The Nigerian Stock Exchange (NSE) has disclosed that total Foreign Portfolio Investment, FPI, in the nation’s capital market contracted by N508 billion or 49.5 per cent in 2016. The total FPI inflow declined from N1.025 trillion in 2015 to N517.55 billion in 2016. On a two year basis also, foreign transactions declined by 66.34 per cent to N518 billion in 2016 from N1.539 trillion in 2014.
However, FPI outflow increased in 2016 to N261.03 billion as against N256.52 billion inflow recorded in 2015.
According to Ayodele Akinwunmi, chief economist at FSDH Merchant Bank Limited, the trend is having serious negative impact on Nigeria’s exchange rate, balance of payment position and foreign direct investment as well as lower tax revenue for the government because of lower investments being undertaken and rising unemployment and inflation. He advised that the government needs to communicate clearly its economic policy to the private sector so that it can inspire investors’ confidence. “FGN should also provide incentives, both fiscal and trade, for investors, both local and foreign to attract them to Nigerian economy,” Akinwunmi said.
Similarly, Johnson Chukwu, Managing Director/CEO, Cowry Assets Management Limited, attributed the fall in foreign investment in Nigeria to lack of confidence. “Nothing has changed about the country’s economic fundamentals to encourage foreign investors to come in. Foreign investors do not have so much confidence; there is lack of confidence in the Nigerian economy as a whole by foreign direct and portfolio investors. That is also not helped by the current disparity in foreign exchange prices between official rate, interbank rate and the parallel market. Moreover, investors are not assured that they can just convert their naira asset back to dollar whenever they want. So, market liquidity in Fx market is another constraint.”
By Dike Onwuamaeze