Modest change in net financial liabilities in the third quarter of 2021

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Wednesday, March 03, 2022 / 10:45 AM / by FBNQuest Research / Header Image Credit: FBNQuest

Our chart today, taken from CBN data, shows Nigeria’s international investment position saw a higher net financial liability of $78.5 billion in Q3 21, from $76 billion in the quarter. comparable to the previous year. However, the net position was virtually unchanged from the previous quarter’s figure of $79 billion. The stock of financial assets increased 25% year-on-year and 14% quarter-on-quarter to $103 billion, outpacing the increase in financial liabilities, which rose 15% year-on-year to around $181 billion of dollars.

As for the drivers of the substantial growth in financial assets, the main driver was other assets, which rose 27% year-on-year to $43.8 billion. Foreign currency deposits, which increased by about $8.7 billion year-on-year to N41.5 billion, largely contributed to the increase in other assets.

Foreign Direct Investment (FDI) outflows from Nigerians increased by 35% year-on-year, from a low base of $9.8 billion in Q3 20 to $13.2 billion in Q3 21.

Portfolio investment abroad has remained largely flat at less than $2 billion since Q2 2019. Reserve assets have also increased by around $3.3 billion due to an increase in the holding of special drawing rights (SDR) by the IMF.

In terms of financial liabilities, portfolio investment (inflows), primarily in debt securities, increased by more than $8 billion, or 29% year-on-year, to $37 billion. On the other hand, FDI inflows recorded a more modest growth of 5% year-on-year to reach 90.5 billion dollars.

Other liabilities increased about 20% year-on-year to $52 billion. Its main components were loans from abroad which amounted to more than $39 billion, of which about 58% is attributable to general government.

In our view, the overall conclusion is that foreign investors continue to limit their exposure to short-dated liquid securities due to relatively fluid macroeconomic fundamentals, changes in government policies and other structural issues. To attract more rigid capital, these obstacles must be overcome.

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