didn’t give further details on the new facility that will be negotiated.

The loan comes amid concerns that Kenya is taking on too much debt. This year alone, the country has also accessed a $1.25 billion syndicated loan and raises a $2.1 Eurobond. Government debt has more than doubled since 2013 to 5.42 trillion shillings ($52.8 billion) by March, according to central bank data. Debt-service costs rose to 33.4% of revenue from 23.5% in 2013.

The concessional loan is a better bet than more expensive commercial debt because it has a tenor of 25 years, a seven-year grace period for paying interest and a rate of 2%, which makes it almost a grant, according to the World Bank.

“It is better to use as much as possible concessional loans, and good to diversify as much as possible the sources of financing,” Ghanem said. “If we did not think it was a good thing, we would not have done it ‘’

The loan was granted on the assumption that the government will implement plans to increase revenue and ease the uptake of debt. The Treasury seeks to narrow the budget deficit to 3% of gross domestic product by 2022 from an estimated 6.8% of GDP in the fiscal year that ended June 30.

The reduction in debt and the budget deficit has to be done “in a gradual way that does not reduce investment,” Ghanem said. “Public investment needs to be maintained, and we have to ensure the consolidation does not have a negative impact on growth.’

Source: bloomberg

Trademore Refutes Land Grab Accusations in Abia

Estate development giant, Trademore International Limited and Chairman, Engr. (Dr) Emmanuel Mbaka have refuted purported claims by a former commissioner in Abia state, Eze Chikamnayo, suggesting that over 10, 000 plots of land were illicitly transferred them.

In a statement issued on Thursday, the company regards the open letter by Eze Chikamnayo as a spurious attempt to taint the company and its chairman’s image.

The statement read: ‘’We wish to clarify that as a business man with proven competence and corporate integrity, Engr. Dr Mbaka and Trademore International Limited do not and will not be associated with controversies that will taint our hard earned image over the years.

‘’We have consistently contributed to the economic advancement of our beloved country through multiple investments in many Nigerian cities including Abuja, and our chairman has led several business and corporate organisations.

‘’After great successes in many parts of Nigeria, we thought it was time to reward the love of our people by extending businesses and opportunities that will better the lives of the people of Abia through employment and entrepreneurships.

‘’Contrary to any claim or suggestion of land grabbing, all we have done is change the narrative about our people and reclaim our spot as an economically viable state. We are not a party to any shady deal whatsoever and have only conducted legitimate businesses and transactions both in Abia and everywhere else.’’

According to the statement, the land hosting the Umuahia event centre was neither grabbed nor forcefully taken away from anybody. The statement read that the land was legally acquired by the then Governor of Abia state, Chief T A Orji in accordance with the provisions of land use Act, with verifiable evidences.

‘’We must join hands to develop and move Abia state forward and stop castigating the character and integrity of Abians who have selflessly sacrificed their resources and time to make Abia a great state.

‘’Our investments in the state haven’t even yielded any benefits yet, and sometimes we take it to be a form of corporate social responsibility. Our ultimate dream is to be part of the Abia state that will attract more investments and business opportunities.

‘’We categorically distance ourselves from any brewing controversy and wish to highlight our image as a business with proven competence and integrity – the pillar upon which our success stories have been reliant on.’’

The statement berated the writer for not doing a thorough background check before embarking on what was referred to as a desperate attempt to smear and blackmail innocent people.

How to Differentiate Yourself in an Overcrowded Real Estate Industry

The real estate industry is brimming with eager agents ready to differentiate themselves from the crowd. Every year, real estate agents look for emerging trends and new inspiration at national conventions and workshops alike.

The real industry trendsetters, however, are those professionals that are driving the new trends and teaching innovative concepts. Still, many agents try following in the footsteps of the most successful professionals, instead of paving their own unique path.

Differentiation always starts with one step: brainstorming. Every agent has something that sets them apart, but it is not always obvious. Even talents and interest that are not directly relevant to real estate can help immensely with branding and marketing.

