What do foreign investors really think of the Nigerian economy, and the Naira Situation?
In a recent interview, this is what the director of capital markets of the Johannesburg Stock Exchange, Donna Oosthuyse, had to say regarding the Naira situation, in a response to questions.
About CBN Policies on the Naira
In a market economy, there is a price for something. And if the official price for that thing is different from the parallel market price for that thing, then there has to be some action that will equalize those markets. When investors see a unified price, they will feel more comfortable that is the true price of that object, which is the exchange rate.
- If there are short term considerations, if you expect that there is going to be a devaluation, then you might expect that you can get a better price later after the devaluation. So you just wait.
- We also see this behaviour in our market: When the dollar strengthens and the Rand devalues, we tend to see more buying from foreign investors because South African assets are cheaper at that time.
- But that doesn’t mean that your basic investment theory is wrong. You are just waiting for your time. But I do say that there is a lot of interest in the African and Nigerian story back in South Africa.
When asked about the expectations of foreign investors from President Buhari:
- From the conversations we have had with people, the wish list we are hearing from the market is that firstly, he should name his cabinet. That is the top of the list from what we have been hearing.
- Second will be to integrate financial policies and exchange rate policy.
- We haven’t heard a lot on tackling corruption because there is the assumption that he is going to do it.
- The 2 issues we keep hearing the most about are naming of the cabinet and integrating monetary policy / exchange rate policy
- **And quite frankly, to really look at the capital controls**
- What investors are saying so clearly is that, “we don’t mind what the policy is, we just want to know what it is. So if you’re going to tell us to pay 20 percent more tax, that’s fine, but we want to know what the situation is”. Unless investors know in the long term what is going on, it will be very difficult to make an investment decision.
When asked about the most appealing sectors for foreign investors:
- The energy sector is a sector that has been closed to private investment, even though there is interest in that sector notwithstanding of the prices of oil. The automobile manufacturers are interested in Nigeria. Consumer industries, commercial real estate, cinemas, shopping malls, and housing. Also, financial services and logistics.