-by our correspondent.
Nigeria needs appropriate policies that will attract Foreign Direct Investment (FDI) into the country to grow capital formation .
The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, said this in his presentation at a virtual workshop, with the theme: “Addressing Nigeria’s Fiscal Challenges – Exploring Alternative Fund Approach”, organised in Lagos by the Capital Market Correspondents Association of Nigeria (CAMCAN).
He noted that Nigeria recorded $1.44 trillion FDI inflow in 2015 as against $1.028 trillion reported in 2020. “It is a far cry compared to countries like Ghana whose receipts are two times what Nigeria realised and Egypt which is seven times what we received. FDI is an important source of capital funding for a country like Nigeria.” Chukwu said.
MD/CEO, Cowry Asset Management Limited, Johnson Chukwu
In his words, “Nigeria has a huge revenue shortfall which means we have to look for funds outside government budget. Total revenue has remained largely flat between 2015 and 2020, our FDI which is what goes to the private sector and infrastructural development has in the last six years (2015-2020) neared flat, the government needs to come out with appropriate policies that will attract FDI especially in foreign exchange.”
Chukwu noted that, for a less stable economy like Nigeria’s, assessment of social conflicts by potential investors will be a key consideration because investors gear their foreign direct investments toward economies where they have the highest potential for profit and the least risk. ”As such, the dent of the social unrest to the image and perceived risk of long-term capital investment would mean that the country will struggle in attracting the much-desired long-term finance needed for accelerated growth and enhanced job opportunities,” he said.
The financial expert recalled that in 2015, the total revenue realised by the Federal Government stood at N3.24 trillion as against N3.47 trillion reported as of November 2020. “There has been a steady growth in expenditure; as of 2015, the total expenditure stood at N4.76 trillion in contrast to N6.24 trillion recorded from January to November 2020.”
“The challenge we have in this country is a revenue challenge, we don’t have the revenue size to support the type of government we run. That’s why our recurrent expenditure has been increasing while our revenue remains flat. The government needs to interrogate issues of recurrent expenditure,” he said.
On the outlook of the financial markets in 2021, Chukwu said the real sector is expected to continue to benefit from the current low interest rate environment to refinance its loans more cheaply, thereby reducing financing cost and increasing profitability while the Nigerian stock market will remain positive following on the heels of its overall positive performance in 2020 justified by the strong fundamentals of the several quoted companies on account of their resilience despite the effects of COVID-19 and the accompanying economic recession.
On the flip side, he said rising inflation and foreign exchange rate uncertainty could restrict consumer spending and squeeze company budgets, both of which could be counterproductive to the real sector.