2023 elections will increase foreign portfolio outflows – Analyst​

The Managing Director, Morgan Capital Securities Limited and an economic analyst, Mr Rotimi Olubi, has said that electioneering for 2023 general elections in Nigeria will further increase foreign portfolio outflows and cause Foreign Portfolio Investors (FPIs) to remain on the sidelines.

Olubi said this at a forum organised by the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos on Wednesday.

Speaking on the theme: “A review of 2021 Market Performance and Factors that will shape it in 2022”, he listed other factors expected to cause further outflow to include rate hikes and capital controls by the monetary authorities.

“Electioneering, rate hikes, and capital controls by the monetary authorities are expected to cause further foreign portfolio outflows and cause FPIs to remain on the sidelines.

“Even as the economy continues its recovery, corporate earnings of companies in the consumer goods and industrial goods sector are expected to be impacted by high input costs caused by high inflation and higher cost of capital due to interest rate hikes.

“Interest income of financial services institutions such as banks is expected to rise in Nigeria if interest rates rise as expected. This is because the U.S could decide to raise interest rates.

“This act by the U.S could lead to downward pressure on commodity prices, drop in global liquidity, increase in the cost of funds from the international debt market and due to the fact that Ukraine and Russia are still having conflicts, oil prices might go up and production could decrease.

“Companies in the oil and gas sector are expected to have a solid year driven by strong oil prices, increasing global oil demand and OPEC+ cuts,” Olubi said.

He said that with relatively low infection rates and fatalities from the pandemic, the likelihood of an economic shutdown was non-existent.