Investor confidence yet to return to Nigeria’s financial system —Analysts

A herd of economic and financial experts have concluded that Nigeria is still going through crisis of confidence in the hand  of foreign investors.

Incidentally, this is coming at a time when Nigeria’s Central Bank Governor, Godwin Emefiele, and Deputy Governor Sarah Alade travelled to the United States and United Kingdom to try and entice bond investors to buy assets in Africa’s largest economy.

Several investors in London, it was learnt, told the governor there wasn’t enough liquidity in Nigeria’s foreign-exchange market for them to be comfortable buying naira bonds.

Nonetheless, a finance and economic expert, Mr Ayodeji Ebo, believes “the relative paucity of Foreign Exchange inflow may be linked to investor confidence deficit which may not improve until the recent reforms are deemed sustainable.”

Also, a France-based financial analyst, Jurgen Hecker, in an email message to Nigerian Tribune revealed that most foreign investors still wonder whether President Buhari and the CBN really mean what they say about naira.

“Is the naira really where it should be or are there still hidden controls? Is there still some pretending going on?,” he queried.

According to Hecker, investors suspect that there are hidden controls despite claiming that market forces determine exchange rates and maybe the currency has not hit rock bottom.

“But until it does there will not be any significant investment going into naira assets, because who wants to invest in a currency that may have further to fall?

“So this creates uncertainty and this is probably unavoidable, until trust can be built. The pain was quick, the recovery will be slow,” Hecker stated.

He went further to assert that it will take time to build export industries that can profit from selling cheaply abroad because of the weak currency.

It will take time to deal with the inevitable surge in inflation that follows such devaluation. And it will take time for investors to want to return he said.

To him,it was not that difficult to predict what would happen when the Naira started floating. The sharp pain that this has caused is the result of inaction and misguided policies previously.

«President Buhari made a fundamental economic mistake in believing that a strong Naira equals a strong Nigeria. He is not alone in this belief; many other leaders have made the same mistake.

«It has happened in Europe, too, when for example France in the 1980s tried to avoid devaluing the franc against the German mark because of national prestige. This is economic nonsense. The longer you maintain such a fiction, the higher the price,» he reiterated.

Investors fled Nigeria as the economy, which relies on oil for 90 percent of export earnings, slowed following the crash in crude prices in mid-2014 and as the central bank imposed capital controls and a currency peg of N197-N199  per dollar from March 2015. While the currency has fallen to around N320 since the 16-month peg ended, few investors have returned to the local markets and the black market rate is still weaker at N390.