Investment inflow into the country, which doubled to $4.2 Billion in third quarter of 2017 from the previous quarter’s level, is expected to continue in 2018.
This is because Nigeria’s business environment remains more attractive and competitive to Investors amid expectations of meaningful structural reforms, analysts at Codros Capital Limited have said.
Reviewing the 2017 economic performance and predicting the outlook of Nigeria’s macro-economic environment for 2018, the Head, Research and Strategy of Codros Capital, Christian Orajekwe, explained that there are strong indications that portfolio inflow into the country would increase tremendously in 2018, as Investors are expected to be actively involved in frontier market activities this year.
“Unless the growth expectations are being visited by some shocks and unless in a very adverse economic condition, I do not think we will experience any bubble,” he said.
Specifically, Orajekwe maintained that with Oil price trading at levels not seen in over two and half years in the international market and the resurging reserves profile, there is positive outlook for Nigerian economy in 2018.
Also, sustained management of the foreign exchange market, which has reduced the countries over dependence on import and the accrued bills, is a boost to the Nation’s economic growth.
The National Bureau of Statistics (NBS) in August 2017, released the capital importation report, stating that investment inflows into the country rose by 95.02 per cent from $884.1 Million in the first quarter of 2017 to $1.79 Billion in the second quarter.
The report, which was made available to newsmen, attributed the main driver of the quarterly growth in capital importation in the second quarter to 146.7 per cent increase in portfolio investments.
This, according to the report, was followed by other investments, which grew by 95.02 per cent, and then Foreign Direct Investment, which increased by 29.8 per cent over the previous quarter. Similarly, investment inflow into the country also doubled to $4.2 Billion in third quarter of 2017 from the previous quarter level.
Orajekwe however, listed instability in polity as one of the downside risks to portfolio flows into the country for 2018.
“Downside risks to portfolio flows, one of the reason why Investors are expected to strongly bet on Nigeria assets in 2018 is because of the growth expectations, in the events where the actual numbers begin to lag expectations, I think foreign Investors reaction to this will be negative.
“Corporate earnings is also very important, last year, the size of corporate earnings growth was major drivers of the inflow that we saw in our market, so where corporate earnings begin to show adverse conditions with the economy, we think investors will react negatively,” he added.
He urged Investors to ensure that they pick stocks of firms with good fundamentals, meet up with post listing requirements and consistent in filing their financials to the Nigerian Stock Exchange.
“We do not expect our clients to invest in stocks without strong fundamentals and companies that have not reported their accounts for a long time and companies that are not open to analysts to discuss their numbers. So what we have seen so far is Investors investing across board and in the event of shocks, those that are not fundamentally backed are the ones that will be most hit.”
Speaking further on the factor that could alter expected growth this year, the Head, Investment Banking of the firm, Femi Ademola, said stability in Forex is imperative, noting that improved Forex lured most of Investors into the Nigerian market in 2017.
“We think Investors will focus more strongly on this, vis-a-vis Government ability to earn Dollars, if we continue to earn good Dollars with transparency in our reform policies, Investors will bring in more flows.
“But when there is adverse Dollar condition so that the Apex Bank will begin to introduce some policies that Investors are not very comfortable with, perhaps even where the import and export window is still relevant, I think Investors will go away from Nigerian market,” he said.