Analysts play down anxiety over investment climate

By Charle Abuede

• Nigeria still attractive despite unrest
• Reward will determine risk appetite
• Shell‭, ‬Chevron‭, ‬Mobil in restive Niger-Delta
• Highlight need to embrace insurance‭ ‬

Nigeria’s investment landscape might have been looking threatened coming from the initial shock occasioned by the coronavirus pandemic, and the aftermath of the social unrest around the country, which was followed by vandalism, lootings, loss of lives and properties worth hundreds of millions of naira; a situation expected by not a few analysts to lead to waning of investor confidence and the portrayal of the most populous nation in Africa as a non-investment destination on account of insecurity.

But some economic analysts over the weekend weighing on the trouble ahead for the Nigerian economy amid the developments of the last three weeks were quick to douse any anxiety that might exist out there, saying Nigeria will be just fine.

According to a broad view shared by them, astute investors are not so much bothered by all the dusts that they see or hear about as long as there are rewards commensurate to the risks that they have to take.

They quickly drew attention to the Niger Delta region, noting that despite the unrest in the region, it did not stop Shell or Mobil or Chevron from investing in the oil industry and others such as China and many local investors are still investing.

They are of the view that one of the key takeaways from the protests is the weak state of the communication infrastructure in the country; that promotes mistrust, adding that the response to this should be a well-articulated communication plan devoid of political undertones.

“We have more citizens speaking to citizens, professionals to professionals and business leaders to business leaders rather than the government speaking to citizens that find it difficult to trust what they hear and see,” one analyst told Business A.M.

However, the Nigerian investment atmosphere remains tepid. Government treasury bills just dropped to less than one per cent in terms of yield, although equity has been seeing some rebound lately.

For domestic investment, investors are really cautious, and this may be the case in the short to medium term. In the face of the foregoing, do analysts view the social unrest which has affected almost every facet of the economy a determining factor driving investors’ decisions into Nigeria’s economy now and in the future and with the rate of rising capital flight and declining foreign portfolio investment in Nigeria; what becomes of the Nigerian investment environment?

Garba Kurfi, the managing director and CEO, APT Securities and Funds Limited, in a note to Business A.M. said with the new money market transfer policy introduced by the nation’s monetary authority, the fate of a small investment into the economy remains bright.

According to the investment securities expert, “The major determinant of investment is market demand. With our growing population of over 200 million and more than 50 per cent being youth, it can attract investment. Take a look at MTN, with a turnover of over N1.0 trillion is enough to encourage others to invest. Meanwhile, over $70 billion was invested in the telecommunications sector in the last eighteen years and there is more to come as they are looking into 5G Investment.

“The local investors, especially retail investors and institutional investors, particularly Pension Funds Administrators (PFAs), are really in the capital market as a result of the low rate of interest in the money market. Now, with Treasury Bills now at 1 per cent, many banks are not willing to take a deposit because of the CBN policy of Loan to Deposit Ratio (LDR), which may push many local investors into an alternative way of investment which the capital market provides. These also attract foreign investors who are now coming back into Nigeria to invest,” Kurfi revealed.

“However, the fate of small investment is very bright with money market transfer policy introduced by the FGN and CBN; though, for the small businesses to thrive, many state governments will come with palliatives to assist small enterprises.  Meanwhile, it is also obvious to embrace insurance policy to mitigate losses,” he submitted.

In the view of Bamidele Adesoji Samuel, an economist and research analyst, “The recent social unrest may not be strong enough to drive away foreign investors. Already, foreign investors’ sentiments have been low due to uncertainty surrounding the Central Bank’s policy stance. Although, it is quite unfortunate even for small businesses, and sadly, some may close down as a result. However, I think some state governors are introducing some soft loans for small businesses, this may provide some short term funding to stay afloat.”

On the other hand, the Economic Stabilization Committee led by Vice President Yemi Osinbajo needs to have its mandate expanded to include the response of the administration to the post-protests season. In the meantime though, the federal government has announced that it is immediately disbursing N25 billion of the N75 billion National Youth Investment Fund (NYIF) and some states have equally announced their own relief or support funds.

However, many say it is the mechanism to be used to identify and provide people with the money that will be critical, and not a few have suggested that the authorities should rely on technology and payment solutions providers in this regard.

It is the opportunity seen in this that many want government to seize; especially as it offers the opportunity for government to properly capture the statistics of beneficiaries and engage them through accredited Business Development Services Providers to ensure sustainability. 

Ekerete Olawoye Gam-Ikon, a management strategy-insurance consultant told Business A.M. that the investment model is changing when it comes to Nigeria, and that we have to undertake a study to validate it.

Gam-Ikon also said more Nigerians are needed to start investing even in their talents in Nigeria first before foreigners will come in to either acquire or take interest in the country.  “No investment was saved during the violent protests but explanations could be given on why some businesses or investments were vandalised while others were not. We must be strategic in engaging our youths to become entrepreneurs and business leaders we desire. A new generation of business leaders is what we need just like we are discussing about the political leaders,” he said.

“In my view, what investors decide and do will largely depend on the response of the Buhari-led administration to the entire situation. I think the administration should take proactive steps to engage and discuss with respective local and international stakeholders in a similarly serious manner as we moved on COVID-19 issue” said Ekerete.

The strategy-insurance consultant further asserts that “when you understand that small businesses in Nigeria thrive on a limited latitude of trust and credibility given their inability to earn the confidence of the banks to fund them, you will appreciate that though it might be very tough for them, they are still able to return to business faster than the medium/large businesses burdened by huge debts. We just need to keep working at rebuilding what had been damaged through a combination of funding by claims payments from insurance companies and relief funds from the Federal and State Governments.

“However, what I think will be the fate of small businesses that lost valuables to the unrest or have investments from foreign investors is that more Nigerian brands will be welcomed even if the funds invested were sourced from abroad,” he surmised.