Nigeria attracted $3.38 billion in capital inflows in the first quarter of 2024, a significant increase of 198% year on year. According to data from the National Bureau of Statistics (NBS), debt instruments dominated the inflows, accounting for 94% of the total.
Foreign portfolio investments (FPIs) led the way, rising by 220% year on year to $2.08 billion. Foreign direct investments (FDI) also grew, increasing by 150% to $119.18 million. Other investments, including loans, rose by 172% to $1.18 billion.
The focus on debt instruments is a deliberate policy choice, with managers of the Nigerian economy seeking to attract foreign capital to finance the country’s fiscal and monetary policies. The Central Bank of Nigeria (CBN) has implemented a series of interest rate hikes to combat inflation, making the country’s debt instruments more attractive to foreign investors.
As a result, short-term instruments such as bonds and money market instruments like treasury bills and OMO bills have seen a significant surge in demand. Foreign capital inflows into money market instruments rose by 11-fold year on year to $1.61 billion, while Nigerian bonds attracted $420.81 million in foreign capital, up by about 40% from the previous year.
The CBN has welcomed the increased interest from foreign investors, with Governor Yemi Cardoso noting that foreign portfolio investors are showing renewed interest in the Nigerian market. The bank has implemented initiatives aimed at ensuring liquidity and stability in the foreign exchange market, resulting in significant inflows of over $1.5 billion into the Nigerian economy.
However, it’s worth noting that foreign portfolio outflows also surged by 237% to N119.81 billion, highlighting a trend where foreign investors are pulling out more funds than they are bringing into the Nigerian economy. Despite this, the CBN governor has emphasized that it’s normal for investors to come and go, and vice versa.
