Nigeria’s Economic Reforms Attract Global Investment Confidence

Nigerian assets are attracting global investors due to positive reforms by the Central Bank. Confidence is restoring, with stocks rising and bond yields falling, as indicated by forecasts of improved economic conditions by 2025. Key challenges remain, but strategic policy implementation promises a brighter economic future in Nigeria.

Global investors are increasingly interested in Nigerian assets, benefiting from the Central Bank of Nigeria’s (CBN) financial sector reforms, which are positively impacting key economic sectors. As confidence is restored through these reforms, stock values rise and bond yields drop. Bismarck Rewane, Non-Executive Director of Parthian Partners, forecasts that Nigeria’s economy will exit its most challenging reform phase by 2025.

The nation’s sovereign risk spread has decreased to its lowest point since January 2020, reflecting a recovery from pandemic-induced economic strains. Despite the challenges posed by external factors such as trade wars, Nigeria has managed to attract foreign capital due to currency reforms and strategic measures aimed at revitalizing the economy.

Emre Akcakmak, portfolio manager at East Capital, noted, “Nigeria appears to be back in business as long-awaited economic reforms take shape.” Key financial measures include improved currency liquidity, which facilitates profit repatriation for investors, as well as maintaining a stable naira.

Samir Gadio, head of Africa strategy at Standard Chartered Plc, highlights that portfolio inflows are likely driven by increased confidence due to structural reforms and improved foreign exchange market operations. Nigeria’s local market shows resilience against global risks, enhancing its attractiveness to investors.

Yields on Nigeria’s $1.5 billion eurobond have recently dropped to 9.69 percent, indicating strong interest in domestic debt offerings. Additionally, a recent auction saw three times oversubscription, signaling robust demand. Experts predict Nigeria’s economic outlook will brighten significantly by 2025, following substantive reforms in various sectors.

Bismarck Rewane emphasized that while Nigeria’s exchange rate fundamentals suggest a stronger naira, achieving stability is contingent upon effective management of the foreign exchange system. He urged that the focus should be on addressing structural issues, such as energy inefficiencies and the oil sector’s opacity.

The role of investment is critical for economic growth, as Rewane remarked: “Revenue alone is not enough; investment is key but will be influenced by confidence, transparency, and the right policies.” Other prominent voices, such as Professor Olayinka David-West and Chinyere Almona, echoed the need for technological innovation and stable energy supply to support ongoing economic growth.

Yemi Sadiku from Parthian Group stressed the importance of creating an environment conducive to infrastructure investment. He called for policies that encourage active participation from the private sector. Olusegun Alebiosu, CEO of FirstBank Group, cited improvements in government revenues as positive economic indicators, bolstered by successful reforms in the foreign exchange market.

Finally, the Nigerian government’s proposed budget for 2025, amounting to N49.7 trillion, aims to provide essential economic stimulation, coupled with projections of a GDP growth rate of 3.68%. Importantly, the expected enhancement in budget execution due to improved revenues points toward a favorable economic trajectory for Nigeria in the coming year.

The growing interest of global investors in Nigerian assets stems from the successful implementation of the Central Bank’s reforms. As the country recovers from previous economic challenges, upcoming structural reforms are projected to improve the financial landscape significantly by 2025. Strategic measures promoting stability, investment, and transparency will be vital for sustaining this renewed confidence in Nigeria’s economy.

Original Source: businessday.ng