Key Takeaways

  • Brainstorm to determine your unique gift and its potential benefits for your career
  • Reach out to family and friends if you are having trouble identifying your gift
  • Take control of your idea and think about exactly how to use it in your business (i.e., branding and marketing)

First, you need to understand that the gurus making industry headlines are not much different than you. The only difference is that she took a creative risk, tried something different, committed to an idea, and made sure that it would pay off. Metaphorically speaking, she got up from her window seat, walked right past her colleagues, kicked open the door to the cockpit, and bumped the pilot from his seat and took the controls.

Now, let’s assume you’re currently a passenger. How do you truly separate yourself from the other passengers and take off on your own direction? I’d like to suggest a process. Here are some considerations to keep in mind as you break away from your clones and redefine your identity in real estate.

Determine your gift (and un-lame it if necessary)

First, realize that we all have our own gift. Your gift might seem lame. You might realize that the only gift you have is that you can make a ridiculous strawberry cake. Uh oh. It’s up to you to un-lame the gift.

For many, our first response to this realization that our gift is ‘not cool enough’ is to very quickly end our work in this process. I’m going to argue that a killer strawberry cake, as irrelevant as it might seem, could become your secret weapon (see below).

But if you’re not happy with that outcome, copy this email and send it out (privately) to your best of friends and family:

“Hey Brad (or Natasha, or Stewart, or Dad, or Mom…),

I feel a little silly doing this, and I promise I’m not just looking for an ego boost, but I’m doing a bit of a marketing exercise right now. Without telling you too much about it, it’s requiring that I reach out to some people who know me well, who can tell me what’s exceptional about me. I have no idea. Does anything come to mind?

Talk to you soon, Mark”

Read whatever responses you get. Often, we perceive ourselves differently than our peers.

Take control of your idea

Now that you’ve got your idea, it’s time to plan; what’s one thing you could do with your gift?

Let’s go back to our strawberry cake example.  Mmmm it’s such a good cake. Everyone loves it.  But it has nothing to do with real estate. Welcome to the pilot seat. You’re now spiraling down to earth. Better think fast or die.

How could your strawberry cake define you and your brand?  By reverse engineering the problem, I’m seeing an influx of happy buyers, celebrating the close of their new home, digging into an ingeniously-presented strawberry cake in their new, empty kitchen. I’m seeing hundreds of pictures of happy customers posting to social media (with hashtags galore) photos of themselves holding a strawberry cake.

Be consistent

Is making a strawberry cake every time you close on a house going to catapult you into the big leagues of real estate?  Probably not. But when you apply that one unique identifier to your business over and over again—compounded months and months and years down the road—that’s when you develop your signature differentiator.

Let it evolve…

I said it—everyone’s on the Facebook Live kick.  The message here is not to ignore the other marketing tactics that your competitors are doing.  Facebook Live is hot for a reason. But rather than going live for the sake of being live, give yours a theme; only film Facebook Live videos in your kitchen as you’re pulling your next cake out of the oven, and talk about how excited you are to leave it on the counter for your client.  The excitement of knowing you’ve got another transaction will become apparent to your audience.

Source: Realvolve

Halfway Into 2019, How Is The Housing Market Holding Up?

Hard to believe we’re already halfway through 2019.

Headed into the year, all eyes were on the housing market as it showed signs of softening for the first time in recent memory. A sharp rise in inventory, talk of more rate hikes and shrinking home price gains in the fourth quarter of 2018 created a cloud of uncertainty.

Six months in, it’s safe to say that the sky isn’t falling. But you might think of the real estate market right now as behaving like a C student that isn’t living up to its full potential.

“The housing market is doing fine,” said Lawrence Yun, Chief Economist for the National Association of Realtors. “But it certainly can do better given what’s happening with job creation and the historically low mortgage rate that is currently in place.”

To make sense of this transitional period, it’s time for a midyear market pulse check. Here’s how leading industry economists are piecing together the first stretch of 2019 and what they say is in store for the future of housing.

Affordability challenges yank back price growth 

“For the first time in a long time, we’re starting to see prices correct,” said Skylar Olsen, Director of Economic Research at Zillow. “And the big thrust that’s changing that narrative is the affordability challenge.”

