SEC blames forex scarcity for low foreign investments
Lamido Yuguda, Director-General of the Securities and Exchange Commission, has blamed the country's declining level of Foreign Portfolio Investments on a lack of foreign exchange.
According to National Bureau of Statistics data, Foreign Portfolio Investment (including equity, bonds, and money market instruments) fell by 27.86% from $3.385.59 million in 2021 to $2.442.24 million at the end of 2022.
Yuguda stated at the end of the Nigerian Capital Market Committee's first quarter meeting on Thursday that the country's lack of liquidity was making it unappealing to foreign investors.
"Regardless of how appealing a domestic capital market is, a foreign investor will always factor in the ability to transfer their domestic earnings into foreign exchange so that they can repatriate these foreign exchange to their country," he said.
"At the moment, we are all aware that Nigeria's foreign exchange situation is problematic. International investors are reporting some difficulties in obtaining foreign currency for the repatriation of dividends or capital. As a result, the proportion of foreign investors in the Nigerian capital market is lower than what this market has been used to."
Yuguda expressed confidence that the currency shortage would not be permanent, and he based his optimism on economic developments such as the Dangote Refinery, which is expected to begin production this year.
"This is a temporary situation," he said, "and we expect their country's foreign exchange situation to significantly improve." There are numerous economic developments in the country today that are laying the groundwork for a much more vibrant foreign exchange. We do use a significant amount of our foreign currency to import refined petroleum products. We currently know that the Dangote refinery in Lekki, once operational, will have a capacity of 650,000 barrels per day of refined petroleum products, lubricants, and the like.
"This means that much of the current importation will be sourced from this source, and the amount of foreign exchange wasted on importing refined petrol should be significantly reduced when this massive refinery comes on board." This refinery is nearing completion."
Yuguda also stated that the Nigerian economy has a significant potential for generating foreign exchange from non-oil sources.
"If you have a much higher realisation of foreign exchange from non-oil sources and a lower use of foreign exchange to import petrol, you will find that this will give you a much better situation where you can use the greater availability of foreign exchange to meet the needs of investors who are interested in taking advantage of the economic opportunities that exist in our country," he added.
"This is not an intractable problem."
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