The total capital importation into Nigeria declined by 46.86 per cent (year-on-year) from $9.6bn in 2015 to $5.1bn in 2016.
The total capital importation for Q4 2016 was estimated at $1.55bn, compared to $1.82bn in Q3 2016.
Loans (other investments), according to a report by Meristem Research, constituted majority (44 per cent) of capital inflows during the period ($2.24bn in 2016 as against $1.66bn in 2015), while Foreign Direct Investment and Foreign Portfolio Investment into equities amounted to 20 per cent ($1.04bn) and 17 per cent ($859.05m) of inflows accordingly.
On the other hand, currency deposits, trade credits and other claims contributed the minimum to inflows.
“We also note the reduced participation in the equities space (37 per cent in 2016 versus 63 per cent in 2015),” the report stated.
The fixed income market recorded more inflows in Q3 2016 compared to the equities market due to the hike in Monetary Policy Rate (14 per cent) in July 2016.
Although the total inflows into the fixed income space in 2016 declined by 29.24 per cent year-on-year, the analysts observed the increased participation in the space compared to other segments during the period (19 per cent in 2016 against 13 per cent in 2015).
Notwithstanding, there were no inflows into bonds and money market in December, the report noted.
According to the report, on sectoral levels, telecommunications, banking, oil/gas production/manufacturing and services sectors contributed 18 per cent, 14 per cent, six per cent and six per cent, respectively. These sectors were said to have contributed the most to the capital inflows during the period under review.
The United Kingdom maintained its position as the leading source of capital inflows, accounting for 40 per cent of the total inflows.
It was trailed by the United a States of America (18 per cent) and The Netherlands (10 per cent).
Noteworthy also were Singapore and Switzerland whose inflows increased by 215 per cent and 322.3 per cent, respectively.
New inflows also came in from Puerto Rico, Gibraltar, Mauritania, Czech Republic, Ukraine, Marshall Islands, Bulgaria, Seychelles, Tanzania and Austria during the period under review, according to the report.
Based on location of investments, Lagos had the highest inflows with capital importation of 97 per cent, distantly followed by Abuja, Cross river, and Ogun states, which had one per cent each, it added.
Also, The nation’s interbank lending rate dropped by 6.5 per cent to five per cent on Friday, as the money market was awash with cash from budgetary disbursal and coupon payment on matured bonds.
The interbank lending rate, also called the cost of borrowing among banks, had closed at 11.5 per cent last Friday due to a drop in liquidity in the market necessitated by bond and treasury bills sales.
According to Reuters, traders said on Friday that around N400bn was injected into the banking system on Wednesday from the December budget allocations to states and local governments, while N49bn coupon on matured bonds was released by the Central Bank of Nigeria on Friday, boosting liquidity and forcing down the interbank rate.
On Thursday, the CBN withdrew around N217bn through the sale of short-dated Open Market Operations bills in a bid to reduce the level of excess liquidity in the banking system, but market liquidity remains high.
The balance in commercial banks’ accounts with the CBN stood at N254.46bn surplus on Friday, against N202.58bn the previous week.
“We strongly believe that the central bank will conduct more OMO next week to take out the excess cash from the system,” one trader said, adding that expected dollar sales at a special forex auction could also help reduce the liquidity level and seen rate rising again.
The naira was unchanged at 498 to the dollar on the parallel market and 305.25 a dollar on the official interbank window on Friday as the market awaited the result of a special forex auction targeted at selected sectors of the economy.
The central bank had on Wednesday asked commercial lenders to submit backlog dollar demand from fuel importers, airlines, raw materials producers, and makers of agricultural chemicals and machinery for manufacturers.
The stock market’s main index rose by 0.15 per cent to 26,328 points, the highest level since January 16, driven by gains in energy company, Oando, which was up by 4.05 per cent and local French Total tick up 4.9 per cent.
Meanwhile, the CBN has asked banks to bid in a special currency auction to clear a backlog of dollar obligations that businesses owe.
In a notice to commercial lenders, the CBN said it would hold a retail foreign exchange auction to sell two- to five-month dollar forwards. The amount of dollars to be sold was unspecified, according to traders.
Last December, the CBN sold around $1bn on the forward market to clear a similar backlog of dollar obligations, in an effort to support production in the economy.
The three tiers of government received a total of N4.95tn instead of N6.1tn projected to be distributed to them in the 2016 fiscal year from the Federation Account Allocation Committee, investigation has shown.
This created a shortfall of about N1.1tn within the 12-month period based on the analysis by our correspondent.
The committee, headed by the Minister of Finance, Mrs. Kemi Adeosun, is made up of commissioners of finance from the 36 states of the federation.
Other members are representatives from the Federal Inland Revenue Service; the Nigeria Customs Service; Revenue Mobilisation, Allocation and Fiscal Commission as well as the Central Bank of Nigeria.
The federation account is currently being managed on a legal framework that allows funds to be shared under three major components – statutory allocation, Value Added Tax distribution; and allocation made under the derivation principle.
Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; states, 26.72 per cent; and local governments, 20.60 per cent.
The framework also provides that Value Added Tax revenue be shared thus: the Federal Government, 15 per cent; states, 50 per cent; and local governments, 35 per cent.
Similarly, extra allocation is given to the nine oil producing states based on the 13 per cent derivation principle.
Findings also revealed that the inability of the revenue generating agencies to meet up with their revenue targets owing to the challenges facing the economy was largely responsible for the dip in revenue, which impacted negatively on the allocations to the three tiers of government.
Figures of statutory allocations obtained from FAAC revealed that while the government had projected to distribute N509.1bn monthly among the three tiers of government, the shutdown of oil installation facilities, which led to a drop in crude oil production, made it difficult to generate enough revenue to achieve that target.
For instance, within the 12-month period of last year, the government could only surpass the monthly budgeted allocation to the three tiers of government thrice.
The months are August, where the highest amount of N691bn was shared; July, which had a total allocation of N559.03bn; and September, which had N510.27bn.
A further analysis showed that the sum of N387.77bn was allocated in January; February had N370.38bn; while March, April and May had N345.09bn, N299.74bn and N281. 5bn, respectively.
For the months of June, October, November and December, the committee distributed N305.12bn, N420bn, N386.87bn and N400bn in that order.
The Chairman, Forum of Finance Commissioners of FAAC, Mahmoud Yunusa, while speaking during an interview in Abuja on the sidelines of this month’s FAAC meeting, said the scarcity of resources to implement the programmes of government owing to the economic recession had made it imperative for states to be prudent and transparent in financial management.
He said, “The resources are no longer there and so whatever resources that we have must be effectively, transparently and judiciously used for the benefit of the people.
“The expectations of the people are very high and the resources are very lean day by day and so we have to add value to the people. People are clamouring for change and we have to look for a way to ensure that the lives of people are changed.”
He said the states would work with the Federal Government to address the current recession in the country.
Yunusa, who is also Commissioner for Finance in Adamawa State, said that the target of the states was to generate enough revenue internally to pay salaries.
He stressed that once this was done, whatever allocation received from the federation account would be used by the states for capital projects.
He said, “The recession is a problem but we should see it as a blessing in disguise because before now, all the states relied solely on the Federal Government but now because the money is no longer there, we are forced to look inwards for the opportunities and potential in our respective states and how to exploit them.
“We have to reduce the cost of governance and plug all the loopholes in our expenditure.”
He added that the challenge had helped the states to look at their revenues and restructure their expenditures to fit into the realities on the ground.
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