Capital flight by foreign investors worries assets managers

Fund managers at Cowry Assets Management Limited have expressed concern over further repatriation of fund by foreign portfolio investors, stating that this will douse high optimism expressed by private businesses on the country’s macroeconomy.
According to them, this is possible in the short term, given the possible pressures on inflation, exchange rate and interest rate amid political spending for 2019 general election.
The Monthly Business Expectations survey report for June 2018, released by the Central Bank of Nigeria (CBN) showed that business owners were more optimistic on Nigeria’s macroeconomic outlook for the month of July 2018 than in the month of June 2018.
The overall business confidence index for June and outlook for July were positive at 34.7 points (faster than 28.9 points in May) and 64.9 points (slower than 65.5 points outlook for June in May) respectively; reflective of the increased volume of total order book in June and the expected increase in volume of business activity in July as their index points rose to 16.4 (from 15.1 points) and 66.7 points (from 64.4 points) respectively.
The apex bank’s outlook on businesses’ financial conditions (i.e.working capital) and average capacity utilization improved; their indices stood at 11.7 and 23.4 index points respectively in June 2018, when compared with the 14.1 and 22.7 points respectively recorded in May 2018.
Improvement in the average capacity utilization (CUI) index according them, can be partly attributed to the positive outlook on financial conditions. However, the survey revealed that insufficient power supply, high interest rate and unfavorable political climate were the major constraints to business activity in the month of June 2018, while the
relative stability in exchange rate witnessed in June 2018 is expected to be sustained in the month of July 2018.
More so, “we opine that equities market activity would sustain its levels as hot money of foreign portfolio investors exit the economy. However, we do expect domestic institutional investors to further take position at lower prices amid the implementation of the multi-fund structure in July,” the Cowry Assets managers stated.
The managers in a not to clients on Friday observed that institutional transactions rose by 97.87per cent to N92.03 billion in May 2018, constituting 73.44 per cent of the total domestic transactions while the retail transactions declined month by month by 22.92 per cent to N33.29 billion in May 2018.
The increased domestic institutional transactions on the local bourse was partly due to the early positioning of the Pension Fund Administrators (PFA) ahead of the implementation of the multi-fund structure scheduled for July 2018.