Foreign firms repatriated $5.86 billion from the Nigerian economy between October 2022 and March 2023, the Central Bank of Nigeria has disclosed.
About $5.13 billion was repatriated as dividends by foreign investors.
In its ‘Economic Report, First Quarter 2023,’ the apex bank disclosed that higher dividend payments to non-residents further widened the deficit in its primary income account. It stated that this deficit widened to $2.69 billion in Q1 2023 from $2.26 billion in Q4 2022.
According to the CBN, the primary income account covers the compensation of employees and investment income.
In its Quarterly Statistical Bulletin (Volume 11, Number 3, September 2022), it said, “The investment income component refers to accrued income on existing foreign financial assets and liabilities. This income may be profits, interest, dividends, and royalties received by or paid to direct and portfolio investors. It may also be interest and commitment charges on loans (Other Investment Income).”
Dividend payments to foreign investors amounted to $5.13 billion in the six months under review.
Giving a breakdown of payments, the bank stated, “The deficit in the primary income account widened by 18.7 percent to $2.69 billion in 2023Q1, due primarily to the 34.9% increase in investment income payments, which amounted to $3.09 billion from $2.77 billion in 2022Q4.
“Income on direct investment in the form of dividends rose by 12.1 percent to $2.71 billion, relative to $2.42 billion in 2022Q4. Similarly, interest payments on portfolio investments rose to $0.09 billion 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’ accounts maintained a surplus position, increasing by 6.2 percent to $0.06 billion, relative to the level in 2022Q4.”
According to a 2019 report, gotten from the CBN’s website, titled ‘Current Account Balance and Economic Growth in Nigeria: An Empirical Investigation,’ the primary income account has been in deficit due to increased debt service payments and remittances of dividends, income, and profits by foreign-owned companies.
It stated that the outflow from the account was undermining the productivity of the real sector as foreign exchange resources, which ought to have been used to develop the economy, were being used to service external debt.
It added, “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.”
The report further noted that the net deficit in the income account has declined in recent years due to lower outpayments of dividends, distributed branch profit, and other interest payments.