Foreign investors may continue to avoid Nigeria into 2024 due to concerns about currency instability and other economic challenges, according to experts speaking at the 2023 African Economic and Capital Markets Conference organized by Vetiva Capital Management Limited. During the virtual conference, Luke Ofojebe, Head of Research at Vetiva Capital, reviewed the capital markets in the West African sub-region and discussed the dominance of local investors in Nigerian markets. He noted that foreign investors have been hesitant to invest in Nigeria due to currency instability and other factors.
Ofojebe explained that high operating costs resulting from the removal of fuel subsidies, as well as increased energy costs due to higher electricity tariffs, have contributed to declining margins. While the hawkish stance of the Central Bank of Nigeria has led to higher interest income for banks, currency weakness remains a concern. The United States Federal Reserve’s plan to continue rate hikes into the first half of 2024 may also lead to capital flight.
To attract foreign investors, Ofojebe suggested that the Nigerian government needs to strengthen its forex receipts, primarily from oil, by ramping up oil production. He also projected that a positive performance of banking stocks could offset the impact of the poor performance of real sector stocks on the local stock exchange.
Ibukun Omoyeni, an economist at Vetiva Capital, emphasized the need to address the high volume of Naira in circulation, stating that tightening rates alone may not solve the country’s economic problems. He recommended measures to control money supply.
The data from the Central Bank of Nigeria indicated that the currency in circulation reached N2.7 trillion by the end of August. Currency instability and economic challenges continue to pose hurdles for Nigeria’s attractiveness to foreign investors.
Stay tuned for more updates on Nigeria’s economic outlook.