The Private Equity and Venture Capital Association of Nigeria (PEVCA) has stated that foreign investors are apprehensive about implementing the over $30 billion investment pledges in Nigeria over the instability in the country’s foreign exchange market.
The group stated this in its mid-year review and strategic outlook for the country which explored the private investment landscape and factors shaping trends in the sector.
According to the association, issues of foreign currency repatriation have worsened the investment risk level in the country using the FMCG sector as an example stating that reduction in private sector consumption coupled with elevated inflation levels have eroded private sector investments.
It added that the presence of key risks, especially challenges with getting foreign exchange out of the country, makes immediate investments appealing only to a specific group of people.
With strong long-term plans, political connections, or a high willingness to take risks.
However, it is noted that this group are in the minority and is quite small.
The report states, “Minister of Trade and Investments, Doris UzokaAnite, highlighted in February this year that direct engagements with foreign investors have resulted in substantial interest and commitments totalling USD 30 billion since Tinubu’s inauguration.
“Despite these commitments, actual investments have yet to materialize due to investor apprehension over the forex market’s instability.”
It explained that the delay in carrying out the $30 billion investment pledges creates a cycle where slow investor actions hinder the chances of the market recovering.
Backstory
- Earlier in the year, the Minister of Industry, Trade, and Investment, Dr. Doris Uzoka-Anite, disclosed that Nigeria had secured approximately $30 billion in investment commitments from various investors.
- She noted that these investments are expected to materialize over the next 5 to 8 years.
- This figure was echoed by the Minister of Information and National Orientation, Muhammed Idris, who, while representing President Tinubu at an event, stated that the country received $30 billion in Foreign Direct Investment (FDI) pledges during the first 9 months of President Tinubu’s administration.
- President Tinubu had at the beginning of his administration engaged in foreign trips to woo investors to bring in their capital to Nigeria securing significant investment pledges on the way.
What you should know
The foreign exchange market in Nigeria has seen one of its worst volatilities in the past year. It opened the year at N907/$ and currently trades at almost N1600/$ on the official NAFEM window.
- In March, following interventions by the Central Bank of Nigeria, (CBN), it emerged as one of the best-performing currencies in the world but quickly reversed to be one of the worst-performing currencies in April.
- At the beginning of his administration, the Governor of the CBN, Yemi Cardoso stated that his priority is clearing the then $7 billion of foreign exchange forwards obligation which he has successfully done for verified FX forwards.
