Foreign investors say Nigeria’s FX policy overshadowing power, fuel reforms
Nigeria’s renewed push to reform its power and petroleum sectors by doing away with subsidies and enthroning a market-based pricing system is being undermined by the country’s foreign exchange policy, which is keeping foreign investors on the sidelines.
“Efforts to remove the fuel and power subsidies are positives but there are negatives like the foreign exchange policy and closed land borders, which limit how positive you can be in investing in Nigeria,” Erik Renander, a London-based portfolio manager of a multi-asset fund, which invests in fixed income and equities across Africa, said.
Renander, who spoke at Businessday’s capital market and investing conference, Thursday, said, “The FX policy is hurting investment appetite (in naira assets) and Nigeria is on hold for now in terms of new foreign investment.”
Renander sold his holdings in Nigerian Treasury Bills in February after he became “nervous” about oil prices and the CBN’S FX policy.
“If you want to invest in Nigeria where there is a risk of not knowing when you are able to get out, the 2 percent yield on T-bills is not enough,” Renander said.
Another foreign investor told Businessday that “ordinarily, the stock market for instance should be doing much better now following the government’s renewed push for reforms that have cast a dark cloud on Nigeria for years but it is not happening because of the FX situation.”
“The power and fuel subsidy removals are potential game changers if the government follows through, but the economy may not reap the full dividends with such a foreign exchange policy,” the South Africa-based fund manager said.
Oscar Onyema, CEO, Nigerian Stock Exchange (NSE), said the Exchange was in talks with the CBN to find a way to address the foreign exchange situation that had cast a lull on the market. The market is down some 5 percent year-todate as foreigners who have historically led activity in the market snub equities.
Several investors have criticised Nigeria’s foreign exchange management, which has led to a rising dollar demand backlog the CBN puts at $2 billion.
With some investors’ funds trapped in the country, Nigeria has fallen out of favour with foreigners.
For the first time in more than four years, no single foreigner invested in Nigerian bonds, according to data by the National Bureau of Statistics (NBS).
That compares with the $231 million and $361.2 million invested in Nigerian bonds in the preceding quarter and the same period last year
But it is not only foreign investors who are reeling from Nigeria’s dollar crunch. Local manufacturers, who are unable to get enough dollars to import key inputs and banks, who are limiting dollar transactions on naira cards, are also feeling the pinch.