She explains that when home values outpace incomes so aggressively, the two “have to snap back together eventually,” which is in effect what’s happened.

In April, the S&P Case-Shiller Home Price Index dropped for the 13th month in a row. To be clear, home values are still going up nationally; they’re just rising at a more moderate rate. Annual gains for April clocked in at 3.5%, down from 3.7% in March.

But in some markets the shift has been far more dramatic.

Take Seattle. For two years price growth accelerated faster there than anywhere else in the country. Then between April 2018 and April 2019, the year-over-year price change shrunk from 13.8% growth to a 0.0% flatline. Over the same time frame, San Francisco fell from 10.9% to 1.8% annual gains.

Notice a trend? The markets with the fastest growth fell the hardest. Some exceptions bucking the norm have been Las Vegas, Phoenix and Tampa, their resilience due to how hard they were hit by the 2008 housing crisis.

“I would say the price appreciation of 3% is a healthy development,” added Yun.

Mortgage rates drop, but buyers aren’t jumping the gun

After four benchmark rate hikes in 2018, the Federal Reserve signaled it planned on two more increases this year. That gave analysts every reason to believe mortgages were well on their way 5.5%.

But in March the Fed moved away from that intent and showed signs of even lowering the interest rate (whether that will happen is still TBD). As expectations changed, mortgage rates dropped from 5.09% to 4.09% between November 2018 and June 2019.

However, low interest rates aren’t like an immediate caffeine jolt for the housing market. “It doesn’t impact the down payment,” said Olsen. “And that’s the real struggle, right? Just because mortgage rates dropped doesn’t mean I can suddenly reenter the housing market.”

Demand is also tied to homebuyer sentiment, which isn’t necessarily strong right now. In June, consumer confidence dropped 9.8 points to the lowest level since September 2017 as a result of tensions surrounding the trade wars, according to the Conference Board.

“Consumers are picking up on that lack of certainty about the economic outlook,” said Danielle Hale, Chief Economist at realtor.com. “And that’s not necessarily going to inspire them to make large purchases like a house.”

Inventory challenges persist on the low-end price points 

Overall inventory has started to creep up a bit this year, though it’s deceiving to try and judge the state of affairs without seeing how the market is truly split in half.

“There is plentiful inventory on the upper end market, so the housing shortage is really on the mid-priced and low ends,” said Yun. “Because the property tax deduction has been limited, there is less desire or greater financial burden from owning than before, so the upper-end market appears to be generally softer.”

In addition experts say builders have faced a number of obstacles to ramping up new construction, including high land prices, labor barriers, material costs, and the onerous process to obtain permits.

All this puts pressure on profit margins so when builders do construct a new house, it tends to be more on the luxury end.

Finally, as people move less often and more boomers decide to age in place rather than downsize, “that’s just kind of holding up a lot of the inventory that otherwise would be lubricating the whole system,” Olsen added.

So together these dynamics have created a tale of two markets.

“If you’re selling an entry level home, you’re probably still looking at a pretty competitive market in most places,” said Hale. “But if you’re selling a more expensive home you probably have to adjust your expectations.”

Cost of living and taxes sway local market conditions 

Nationally, housing conditions could be described as a seller’s market that’s gradually moving more in favor of buyers.

Drill down to the regional or local level though, and it varies. For one, some metro areas outside of major cities have stayed warmer as they catch the spillover of priced-out buyers (see: Tacoma). Strong job creation and reasonable cost of living has kept Midwest markets like Louisville and Indianapolis thriving, along with markets that resemble the Midwest in affordability. Rochester, New York is a prime example.

But there’s always exceptions. Go to Chicagoland, and you’ll hear agents tell a very different story.

“It’s definitely a buyer’s market here,” said Kim Alden, a Realtor with Baird & Warner in the Chicago suburb of Barrington, Illinois. “Inventory is a lot higher. Buyers are negotiating harder than ever because there’s a lot of people who want to sell their house and they’re using that to get the lowest price that they can.”

