Nigeria’s foreign portfolio deficit, which is the gap between outflows and inflows, narrowed considerably by 91.02 per cent (N14.50 billion) to N1.43 billion between January and August 2022, report on the fund’s movement has shown.
The report released by Financial Derivatives Company Limited, said the performance is an improvement compared to N15.93 billion in the corresponding period in 2021.
According to the domestic and portfolio report of Nigerian exchange limited, total Foreign Portfolio Investment in Nigeria stood at N149.97 billion in the first eight months of 2022, 21 per cent higher than N123.46 billion between January and August 2021.
The increase in the country’s foreign portfolio investment is due to the increased foreign investors’ appetite in Nigeria stocks. While the recent improvement is admirable, there are certain factors that will continue to fuel foreign investors’ apathy and limit Nigeria’s attractiveness to foreign investors.
The report explained that one is the lack of flexibility in the foreign exchange (forex) management framework and the inadequate structural reforms, which are major factors discouraging foreign investors from the Nigerian market.
“Additionally, the lingering insecurity and heightened political uncertainties and risk ahead of the 2023 elections could discourage government, most of the diaspora flows are repatriated via unofficial channels,” it said.
This, it said, will reduce the ability of the government to meet its balance of payment obligations, ultimately putting the country in dire straits.
The World Bank recently revised downward Nigeria‘s economic growth forecast for 2022 to 3.3 per cent from its initial projection of 3.8 per cent in April. The Bank also lowered its 2023 growth target for Nigeria to 3.2 per cent from April’s forecast of four per cent.
“The downward revision was premised on multiple shocks affecting the economy including the global economic slowdown, spiraling inflation spurred by elevated food and fuel prices, and the rising risk of debt distress due to the current global tightening stance.
“The IMF also lowered its 2023 growth forecast for Nigeria to three per cent from 3.2 per cent projected in July due to the lingering impact of global supply apathy and limit Nigeria’s attractiveness to foreign investors,” it said.