Total capital inflow into the Nigeria’s manufacturing sector rose Year-on-Year (YoY) by 88.17 percent in the first half of the year ended June 30, 2023 (H1’23).
Findings from the National Bureau of Statistics (NBS) data showed that inflow into the sector jumped to $861.17 million in H1’23 from $457.66 million in H1’22.
The data also shows that the share of inflow to the manufacturing sector to the total capital inflow for the six month period rose to 39.81 percent in H1’23 from 14.73 percent in H1’22, representing a 25.08 percentage point increase. Total capital importation in H1’23 stood at $2.163 billion.
Inflow through the sector increased Quarter-on-Quarter by 136.2 percent to $605.04 million in Q2’23 as against $256.12 million in Q1’22. This also represented 58.73 percent of total capital imported in Q2 2023. The sectoral breakdown shows that the manufacturing sector recorded the highest inflow during the period followed by the banking sector, which attracted $499.14 million.
The information and technology services, financing, and shares sectors ranked among the top five sectors of interest.
Commenting on the development, Ayorinde Akinloye, an economic and investment strategist, expressed surprise at the surge in inflow into the manufacturing sector, saying that it was more of an outlier.
He stated: “I don’t think there’s a broad economic explanation for what happened. It is likely a situation whereby a major piece of equipment was imported into the sector. You will recall that sometime in 2018, Aliko Dangote imported one equipment for his refinery and that sort of boosted imported capital and foreign trade as at that time. That may be what also happened in this case.”
Akinloye, however, said that the fact that the surge seen during the period was an outlier would make it difficult to sustain the trend going forward.
“The economic fundamentals that should aid improvement in capital importation through production and manufacturing are not there. Foreign Exchange (forex) remains a problem; the business operating environment also remains quite difficult,” he said.
Speaking in the same vein, Chinazom Izuora, Senior Associate at Parthian Securities Limited, said: “Higher dollar interest rates, the liberalization of the Naira and the FX supply challenges are likely to put a strain on the ability of Nigerian businesses to service dollar obligations.
Companies that have foreign operations or FX earnings are better positioned to service dollar obligations.
“Therefore, Nigerian producers/manufacturers need to produce not just for local consumption but to export in order to improve dollar supply and bolster the economy.”