Nigeria’s foreign assets’ value dips by N459bn in three months

By MICHAEL EBOH

The value of Nigeria’s assets abroad dipped by N459.2 billion (US$2.87 billion) in the first quarter of 2012, according to a report by the Central Bank of Nigeria.

The CBN also disclosed that Foreign Direct Investment, FDI, inflow into Nigeria dropped by 19.25 per cent to N275.2 billion (US$1.72 billion) in first quarter 2012 from N340.8 billion (US$2.13 billion) recorded in the fourth quarter of 2011, blaming the decline on the activities of terror group in the country.

In the report titled, ‘Development in the external sector for quarter one 2012’, the Apex bank said the country’s assets dropped by 56.83 per cent from N808 billion (USS5.05 billion) recorded at the end of 2011 to N348.8 billion (US$2.18 billion) at the end of March 2012.

The CBN blamed the decline on the country’s foreign assets on the global financial crisis which is threatening the global financial landscape.

According to the apex bank, the decline may be linked to the persisting Eurozone crisis which has continued to adversely affect major international financial centres.

Despite the decrease in the value of the foreign assets, the country recorded a surplus in its Capital and Financial accounts.

According to the report, the capital and financial accounts swung from a deficit position of US$1.06 billion in fourth quarter 2011 to a surplus position of US$2.46 billion as at the end of the first quarter 2012. The improvement in the capital and financial accounts, according to the apex bank is as a result of the huge surge in portfolio investment.

Also, aggregate financial liabilities increased from US$3.99 billion recorded in fourth quarter 2011 to US$4.65 billion as at the end of March 2012.

“This is a welcome development, especially with the crave for the economy to have more foreign capital to finance domestic economic growth. This also indicates a renewed investors’ confidence in the economy.

“Notwithstanding, there is need for cautious optimism given that the bulk of the inflow is portfolio flows,” the CBN said.

Analysis of the flow of capital into the country in the period under review, shows that foreign investors invested N884.8 billion (US$5.53 billion) in the Nigerian economy, compared to N556.8 billion (US$3.48 billion) and N542.4 billion (US$3.39 billion) in fourth and first quarters 2011 respectively.

According to the report,Foreign Direct Investment, FDI, inflow accounted for 31 per cent of the aggregate foreign capital inflows while portfolio investment accounted for 69 per cent.

Continuing, the CBN said, “Further analysis revealed that FDI dropped from US$2.13 billion in fourth quarter 2011 to US$1.72 billion in first quarter 2012. In contrast, estimated portfolio investment inflows increased significantly from US$1.36 billion in fourth quarter 2011 to US$3.82 billion in first quarter 2012.

“The decline in FDI inflows during the review period was traced to the insecurity occasioned by terrorist activities while the increase in portfolio investment inflow was attributable to the positive effect of the CBN’s policy on foreign investment in short-term instruments and the relatively high yield.”

The apex bank, however, warned that the continued increase in portfolio investment over and above FDI portends serious consequences for foreign exchange management. “Therefore, there is need to closely monitor this and to put in place measures to stem any adverse effect, in case of a reversal,” it stated.

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Nigeria’s foreign assets’ value dips by N459bn in three months