Nigeria is a special place. When the news broke that Economic and Financial Crimes Commission (EFCC) operatives raided the headquarters of Dangote Group, as part of investigations into possible misuse of foreign currency, I had expected that during the next trading day on the Nigerian stock exchange, the values of Dangote Cement and other companies in the Group would struggle.

But you know what? Investors did not care. It was similar to what happened when APC named Aliko Dangote as part of Buhari’s reelection committee member in 2019. On that one, investors did not pay attention also.

If this information does not move markets in Nigeria, what are investors trading on then? In the United States, Dangote properties would have suffered huge losses. But in Nigeria, just like in elections, no one cares about anything. 

“We went to the head office of Dangote Group today to look into their books on the ongoing investigation on the abuse of the extant laws that govern the foreign exchange transaction during the tenure of Godwin Emefiele as CBN governor,” one of the sources told Reuters.

“Here, we are talking about multiple exchange rates and others. It is an ongoing investigation and it was the turn of Dangote Group today,”  

Sure, they do not re-price in near-real time, but over weeks and months, they do re-price. That simply shows the level of our stock market development. It is not driven by data and most times, it is all about herding and speculations. Once in, they tune off, and even a possible criminal investigation in a company does not constitute risk! What a nation!

Count yourself lucky of being a Nigerian because you can get away with most things!

Global audit firm KPMG has warned that Nigeria’s economic stability faces a critical threat due to a significant downturn in portfolio investment. This alarming trend has dire implications for foreign exchange availability, currency devaluation, inflation, purchasing power, and economic growth.

The National Bureau of Statistics (NBS) capital importation report, analyzed by KPMG, highlights an 86.58% decline in portfolio investment from $649.28 million in Q1 2023 to a mere $87.11 million in Q3 2023. This steep drop in financial asset investments—stocks, bonds, and securities—reflects sustained negative sentiments despite initial positive reactions to reforms in Q2 2023.

The firm noted: “Portfolio investment which includes investments in financial assets such as stocks, bonds, and other securities has also been on the decline since Q1 2023 from $649.28 million to $87.11 million in Q3 2023 exposing the economy to risks of foreign exchange illiquidity and currency depreciation, pressure on consumer price inflation, reduced purchasing power, slower economic growth (3.75% target for 2024), lower job creation (especially from persistent reduction in (FDI), and overall macroeconomic instability.”

KPMG’s assessment identifies various contributors to this concerning downturn. Factors include macroeconomic instability, a negative interest rate environment, an expanding FX gap coupled with dwindling reserves, and global reclassifications by investment bodies such as FTSE Russell and MSCI, which have adversely influenced external perceptions of Nigeria’s market.

“It also makes the economy more vulnerable to global economic shocks which is especially concerning given the current global poly-crisis,” KPMG noted in its analysis.

The departure of nearly 10 major companies from Nigeria in 2023 has severely eroded investor confidence. Multinational exits like GlaxoSmithKline and Procter & Gamble opting for distributor-led models, coupled with external reclassifications of Nigeria’s market status, have compounded negative sentiments, heightening concerns about the country’s economic stability.

This steep fall in capital importation, despite a temporary upswing in Q2 2023, underscores the urgent need for macroeconomic stability, clear monetary and fiscal policies, and investment-friendly regulatory frameworks.

KPMG also noted the disturbing dominance of short-term capital inflows, particularly trade credit and loans, accounting for around 78% of the total foreign capital inflow of $654.65 million in Q3 2023. This heavy reliance on short-term capital raises concerns about Nigeria’s ability to compete globally and attract sustainable, long-term foreign investment, potentially inflating business costs and diminishing investment attractiveness.

However, amid these challenges, KPMG offers a glimmer of hope, citing reported successes by President Tinubu in securing foreign investment commitments exceeding $15 billion in Foreign Direct Investment (FDI) during international trips. Fulfilling these commitments could significantly reshape Nigeria’s economic trajectory, underlining the urgency of initiatives to augment foreign capital inflows across diverse sectors, it said.

The audit firm’s analysis stresses the imperative of strategic interventions to stabilize Nigeria’s financial sector and foster sustainable growth. It noted that while the decline in foreign inflows poses immediate risks, it also presents an opportunity to foster self-sufficiency, explore alternative financing avenues like domestic savings and capital markets, and nurture local entrepreneurship.

KPMG said that overcoming these economic headwinds will demand the fulfillment of foreign investment commitments and concerted efforts to attract sustainable capital inflows, pivotal in steering Nigeria toward a more resilient and prosperous economic future. The firm’s assessment emphasizes the need for Nigeria to act swiftly and decisively to change its current economic narrative.