Alden says that 65%-75% of her listings come from people who want to leave the state of Illinois altogether to escape new and existing state tax laws.

With supply high, she’s seeing sellers experience disappointment that they can’t get as much money for their house as they expected, with one exception: updated, smaller homes are “flying off the shelves.”

“I listed a little three-bedroom, bath and a half for $178,000, and in the first weekend we had 33 showings,” Alden recalled.

Apparently anywhere, an affordable turn-key home remains a hot commodity.

But high-end sellers will need to bust out the paint and spruce up their curb appeal to attract buyers.

What about the rest of the year? 

Real estate experts remain optimistic about housing’s prospects for the latter half of 2019. Olsen expresses that even if GDP growth weakens and wages slow, it’s likely that the market is primed for some kind of a rebound.

The biggest reason for this is that as huge waves of millennials continue to reach peak home-buying age, that will put pressure on demand not only this year but in the years to come. And it’s hard to argue with long-term demographics. If a recession does hit at some point as part of the economic cycle, housing would therefore be impacted though perhaps not devastated.

Ultimately after a long post-recession hot streak, housing was due to break fever. The hope is that the market will heat up a little slower next time and create some normalcy. For now, consider it a short-term correction, and hope that more homes will come on the market that people can actually afford.

“The perfect scenario going forward,” Yun said, “even off into the next couple of years, is if there can be a robust increase in new home construction, the housing market will be more of a bright spot for the broader economy.”

Lagos and Abuja Remain top Destinations for Foreign Investment in Nigeria

The latest capital importation data released by the National Bureau Statistics (NBS) revealed that Lagos and Abuja are Nigeria’s biggest destinations of foreign capital inflows. The two received $8.35 billion out of the entire $8.48 billion in the first quarter of 2019, representing about 98% of Nigeria’s total capital inflow.

According to the NBS data, Lagos is officially Nigeria’s biggest destination of capital inflow with $4.77 billion or 56% as at the end of March 2019. Also, Nigeria’s Federal Capital Territory, Abuja, received a total of $3.55 billion or 42% of capital importation.

Breakdown of States’ capital inflow: Analysis of the NBS data shows that only 20 states in Nigeria were listed as destinations for capital inflows. Asides Lagos and Abuja which received the largest chunks, other states included:

  • Rivers ($41 million),
  • Adamawa ($25 million),
  • Benue ($25 million),
  • Cross River ($25 million),
  • Imo ($3 million),
  • Ogun States ($2.21 billion),
  • Kaduna ($2.16 billion),
  • Kano ($1 million).
  • Katsina ($576 million),
  • Borno ($500 million),
  • Oyo ($249.9 million),
  • Kwara ($200 million),
  • Bauchi ($99 thousand),
  • Niger ($67 thousand),
  • Akwa-Ibom ($55 thousand),
  • Anambra ($50 thousand) and
  • Delta ($40 thousand).

Note that the traditional foreign investment destination in Nigeria has always been Lagos, usually followed by Abuja. Although, this order was reversed in 2017 (fourth quarter) when Abuja attracted $2.68 billion while Lagos only trailed behind with $2.55 billion. However, Lagos has since overtaken Abuja to become the top destination for capital inflows.

 

The U.K tops Capital investments into Nigeria: Further analysis shows that the largest capital inflow into Nigeria was from the United Kingdom with $4.5 billion, which represents 53% of total capital inflow in Nigeria.

Also, the United States ranks second with an estimated $1.53 billion or 18% of total capital inflows.

Other countries that make up the top ten biggest share of capital inflows into Nigeria include: South Africa ($763 million), United Arab Emirates ($272 million), Switzerland ($271 million), Mauritius ($268 million), Belgium ($240 million), The Netherland ($208 million), Singapore ($92 million), and Zambia ($60 million).

Ranks of countries of origin for Nigeria’s capital importation as at Q1 2019

Best cities to start a business: According to the World Bank report on ease of doing business, Lagos ranked low in terms of ease of doing business in 2018. Specifically, Lagos State ranked number 28th with 54.90 index points, while Abuja ranked 9th with 59.85 points. However, despite being ranked low in the ease of doing business by the World Bank, most investors still prefer to invest in Nigeria’s commercial hub, Lagos.

