The Nigerian banking industry continues to play a pivotal role in attracting foreign capital amidst the country's ongoing economic challenges. According to the National Bureau of Statistics (NBS) Capital Importation Report for Q2 2024, Citibank Nigeria Limited emerged as the leader in capital inflows, bringing in a substantial $818.46 million, which accounts for 31.43% of the total capital importation into the country. Following closely were Standard Chartered Bank Nigeria Limited with $654.79 million (25.14%) and Rand Merchant Bank Plc with $488.59 million (18.76%).
Analysts suggest that this trend highlights the significant role financial services play in securing foreign investments for Nigeria. With a total capital inflow of $5.98 billion recorded in the first half (H1) of 2024, this marks an impressive 177% year on year (y/y) increase compared to $2.16 billion in H1 2023. The increase was largely driven by a 360% y/y growth in portfolio investments to $3.48 billion and an 85% surge in other investments to $2.35 billion.
Stanbic IBTC Bank, Access Bank, and Zenith Bank also made significant contributions, bringing in $409.93 million, $80.14 million, and $78.01 million respectively. Smaller banks such as Ecobank Nigeria, FBN, and GTBank attracted more modest capital, but their participation remains essential to the sector's overall performance.
One of the main drivers of this capital surge has been the elevated interest rates offered by the Central Bank of Nigeria (CBN). During this period, the CBN offered yields as high as 22.5% on treasury bills, making Nigerian debt instruments highly attractive to foreign investors. OMO bills and commercial papers were also appealing, yielding up to 30%, further boosting foreign portfolio investment (FPI) inflows.
Foreign investors flocked to Nigeria's money markets, with 77% of FPIs directed toward treasury bills, OMO bills, and commercial papers in H1 2024. The high return on these instruments drew significant foreign interest despite challenges such as inconsistent foreign exchange policies and local currency devaluation.
While treasury and OMO bills dominated the market, bonds also saw growth, attracting $599 million in FPIs during H1 2024, up from $386 million the previous year. This 55% increase in bond investment further illustrates foreign investors' confidence in Nigeria's fixed income market.
Beyond banking, Nigeria’s trading and production sectors also performed well, capturing 17.8% and 13.7% shares of the total capital imported, respectively. These sectors' ability to maintain their position as top investment destinations reflects their critical contribution to Nigeria’s economic growth and expansion, supported by the continued adoption of innovative practices.
As Nigeria continues to attract substantial foreign investments, particularly in its banking and financial sectors, the focus must remain on sustaining investor confidence through consistent policies and market reforms. The significant growth in capital inflows during H1 2024 indicates that, despite economic hurdles, Nigeria remains a key destination for foreign investors seeking high returns on debt instruments.
However, the country must continue to strengthen its macroeconomic stability and address lingering issues such as foreign exchange liquidity and inflation to ensure sustained growth in the coming quarters.
Citibank's dominance in Q2 2024 underscores the critical role that large financial institutions play in bringing much needed capital into Nigeria. As the nation navigates its economic challenges, the banking industry will undoubtedly remain a cornerstone of its investment landscape.