It’s Hot Money, Not FDI, That’s Bringing Dollars Into Nigeria

LAGOS (Capital Markets in Africa) – Investors haven’t pumped this much hot money into Nigeria in three years.

Portfolio investment more than tripled in the third quarter from a year earlier to $2.8 billion, according to the country’s National Bureau of Statistics. Foreign direct investment fell 65 percent year-on-year to $118 million, the lowest level since the fourth quarter of 2013.

Debt traders have mostly piled into short-term securities, attracted by yields of almost 20 percent. Of the fixed income investment in the last quarter, 86 percent went into money market instruments, the NBS said.

Bond and stock investors have returned to Africa’s biggest economy since it opened a foreign-exchange trading window in April, where the naira was allowed to weaken to its black-market rate. That, along with higher oil prices and production, has helped ease Nigeria’s shortage of hard currency.

Read more about Nigeria’s foreign-exchange regime here

It’s a different story when it comes to enticing foreigners to buy or create hard assets. For them, the concern is that while Nigeria’s economy returned to growth in the last two quarters, it’s still reeling from its worst downturn in around 25 years and inflation of almost 16 percent.

Source: Bloomberg Business News