The Pacesetter Frontier Magazine

Tag: Foreign investors

  • INFLATION: Foreign exchange crisis pushes foreign investors to withdraw N139.39bn from NSE

    With a weakened macroeconomic indices as well as worsening foreign exchange crisis, latest investigations have shown that foreign investors withdrew a total of N139.39 billion from the Nigeria’s stock exchange between January and August 2021.

     

     

    According to the Domestic & Foreign Portfolio Investment report of the Nigerian Exchange Limited (NGX) for August 2021, foreign inflows dropped to N123.46 billion from N161.31 billion in 2020 year-to-date (ytd) while foreign outflows stood at N139.39 billion from N308.89 billion in 2020.

     

    The report indicated that as at August 31, 2021, total transactions at the nation’s bourse fell marginally by 0.39 per cent from N89.77 billion (about $218.20 million) in July 2021 to N89.42 billion (about $217.53 million) in August 2021.

     

    The performance of the current month when compared to August 2020 (N94.45 billion) figures revealed that total transactions decreased by 5.33 per cent.

     

     

     

    Also, in August 2021, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by 44 per cent, as domestic inflows for the month under review stood at N33.82 billion while outflows stood at N30.24 billion. In the same vein foreign inflows and outflows stood at N10.72 billion and N14.64 billion respectively.

     

    Further analysis of total transactions executed between the current and prior month (July 2021) revealed that domestic transactions fell by 13.71 per cent from N74.24 billion in July to N64.06 billion in August 2021.

     

    However, total foreign transactions increased by 63.30 per cent from N15.53 billion (about $37.75 million) to N25.36 billion (about $61.69 million) between July 2021 and August 2021.

     

    The report also indicated that Institutional investors outperformed Retail investors by 0.44 per cent as the comparison of domestic transactions in the current and prior months (July 2021) revealed that retail transactions dropped by 15.16 per cent from N37.59 billion in July 2021 to N31.89 billion in August 2021. Similarly, the institutional composition of the domestic market decreased by 12.22 per cent from N36.65 billion in July 2021 to N32.17 billion in August 2021.

     

    Daily Sun investigations revealed that in 2018, N642.65 billion in foreign portfolio investment outflow was recorded, while foreign investors withdrew N523.42 billion and N481.93 billion during the corresponding period in 2019 and 2020.

     

    Piqued by the huge capital outflow from the equities market in 8 months, operators at the weekend predicted a gloomy outlook for the market and economy. They argued that the macroeconomic indices have been overwhelmingly weak, noting that the increase in foreign transactions was due to the knock-on impact of IMF’s SDR allocation and the recently concluded Eurobond issuance on FPIs appetite for stocks.

     

    Speaking during the Sunrise programme on Channels Television, Former Head, Banking and Finance Department at the Nasarawa State University Keffi, Professor Uche Uwaleke, said the GDP figure appears to be disconnected from reality as Nigeria’s growth figures appear not to be quite an inclusive one.

     

    According to him, “Unless the Federal Government improves the ease of doing business and addresses infrastructural deficits, the level of outflows might continue to increase”.

     

    For their part, analysts at Cordros Capital, said, “Our expectation of yield moderation in the fixed income market bodes well for the equities market over the short to medium term. Similarly, we expect improved participation from FPIs on account of increased dollar liquidity at the I & E window given inflows from IMF’s SDR allocation and the Eurobond issuance.

     

    Accordingly, we see scope for improved activities from both the domestic and foreign in vestors over the medium term”.

     

     

     

     

    Source: www.sunnewsonline.com

  • Interest of foreign Investors in Nigeria decline by 27.5%

     

    Nigeria received about $8.4bn investment announcements as at 4th March 2021, out of which $5.46bn were pledged by foreign investors. The remaining $2.08bn was promised by domestic investors, statistics obtained from the Nigerian Investments Promotion Commission showed.

     

    The sum pledged by foreign investors in Q1 2021 is 27.5 per cent lower than the $7.54bn foreign investment announcements recorded by the NIPC in the preceding quarter.

    However, the Q1 foreign investment profile was 36.5 per cent higher than the $4.02bn reported in the corresponding period in 2020, but was 56.6 per cent lower than the S12.6bn recorded in the same period in 2019.

     

    In its ‘report of investment announcements in Nigeria (January – March 2021)’, the NIPC noted that the major sources of foreign investments announcements in Q1 2021 originated from Morocco, the United Kingdom and the United States.

     

    Investors from the three countries pledged $1.40bn, $0.24bn and $0.08bn respectively, while other investors from undisclosed countries pledged to invest $3.74bn in Nigeria’s economy.

     

    The report revealed that Bayelsa and Delta States were the top investment destinations during the period, followed by Akwa Ibom and Lagos States.

     

    Data obtained from the NIPC showed that Bayelsa State received the largest share of total announcements of $3.6bn in manufacturing, Delta State recorded $2.94 bn worth of announcements in construction and power transmission, Akwa Ibom State had $1.4bn announced in mining and quarrying, while Lagos State announcements totalled $0.26bn from electricity and manufacturing.

     

    By sector, manufacturing received the largest investment intention, at $5.08bn, followed by construction at $2.9bn, electricity at $0.26bn, agriculture $0.11bn, and others at $0.07bn.

     

    In terms of volume, NIPC said Nigeria received 15 projects across eight states in Q1 2020, compared to corresponding quarter of 2020 with 19 projects across 14 states including the Federal Capital Territory.

     

    Economists, who spoke on the decline, attributed it to the unfavorable investment climate the country fueled by serial currency devaluation, unstable foreign exchange rates, poor and inefficient infrastructure among other factors.

     

    A professor of economics at the Olabisi Onabanjo University Ago-Iwoye, Sheriffdeen Tella, stated that the dwindling interest of foreign investors is as a result of inefficient power supply, naira depreciation and increased cost of production.

     

    He said, “The prices of electricity and other infrastructure are becoming more and more expensive, and because electricity is not efficient, so many companies are forced to utilise other sources such as power generation plants that use fuel, and the price of fuel has been going up.

     

    “So, that also adds to their costs and that discourages them from wanting to invest in the country.

     

    “Another thing is that the naira has been depreciating, even before the devaluation by the CBN.

     

    “So they are looking at it that when they make money in naira, if they want to convert it to foreign currencies, it won’t have much value. So, the instability of the value of naira is also part of it.”

     

    Another expert and the former Director-General of the Abuja Chamber of Commerce and Industry, Dr Chijioke Ekechukwu, noted that beyond the aforementioned factors, insecurity, corruption and unstable government policies were driving the decline.

     

    He said, “Top on the list is the level of insecurity that has bedeviled the country in the last few years and of course, you know that the insecurity worsened every day.

     

    “Another factor is the level of inflation and the fact that the exchange rates are not encouraging, then unstable government policies and finally corruption.

     

    “These factors are chasing investors to other neighboring African countries. Because the problems found here are absent in countries like Ghana.”

     

    According to Ekechukwu, the decline has direct implications for the Nigerian economy.

     

    He said, “The implications are we don’t have enough foreign exchange to be able to meet our demands; secondly, jobs that would have been created by these FDIs are no longer there, and they are going to other countries in Africa.

     

     

     

    “Thirdly, these investments should have added to our GDP but they are not. So our GDP is just growing marginally instead of significantly.”

     

    The experts urged the Federal Government to tackle the militating factors to create a suitable and attractive environment that would interest investors.

     

    Ekechukwu said the government should make sure the country was saf e enough for people to live in and do their businesses.

     

     

     

     

     

    Source: www.punchng.com