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Insecurity: Foreign investments drop by N61.58bn

By on September 22, 2014

Some foreign investors are beginning to shun the Nigerian business environment due to concerns about insecurity and the fear of uncertainty regarding the 2015 elections.

The latest investment analysis from the Nigerian Stock Exchange showed that foreign investments dropped significantly by N61.58bn at the end of July.

As of June this year, the total investments by foreign investors stood at N118bn.

The document obtained from the NSE on Friday indicated this amount dropped by N61.58bn or 52 per cent to N56.42bn as of the end of July.

Analysts who spoke to our correspondent attributed part of the reasons for the reduced foreign investments to increasing security concerns as well as tight monetary policies of the Central Bank of Nigeria.

They said the various activities of the extremist Islamic sect, Boko Haram, as well as the upcoming general elections might have contributed substantially to the reduced investments.

The NSE’s statistics, on the other hand, showed that domestic investors increased their investments in the period under review as the figure rose from N107.51bn in June to N167.77bn in July.

Our correspondent learnt that this was the second time since the beginning of the year that domestic investors had recorded increased investments compared to their foreign counterparts.

The reduction of foreign investments, according to experts, has led to a major depression in the capital market as the NSE’s All-Share Index, which measures the performance of the equities on the Exchange, has recorded significant decline.

The Managing Director, Highcap Securities Limited, Mr. David Adonri, said the reduced investments by the foreign investors, who had before now been driving investment in the NSE, was largely as a result of insecurity and the political risk attached any business initiated in the face of the 2015 elections.

He said, “The decline in foreign investment from July to date has led to a general depression of the equities market. Now, the All-Share Index is negative.

“Some of the factors behind the decline include the heightening insecurity in Nigeria, tight monetary policy of the CBN, tapering of quantitative easing by the United States Feds.

“Also, the decline in the price of crude oil has contributed to the reduced investments of the foreign investors in our market.”

Adonri pointed out that there was increasing political risk in the economy as the 2015 elections got closer.

He added that all these issues had combined to increase the country’s risks, which foreign investors were reacting to.

The President, Association of Stockbroking Houses of Nigeria, Mr. Emeka Madubuike, said that the market usually responded to the factors in the environment.

This, he said, was not out of place, adding that even though foreign investments were dropping as a result of insecurity and the upcoming elections, there was no cause for alarm.

He said, “We know that next year is an election year and these investors usually adopt a ‘wait-and-see’ approach, to see how things will turn out, hence the reduced investment.

“But, I don’t think there is any need for panic yet, because every market responds to factors within the environment. It is expected that as the fourth quarter approaches, they may begin to take position for the coming year.”

On his part, the Chief Executive Officer, Trust Yield Securities Limited, Mr. Ola Yussuf, said it was important to note that Nigeria was in a pre-election year and there had not been many positive developments in the country.

He said, “The investments and the returns depended largely on confidence, and there had been the fear that the election period could create problems for them.

“So, what you are having now is that if you look at most of these investors, it is like they are holding back and just waiting for something positive to happen to propel them to return.”

Apparently reacting to this, the Chief Executive Officer of the NSE, Mr. Oscar Onyema, had said the NSE was working on the next phase of growth to be able to attract more foreign and domestic investors to the market.

“The NSE has started work on its new medium-term strategic direction, covering the 2014-2019 corporate strategic plan with clearly outlined objectives leading up to 2019,” he said.

 

[Punch]