Absa-OMFIF Africa Financial Markets Index 2021 (AAFMI) report has pointed at Nigeria’s foreign exchange restriction measures as an albatross to the country’s foreign investment attraction.
AAFMI scored Nigeria low on access to foreign exchange and capacity of local investors, hence, ranking Africa’s largest economy behind South Africa and Mauritius, following a survey of 23 countries in sub-saharan Africa.
Nigeria made the top five list, taking the third spot, with a score of 63, South Africa and Mauritius were scored 86 and 70 points respectively, while Ghana received 62 points and Uganda was awarded 57 points by AAFMI, which based its best market for foreign investment on six pillars.
The index, obtained by Ripples Nigeria on Friday, from OMFIF, scored Nigeria in the following areas; access to foreign exchange, 20; capacity of local investors, 44; in market depth, the country scored 62; for macroeconomic opportunities, 69; market transparency, tax and regulatory environment, 86; while enforceability of the standard master agreement got 100.
Government control creating a problem
AAFMI faulted the President Muhammadu Buhari-led administration’s policy around forex, stating that while the measures have their advantages, it also limits the use of FX in doing business.
It highlighted instances of import restriction on the famous 41-item list – which contains; Rice, Meat and processed meat products, Poultry (chicken, eggs, turkey), Cement, Vegetables and processed vegetable products, Margarine, Palm kernel, Palm oil products/vegetable oils – have continued to be denied foreign exchange access.
This affects FX supply, importation of goods and cost of importation into the country, as businesses involved in the banned forex item list have to depend on the bureau de change, where dollar and other foreign currencies are sold at expensive rate.
Also, investors face a challenge with repatration of funds, due to the government’s control of the FX and quest to stable the country’s foreign reserves, “While these measures restricted capital outflows and helped keep reserves stable, market liquidity remained below pre-pandemic levels.
“The volatile FX market and the delays in the repatriation of foreign currency out of Nigeria caused further problems,” the report stated, adding that, “Despite a rebound in oil prices and remittances, the FX shortage persists as imports recover faster than exports. All these factors contributed to Nigeria’s poor performance in Pillar 2 (Access to forex).”
Areas Nigeria received commendations
AAFMI stated that Nigeria was among nine countries that have introduced investment products known as green or sustainable, with the most popular instrument being the green bonds.
It also commended the country for introducing technology into its stock exchange to improve capital market participation, citing the FinPort, a fintech portal launched by the Securities and Exchange Commission (SEC), which was incorporated to ease fintech ventures’ understanding of the Nigerian bourse.
“Nigeria continues to make strides in creating an enabling investment environment for foreign investors, with the necessary regulatory developments and policy initiatives.” the report stated.
Join the conversation
Support Ripples Nigeria, hold up solutions journalism
Balanced, fearless journalism driven by data comes at huge financial costs.
As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.
If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.
Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.
SPECIAL REPORT: Lack of legal provisions, cultural sentiments fueling marital r*pe in Nigeria
By Arinze Chijioke In the early days of Sandra Izuckukwu’s marriage in 2019, her husband, Sunday Izuchukwu, did everything she...
INVESTIGATION… LIVES ON THE LINE (IV): Surviving in a dangerous media environment
This investigation is on the unresolved killing of three Nigerian journalists while on assignments between 2019 and 2020. For six...
INVESTIGATION… LIVES ON THE LINE (III): Precious Owolabi was killed covering a protest
This investigation is on the unresolved killing of three Nigerian journalists while on assignments between 2019-2020. For six months, Nigerian...
INVESTIGATION… LIVES ON THE LINE (II): Alex Ogbu was telling a story but became the story
This four-part series investigation is on the unresolved killing of three Nigerian journalists while on assignments between 2019 and 2020....
SPECIAL REPORT… TELECOMS BLACKOUT: Nigeria’s latest tactic against banditry grounds businesses, forcing residents beyond borders
The fight against notorious bandits raining terror and kidnapping students in Northwest Nigeria took a new dimension in September as...