 

The World Bank aggregated four indicators in arriving at the ease of doing business index. These include – starting a business, dealing with construction permits, Registering Property, and Enforcing Contracts. In terms of “starting a business”, Abuja ranked first with 85.61 index points, while Lagos State ranked second with 83.67 index points in 2018.

Source: nairametrics

Nigeria’s investment inflows near 6-year high on carry trade

After declining for three straight quarters, capital importation into Nigeria rose to the highest in almost six years and gained the most on a quarterly basis since third quarter (Q3) 2017 as carry trade increased in first quarter (Q1) 2019.

This followed the peaceful conclusion of the 2019 general elections, an attractive yield environment in Nigeria, and the fact that most central banks in developed economies dropped interest rates, analysts say.

Carry trade is a strategy that involves borrowing at a low interest rate and investing the amount in an asset offering higher returns.

Data released Tuesday by the National Bureau of Statistics (NBS) showed that the total value of capital importation into the country stood at $8.49 billion in the first three months of this year, the highest since Q3 2014, when $6.54 billion flowed into the country.

On a quarterly basis, capital importation rose by 216 percent, the highest gain since Q3 2017, when it increased by 131.27 percent. The latest figure also represents a 34.61 percent increase from $6.3 billion in the first quarter of 2018.

Nnamdi Olisaeloka, a fixed-income analyst at ZedCrest, said the figure was not surprising.

“When investors became convinced of a win for the incumbent president, they had a risk-on appetite for fixed-income securities even though they were wary of equities,” he said.

Olisaeloka pointed out that investors were lured by the high interest rate and yields environment which buoyed carry trade in Q1.

“Foreign portfolio investors were basically cherry-picking on interest rate opportunities given the expectations of continuous stability of the naira,” Olisaeloka added.

Capital importation rose to $2 billion, but rose 129 percent to $4.6 billion by March.

Favourable oil cycle and the dovish monetary policy stance in developed countries are also factors supporting carry trade across emerging markets including Nigeria, Omotola Abimbola, macroeconomic and fixed-income analyst at Chapel Hill Denham, said.

Abimbola, however, warned that while the interest environment has been juicy, levels of inflow have slowed down since March.

“Data from FMDQ are showing that from April to June, capital inflow, portfolio inflows, and even FDIs have gone back to trend level. March was a one-off jump as underinvested foreign investors increased their level of naira holdings post-elections,” he said.

For the quarter under review, the largest amount of capital importation by type was received through portfolio investment, which accounted for 84.21 percent ($7.15 billion) of total capital importation.

Other investment accounted for 12.91 percent ($1.1 billion) of total capital, while FDI accounted for 2.86 percent ($243.36m) of total capital imported in 2019.

By sector, banking received the most capital in Q1 at 33.6 percent. The sector grew its receipt by 976.57 percent quarter-on-quarter and 141.45 percent year-on-year to $2.85 billion.

Shares (equities) were the second largest destination with 28.32 percent or $2.4 billion. The figure represents a 126.25 quarterly rise although inflow was down 37 percent year-on-year.

Financing amassed a total of 25.21 percent of total capital importation in Q1 amounting to $2.139 billion. Growth was up year-on-year by 236 percent and quarterly by 232 percent.

Cumulatively, the top three sectors accounted for 87.13 percent of total capital importation in Q1.

According to the report, United Kingdom emerged as the top source of capital investment in Nigeria with $4.53 billion accounting for 53.40 percent of the total capital inflow in Q1 2019, while Lagos State emerged as the top destination of the capital investment at $4.78 billion, representing 56.25 percent of the total capital inflow during the period.

Similarly, capital inflow distribution by bank shows that Stanbic IBTC Bank plc emerged at the top of capital investment in Nigeria with $3.61 billion, representing for 42.50 percent of the total capital inflow in Q1 2019.

By CYNTHIA EGBOBOH & SEGUN ADAMS

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