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Foreign Investors Express Worries Over Nigerian Market, Tinubu Government’s Policies

Recall that Tinubu has made some reforms aimed at luring investors and boosting dollar liquidity in the country. 

Some foreign investors have expressed their lack of confidence in the Nigerian economy one year after Bola Tinubu’s inauguration as the country’s elected president. 

According to Bloomberg, the investors said they were excited and very hopeful of investing their wealth into the Nigerian market last year shortly after Tinubu came to power, but the current realities have dashed their hopes. 

“We are likely to add to local currency bonds once FX volatility declines, but the timing of that remains up in the air,” Kevin Daly, a portfolio manager at London-based Abrdn Investments Ltd was quoted by Bloomberg

 “It will require a combination of factors such as further foreign portfolio flows, and more importantly some de-dollarisation as the Central Bank can’t be the sole provider of FX liquidity for the market,” he added.

Recall that Tinubu has made some reforms aimed at luring investors and boosting dollar liquidity in the country. 

These reforms include removal of costly fuel subsidies, replacing central bank governor Godwin Emefiele with ex-Citibank executive Olayemi Cardoso, who has pledged a return to orthodox central banking, clearing a foreign-exchange backlog, and overhauling the country’s exchange-rate policies — effectively devaluing the naira.

While the initial moves enthralled investors, stimulated dollar flows, and resulted in a naira surge, that has subsequently subsided. 

SaharaReporters had on Tuesday reported that former Vice President, Atiku Abubakar, advised Tinubu’s administration to do six things to revive the economy and pull the country out of its current economic crisis.

Atiku, who was also the candidate of the Peoples Democratic Party (PDP) in the 2023 presidential election, had given the advice while assessing President Tinubu’s first year in office.

According to him, Tinubu’s one year in office is a “cocktail of trial-and-error economic policies”.

Also, according to Tellimer Ltd. data, investor inflows into the foreign exchange market fell by over a fifth in April to a daily average of $200 million from a month earlier, and reached $180 million in the first three weeks of May. 

The naira has lost about 67% of its value versus the dollar since June, while gasoline subsidies have been restored following a popular reaction against rising food and fuel expenses.

Other measures investors would like to see before they boost their investments is better returns. 

“We have invested in Nigerian eurobonds, but not yet invested in the local currency bonds,” said Ayo Salami, chief investment officer at Emerging Markets Investment Management Ltd. 

“The local currency bonds are not yet attractive given that inflation at about 33.7% is still above the policy rate at 26.25%,” Salami said. 

Another issue Nigeria needs to address is the repatriation of funds.

“While Nigeria offers higher equity valuations and better yields, emerging and frontier market peers like South Africa, Egypt, Kenya, Turkey and Pakistan offer less repatriation risks and a more advanced policy course correction and higher credibility that policies will be sustained,” Tellimer said. 

“I think as long as we can be consistent and clear about policy direction, when it comes to monetary policy and the like, then I think you will see confidence return, then you will see liquidity return,” said Ladi Balogun, chief executive officer of Lagos-based FCMB Group. “That is when you will see international investors come back.

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