- Charge investors to capitalize on reform prospects.
Investment bankers believe the naira would rise to between N550 and N600 per dollar later this year as the foreign exchange market reforms take effect and foreign capital flows into the economy.
They also anticipated accelerated growth in the country’s foreign reserves, estimating they may reach $60 billion this year.
As a result, they urged investors to take advantage of the reform and position themselves in the investment market ahead of the influx of international investors.
At AFRINVEST West Africa Limited’s mid-year investment meeting in Lagos, Group Managing Director, Afrinvest West Africa, Ike Chioke, discussed the prospects afforded by the currency and energy reforms to investors and how they should be explored for maximum returns on investment.
Speaking on the theme of ‘The Turning Point: Positioning for Optimal Return,’ he urged investors to position themselves for economic possibilities that have been increased by current changes.
Chioke stated that signs in both the domestic and global markets indicated that the country’s economy was nearing a tipping point toward greatness.
“Global inflation rates have fallen alarmingly in the last six or seven months.” We’ve seen that global central banks’ rate-tightening has reached a halt.
“They have succeeded in containing inflation.” “The new government and ongoing forex reforms have implications for Nigeria,” he added.
He stated that eliminating the petrol subsidy would result in fiscal savings of N2 trillion in 2023, adding that this, along with gains from enhanced oil exports and non-oil sources, would raise income.
According to him, despite the fact that the naira has been devalued by around 40%, it has several positives, including the government saving around N2 trillion simply by eliminating subsidies.
He, on the other hand, argued against spending the savings on palliatives, claiming that “a palliative is not a permanent solution.”
Chioke also stated that the Central Bank of Nigeria’s FX changes had given him hope for long-term economic development.
He predicted that the surge in currency rates on the parallel market would be short-lived as foreign investors pumped dollars into the economy.
He predicted that additional foreign direct investments would flow into the economy in the long run.
Abiodun Keripe, Managing Director of Afrinvest Consulting, stated that the currency market changes had opened the door for Nigeria to increase its foreign reserves to $60 billion by year’s end.
He stated that meeting the aim will necessitate increased oil output, increased diaspora remittances, and the continuation of tax and oil subsidy changes.
According to Keripe, adopting the changes would help boost the naira from its current value to roughly N550/N600/$ by year’s end.
“No policy can artificially fix the rate without worsening the delicate situation.” In fact, the incentives to significantly lower the exchange rate are rather limited for revenue mobilization,” he stated.
He explained that the impact of currency unification on the lowering of the government deficit by around N350 billion was also of interest to investors.
“Inflation is likely to reach 24 percent before slowing in the fourth quarter due to the base effect and weakened demand pressure.” As a result, monetary policy would proceed cautiously by maintaining the status quo.
“We anticipate a more market-responsive FX rate, which will boost investor confidence and improve trade and capital flows.” However, the road to FX stability would be hard. “The FX rate is expected to remain above N700 in the near to medium term,” he said.
Ayodeji Eboh, Managing Director/Chief Business Officer, Optimus by Afrinvest, also spoke, saying the reforms were a watershed moment since, with Nigeria’s new administration, there would be short-term pains that would subside over time.
However, he believes that subsidy savings should be related to specific projects that benefit people.
He advocated for increased infrastructure investment and measures that encourage ease of doing business.