Citigroup Inc. has said that Nigeria, Angola and Kenya are among the African countries that are expected to draw more foreign investment flows despite the huge decline in their currencies.
This is coming barely a week after global financial service firm, JP Morgan, revealed that Nigeria’s net FX Reserve is estimated to be around $3.7 billion, much lower than the net figure of $14 billion that was reported, putting the country’s foreign exchange market under further pressure.
According to Bloomberg, this was made known by Citi’s Head of Markets for Sub-Saharan Africa, George Asante, during an interview in Nairobi, where he stated that these countries with significant forex adjustments are clear winners from an investment perspective.
More opportunities
- Asante said, “Countries where we’ve seen significant FX adjustments are clear winners from an investment perspective. All these from a local market perspective offer opportunities.”
The naira is reported to be among the worst-performing currencies in Africa as it plunged to a record low against the dollar after the unification of the exchange rate and the removal of the widely criticized subsidy on petrol.
Asante said the removal of this petrol subsidy was a very important reform for Nigeria, while moves to merge multiple exchange rates will also help to boost liquidity. He pointed out that the next task for the government is to make sure the official FX market can function smoothly in the wake of the changes.
He said, “I believe that this will be a significant catalyst for flows back into the Nigerian market.’’
Ivory Coast, Senegal to attract the most interest
On the prospects for Eurobond issuance by African nations, Asante said the darlings of the market including Ivory Coast and Senegal will probably attract the most interest from investors when the market reopens, adding that both countries have long-term foreign debt ratings of Ba3 from Moody’s Investors Service.
- He said, “These two countries have fairly consistently high growth rates, diversified economic bases, large IMF programs with associated concessional financing and a track record for economic reforms and fiscal prudence as well as low cost of debt service.’’
What you should know
On June 14, 2023, the CBN announced the unification of all segments of Nigeria’s foreign exchange market, consolidating all windows into one.
This action was part of a series of immediate changes aimed at improving liquidity and stability in the Nigerian Foreign Exchange (FX) Market.
Under this directive, commercial banks were given permission to remove the rate cap on the naira at the Investors and Exporters (I&E) window of the foreign exchange market, allowing for a free float of the naira against the dollar and other global currencies.
The CBN’s decision to float the currency and unify the country’s multiple exchange rates has been praised by the organized private sector, financial experts, and economists.
They believe this move will bring transparency and stability to the forex market, as well as attract more foreign investment and capital inflow into the economy.
