The Private Equity and Venture Capital Association of Nigeria (PEVCA) has expressed concerns that foreign investors are hesitant to follow through on over $30 billion in investment pledges due to instability in Nigeria’s foreign exchange market.
This concern was highlighted in PEVCA’s mid-year review and strategic outlook, which analyzed the private investment landscape and the factors influencing trends in the sector.
The association pointed out that issues surrounding the repatriation of foreign currency have heightened the investment risk in the country. Using the FMCG (Fast-Moving Consumer Goods) sector as an example, PEVCA noted that a reduction in private sector consumption, combined with high inflation levels, has negatively impacted private sector investments.
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Additionally, the association stated that the existing risks, particularly the challenges of moving foreign exchange out of the country, make immediate investments attractive only to a small group of individuals. These individuals either have strong long-term plans, political connections, or a high tolerance for risk, but this group represents a minority.
The report mentioned, “Minister of Trade and Investments, Doris Uzoka-Anite, emphasized in February this year that direct engagements with foreign investors have generated substantial interest and commitments totaling USD 30 billion since President Tinubu’s inauguration.
“However, despite these commitments, actual investments have yet to be realized due to investor concerns over the instability of the forex market.”
The report further explained that the delay in actualizing the $30 billion investment pledges creates a cycle where slow investor actions impede the market’s recovery.
Background:
Earlier this year, the Minister of Industry, Trade, and Investment, Dr. Doris Uzoka-Anite, revealed that Nigeria had secured approximately $30 billion in investment commitments from various investors. She noted that these investments are expected to materialize over the next 5 to 8 years.
This figure was echoed by the Minister of Information and National Orientation, Muhammed Idris, who, while representing President Tinubu at an event, stated that the country received $30 billion in Foreign Direct Investment (FDI) pledges during the first 9 months of President Tinubu’s administration.
At the beginning of his administration, President Tinubu undertook several foreign trips to attract investors to bring capital into Nigeria, securing significant investment pledges along the way.
Key Points to Know:
Nigeria’s foreign exchange market has experienced significant volatility over the past year. The year began with the exchange rate at N907/$, and it has since approached nearly N1600/$ on the official NAFEM window.
In March, following interventions by the Central Bank of Nigeria (CBN), the naira briefly became one of the best-performing currencies globally, only to reverse course and become one of the worst-performing currencies by April.
At the start of his tenure, CBN Governor Yemi Cardoso stated that his priority was clearing the then $7 billion in foreign exchange forwards obligations, a goal he has successfully achieved for verified FX forwards.
