Forex scarcity, repatriation uncertainties depress investments in Q1 — Analysts

CBN investigates 55 companies over foreign exchange infractions

By Nkiruka Nnorom


Investment analysts have blamed foreign exchange (forex) scarcity and concerns around the possibility of ease of repatriating funds out of the country as cause of the dwindling Foreign Portfolio Investment (FPI) in the stock market.

They stated that investors are wary of investing in climes where forex prices are managed and not market reflective.

Foreign Portfolio Investment (FPI) in the Nigerian Exchange Limited (NGX) had continued a downward streak, according to the data on Domestic and Foreign Portfolio Participation in Equity Trading for March 2021, falling by 40.4 percent to N150.23 billion in the first quarter (Q1) 2021, from N251.87 billion in Q1 2020.

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Analysis of the figures on FPI participation in the equities market, showed that foreign investors contributed paltry 22.21 percent to total transactions (N676.53 billion) during the period under review.

Explaining the lax interest in the local bourse by foreign invstors, Ali Khalpey, CEO, EFG Hermes Frontier, said that uncertainty around the exchange rate and the possibility of repatriating dollars out of the country still serve as challenges.

He said: “ FPIs are not going to come in knowing that foreign Exchange (FX) prices are managed and not market reflected. it is very difficult to attract capital when you are dealing with such low yields and high inflations and then you still try to control FX pricing. So, there is no way we would get the level of capital that the market needs.

“If we see significant reforms on FX regime, significant adjustment in naira exchange rate coupled with the high oil price, then we will see a very quick turnaround in what the equities market will do.”

Corroborating, Lilian Olubi, Chief Executive Officer, EFG Hermes Nigeria, said that price fixing regime in the foreign exchange (forex) market is a deterrent to Foreign Portfolio Investors (PFIs), and enjoined the authorities to reduce focus on FX management.

“There has been too much focus on managing the foreign exchange price and the effect of that action has been affecting other things including the confidence of investors coming to the market. 

They should allow things to run and should reduce management and focus on FX pricing, which seems to be the key and core of CBN’s activities at the detriment of other macroeconomic issues,” Olubi said.

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Forex scarcity, repatriation uncertainties depress investments in Q1 — Analysts