Financial experts have recommended early budget passage, improved business environment and liquidity in the Foreign Exchange Market (Forex) to sustain the flow of capital importation to the economy.
The experts told The Tide source last Friday in Lagos that increase in capital importation to the economy supported the view that foreign investors’ confidence was bolstered on the back of rate convergence and liquidity in the foreign exchange market.
The nation’s Capital Importation report released by National Bureau of Statistics (NBS) on March 2, revealed a 12.2 billion dollars capital inflow in 2017.
The inflow represents an increase of 7,104.4 million dollars or 138.7 per cent, compared with the 5.12 billion dollars figure recorded in 2016.
The report revealed that the capital inflow was divided into three main investment types namely: Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI) and Other Investments.
According to the report, foreign portfolio Investment accounted for 60 per cent capital imports, the single largest share compared to Foreign Direct Investment and Other Investments.
Mr Muda Yusuf, Director-General, Lagos Chamber of Commerce and Industry (LCCI), told reporters that increased portfolio investment was driven by improved investors’ confidence, performance and growth in the Nigerian Stock Exchange (NSE) in 2017.
According to him, S&P Dow Jones Indices ranked NSE as one of the best five capital markets in the world for 2017.
“The NSE closed the year on the positive note as the NSE All-Share Index returned 42.30 per cent year-on-year.
“Market capitalisation grew positively to close at N13.61 trillion compared to N9.25 trillion recorded at the end of 2016,’’ he said.
Yusuf noted that participation of foreign investors in the nation’s equities market gained momentum following the introduction of Investors’ and Exporters’ Foreign Exchange window by the Central Bank of Nigeria (CBN) in April 2017.
“The foreign exchange window and the various forex interventions by CBN helped to ease scarcity and challenge in the foreign exchange market.
“Government needs to intensify efforts to pass the 2018 Budget and expedite its quick implementation toward bridging the nation’s infrastructure deficit which stands as a disincentive to foreign direct investments,’’ he said.
The LCCI boss urged the Federal Government to evolve policies that would attract more foreign capital into the economy to further boost NSE performance and strengthen economic rebound.
Yusuf recommended that more companies should be attracted to get listed on the NSE to further deepen the market, increase trading activities and improve liquidity.
Ms Peace John, a researcher at Centre for the Study of the Economies of Africa (CSEA), told The Tide source that maintaining economic growth as portrayed in the recent GDP report would sustain flow of capital import.
“The investors are coming in already and if we keep having positive data on our economic indicators, that means that recovery process would be consolidated.
“The external factors that have to do with oil price, foreign exchange are stable for now and if the government should do its part with the passage and implementation of budget and effective implementation of Economic Recovery and Growth Plan (ERGP), capital inflow would be sustained,’’ she said.
John noted that further improvements in the ease of doing business, favorable lending rate policy, capital release for projects and tax incentives would attract more investors to different sectors of the economy.