Managing Director of FBNQuest Funds Limited, Ijeoma Agboti-Obatoyinbo, has said currency volatility and inflationary pressures will be critical factors that will influence investors to come or stay away from the Nigerian market.
Agboti-Obatoyinbo who disclosed this in an interview said bearish investors may choose to hold onto cash whilst they watch the economic landscape in the lead-up to the 2023 elections and hope for a return to some level of naira stability.
“Ultimately, time and prudence will see investors through the present uncertainty, and once the elections have taken place, whatever the outcome, we expect that investors will regain confidence in the market.
Speaking on the impact of the flexible exchange rate policy adopted by the Monetary Policy Committee (MPC) on the Nigerian capital market and the economy, Agboti-Obatoyinbo said the impact of the Naira has been challenging and this, along with other factors, has impacted the economy negatively.
“A multiple-rate regime has led to demand and supply dynamics that have been difficult for enterprises and individuals. Allowing the naira to float freely would be a better option towards attaining stability, but would not be without its pain points. It will have to get worse before it gets better.
“Alternatively, a hold stance may be adopted if the committee wishes to wait and further evaluate the impact of its multiple increases to date. New approaches will also have to be considered to restore confidence in the economy, especially as businesses, and the government itself, have begun to seek both domestic and international capital inflows. According to her, Inflation has increased rapidly and steadily since the start of the year and interest rates have moved markedly upwards alongside the benchmark rate, following tightening interventions by the CBN aimed at curbing inflationary pressures. “However, with headline inflation presently at 21.47 per cent in November, real returns remain negative. In addition, against the backdrop of unpredictable upcoming elections, insecurity, currency volatility and public debt concerns, there has been only moderate economic growth over the past several quarters. Growth is likely to remain at modest levels, at least in the near term. “Given the current state of the economy, there is both a great challenge and opportunity for the next administration to embrace. Key areas for transformation include fiscal and monetary policies, energy, infrastructure, sovereign debt and, importantly, much-needed social interventions. Identity management is essential and needs further enhancement. We cannot begin to revive our economy without a solid grasp on whom and where our people are and how to serve them,” she added.
