The Central Bank of Nigeria has revealed that foreign firms repatriated a total of $5.86 billion from the Nigerian economy between October 2022 and March 2023. Out of this sum, $5.13 billion was repatriated as dividends by foreign investors.
In its ‘Economic Report, First Quarter 2023,’ the central bank disclosed that higher dividend payments to non-residents contributed to a widening deficit in its primary income account. This deficit expanded to $2.69 billion in Q1 2023, up from $2.26 billion in Q4 2022.
The primary income account, as defined by the CBN, encompasses compensation for employees and investment income, including profits, interest, dividends, and royalties received by or paid to direct and portfolio investors, as well as interest and commitment charges on loans (Other Investment Income).
Dividend payments to foreign investors amounted to $5.13 billion during the six-month period under review.
Providing a breakdown of payments, the central bank noted, “The deficit in the primary income account widened by 18.7 percent to $2.69 billion in 2023Q1, primarily due to the 34.9 percent increase in investment income payments, totaling $3.09 billion, up from $2.77 billion in 2022Q4.
“Income from direct investment in the form of dividends increased by 12.1 percent to $2.71 billion, compared to $2.42 billion in 2022Q4. Likewise, interest payments on portfolio investments rose to $0.09 billion, up from $0.05 billion in 2022Q4. Interest earnings on reserve assets increased by 35.7 percent to $0.20 billion, from $0.15 billion in 2022Q4. Conversely, interest payments on loans declined by 0.7 percent to $0.30 billion.
“The compensation of employees’ account maintained a surplus position, increasing by 6.2 percent to $0.06 billion compared to the level in 2022Q4.”
A 2019 report from the CBN’s website, titled ‘Current Account Balance and Economic Growth in Nigeria: An Empirical Investigation,’ indicated that the primary income account had consistently been in deficit due to increased debt service payments and the remittance of dividends, income, and profits by foreign-owned companies. This outflow was noted to be undermining the productivity of the real sector and using foreign exchange resources that could have been used for economic development.
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The report emphasized, “In addition, the profit, which ought to have been ploughed back to generate increased economic activities, is being remitted to overseas countries by foreign-owned companies in Nigeria.”
However, the report also observed that the net deficit in the income account had been declining in recent years due to lower outpayments of dividends and distributed branch profits, as well as other interest payments.
A recent report, foreign airlines repatriated $4.66 billion from Nigeria through ticket sales over 15 months, even though they faced difficulties accessing their funds due to a scarcity of foreign exchange in the country.
Acknowledging the challenges faced by investors in repatriating their funds, President Bola Tinubu, in his inaugural address, pledged to address issues related to multiple taxation and investment barriers, ensuring that investors, both local and foreign, could repatriate their dividends and profits.
The CBN’s Q1 economic report also revealed that foreigners redeemed matured investments in Q1 2023, resulting in a reduction in their claims on the Nigerian economy. The bank attributed this development to reversals of portfolio investments and the withdrawal of foreign currency and deposits from domestic banks. Additionally, uncertainty surrounding the 2023 general elections and investors’ quest for safer havens contributed to the divestment.
The report concluded, “A portfolio investment reversal of $1.17 billion was recorded, in contrast to an inflow of $0.34 billion in 2022Q4, occasioned by the redemption of investments in short-term debt securities by non-resident investors.”
