Press focuses on effects of forex crisis, insecurity on investment inflow, others

The report of the World Bank that foreign direct investment in Nigeria remains low because of limited forex availability, security…

The report of the World Bank that foreign direct investment in Nigeria remains low because of limited forex availability, security concerns, and other structural challenges is one of the trending stories in Nigerian newspapers on Monday.The Punch reports that the World Bank says that foreign direct investment in Nigeria remains low because of limited forex availability, security concerns, and other structural challenges.

According to the bank, these challenges have also affected the net withdrawal of equity by foreign investors. The global bank disclosed this in its ‘Nigeria Development Update (December 2022): Nigeria’s Choice’ report.

It stated that FDI and foreign portfolio investments contributed only one per cent to the country’s GDP and do not compare favourably with similar economies of the world.

It said, “Net foreign direct investment and foreign portfolio investment flows into the Nigerian economy remain low, totalling only about 1 per cent of GDP.

 “Net FDI inflows are negative, reflecting net withdrawals of equity by foreign investors. FDI and FPI flow into Nigeria do not compare favourably with similar economies of the world, reflecting difficulties with FX availability, security concerns, and other structural challenges in recent years.

“Low growth and slow structural transformation have contributed to this outcome — the pace of structural transformation of the domestic economy of the 2000s has not been sustained over a sufficiently long period.”

The newspaper says that food and beverage imports for households rose by 71.12 per cent between the third quarter of 2018 and the corresponding quarter of 2022 despite the foreign exchange crisis in the country.

This finding was based on data from the Q3 2022 Foreign Trade Statistics report by the National Bureau of Statistics.

The food and beverage imports were classified into primary and processed foods for households.

In Q3 2018, the primary food and beverage imports were put at N84.84bn while that of processed foods were about N77.41bn, making a total of N162.25bn.

By Q3 2022, the primary food and beverage imports were about N153.82bn while that of processed foods were about N123.82bn, making a total of N277.64bn.

The development came amid the shortage of foreign exchange the nation is grappling with.

The International Monetary Fund recently said that the food crisis currently ravaging Nigeria and other sub-Saharan countries has been exacerbated by over-reliance on imported foods.

In a new report titled, “Africa Food Prices Are Soaring Amid High Import Reliance,” the Washington-based lender said staple food prices in sub-Saharan Africa surged by an average 23.9 per cent in 2020 to 22—the most since the 2008 global financial crisis.

The report noted that the increase was commensurate to an 8.5 per cent rise in the cost of a typical food consumption basket (beyond generalised price increases).

The report said that global factors were partly to blame because of the region’s imports of top staple foods, noting that the pass-through from global to local food prices was significant.

The Guardian reports that President Muhammadu Buhari, in the course of the week, said the Ajaokuta Steel Complex would provide 500,000 estimated jobs for Nigerian youths.

The president revealed this during his one-day state visit to Kogi on Thursday.

He also spoke of the determination of his administration to position Kogi as an industrial hub as well as a solid mineral power base.

He explained how the Federal Government achieved the resolution of all legal entanglements that had bogged down the progress of the Ajaokuta Steel Complex.

According to him, the project stands to benefit the people of the state immensely.

The newspaper says that despite uncertainty in the nation’s political space, in addition to prolonged foreign exchange (forex) illiquidity and other macroeconomic challenges, coupled with the crises rocking the global economy, improved corporate earnings churned out by listed firms spurred local patronage in equities as investors gain about N5.6 trillion or 19 per cent in 2022.

The figure is, however, higher than the marginal 5.7 per cent growth recorded in 2021.

At the closed of transactions in 2022, the All-Share Index (ASI) appreciated by 19.98 per cent to close on December 30, 2022, at 51,251.06 points from 42,716.44 points at which it opened trading on January 4, 2022. Similarly, market capitalisation for the period gained from N5.618 trillion to N27.198 trillion on December 30, 2022, from N22.297 trillion.

Although foreign investments in equities waned in 2022, amid lingering FX liquidity constraints, and heightened global uncertainties, however, improved domestic investors’ appetite for stocks triggered a high level of activities that engendered credibility and relative stability in the market.

For instance, the foreign portfolio investors’ appetite for equities dropped in the first 10 months of 2022 as participation closed at N349.59 billion, lower than N1.73 trillion transactions recorded by domestic investors within the same period.

October edition of the Nigerian Exchange (NGX) report on domestic and foreign portfolio participation in equities trading in the first 10 months of 2022 showed that total equities market transactions increased year-to-date (YTD) as of October 30, 2022, by 34.59 per cent to N2.079 trillion with local investors’ patronage surpassing those by foreign investors.

The domestic investors pulled transactions of N1.73 trillion, representing 83.19 per cent in the first 10 months of the year, while foreign investors transacted total equities worth N349.59 billion and representing 16.81 per cent.

Reviewing the market performance in 2022, the Managing Director of APT Securities and Funds Limited, Garba Kurfi, said the market closed the year positive with more highly capitalised stocks recording improved capital appreciation.

“Among the factors that contributed to this is that most of the major capitalised stocks like Airtel Africa, MTN Nigeria, Dangote Cement and BUA Cement, which control over 70 per cent of the total market capitalisation gained about 50 per cent during the period under review and qualified to be invested in by the PFAs, which they did,” he said.

Managing Director of ARM Securities Limited, Rotimi Olubi, said the improved participation by local investors in the market boosted performance in 2022.

He also stated that the positive earnings boosted investors’ confidence in the equities market, adding that improved participation by domestic players in the market was the major factor that shielded the NGX from negative sentiments seen in the global equities market due to the Russia-Ukraine conflict.

To sustain the trend in 2023, the President of Issuers and Investors Alternative Dispute Resolution Initiative (IIADRI), Moses Igbrude urged the Federal Government to implement appropriate legislation that will help tackle insecurity and other macroeconomic challenges this year.

According to him, key issues that could spur activities, stimulate investment and propel a boom in the market in 2023 include a downward review of the Monetary Policy Rate (MPR), policy stability, stable foreign exchange policy and implementation of appropriate legislation that would compel major enterprises to be listed to deepen the market.