Nigeria’s Economic Recovery: CBN Reforms Attracting Foreign Investments

Nigeria’s economic outlook is improving with declining inflation, increased FDI, and a stable Eurobond market. The Central Bank of Nigeria’s policy decisions have rejuvenated investor confidence. Recent GDP rebasing may further attract investments in newly recognized sectors, while the CBN’s commitment to stability reflects an ongoing strategy for sustainable growth.

In January, Nigeria’s inflation decreased to 24.5%, coupled with increased Foreign Direct Investment (FDI) and a growing Gross Domestic Product (GDP), indicating a faster economic recovery than expected by analysts. The Central Bank of Nigeria’s (CBN) decision to maintain interest rates has bolstered confidence among foreign investors, leading to a positive trend in the Eurobond market. With encouraging macroeconomic indicators, Nigeria is seen as a promising destination for investment.

Furthermore, Nigeria’s Eurobond market closed February positively, with the average yield falling to 8.80%, signaling strong investor demand. Comparatively, the Sub-Saharan African Eurobond market saw reduced yields, positioning Nigeria ahead of its regional counterparts. Analysts attribute this interest to a combination of improving macroeconomic dynamics and forecasted liquidity inflows from significant coupon payments and bond maturities.

The recent rebasing of the GDP by the National Bureau of Statistics (NBS) incorporated new sectors like fintech and e-commerce, resulting in a more substantial economic profile. This rebasing suggests a shift in economic contributions, with technology and services gaining prominence over traditional sectors such as agriculture and oil. Experts believe this could enhance fiscal policies and attract foreign investments into newly recognized sectors.

Optimistic signs emerged from the economy, buoyed by improved government revenues and a projected GDP growth rate of 3.68% for 2025. The ongoing challenges posed by inflation, which peaked at 34.60%, remain a concern but show signs of moderation. The CBN’s Monetary Policy Committee (MPC) has maintained the MPR at 27.50%, aiming to support the economy amid anticipated GDP growth driven by the non-oil sector.

The MPC’s recent decisions have enabled the naira to appreciate in the parallel market and have provided businesses with relief from rising borrowing costs. Alongside supporting measures to enhance FX liquidity and transparency, the CBN instills confidence in the economic landscape. Furthermore, remittances have surged by 79.4% in response to FX reforms, highlighting a positive correlation between policy adjustments and economic engagement.

The CBN is committed to balancing inflation and stability through both orthodox monetary policies and strategic reforms. These efforts seek not only to restore market confidence but also facilitate conditions for sustainable growth. The introduction of an Electronic Foreign Exchange Matching System emphasizes the CBN’s focus on transparency and efficiency in forex operations, reinforcing the framework for long-term economic resilience.

Significant measures taken under Governor Olayemi Cardoso, including the enhancement of the banking sector’s resilience, reflect the ongoing dedication to achieving macroeconomic stability. Emphasis on prudent regulatory oversight and efficient credit distribution to growth sectors are critical in paving the way for the country’s economic revitalization, making Nigeria a more attractive environment for international investors.

In summary, Nigeria’s recent economic reforms, spearheaded by the Central Bank of Nigeria, have positioned the country favorably for both domestic and foreign investment. The combination of reduced inflation, a stable Eurobond market, and improved GDP indicators highlights the economic recovery efforts. Furthermore, the rebasing of GDP and strategic fiscal measures are anticipated to enhance the investment landscape in emerging sectors. As such, the CBN’s proactive approach and sustained monetary policies aim to promote long-term economic stability and confidence.

Original Source: businessday.ng