Wed. Sep 27th, 2023

Investors Toolkit by Amira Kaba

International investors are keeping a close eye on the upcoming presidential election in Nigeria, which is set to take place on February 25th. The election has been a topic of discussion in the investment community as they are hopeful that the next president will be more market-friendly than the current government. The main contenders for the presidency are Bola Tinubu, Atiku Abubakar, and Peter Obi.

One of the main concerns for international investors is the reform of the foreign exchange market. According to Steve Pollicino of Auerbach Grayson, a US brokerage, the uncertainty over how long it takes to get money out of Nigeria is a significant deterrent for investors. In fact, foreign investors held only 16% of shares on Nigeria’s stock exchange last year, compared to 58% in 2014.

Removing fuel subsidies, which cost $10 billion in 2022, is also crucial for investors. However, this is seen as a hard sell by many in the investment community. Babatunde Ojo, an emerging markets equities portfolio manager at Harding Loevner, says that this is a short-term pain that must be taken in a long-term game.

Another concern for international investors is the regulation of the oil and gas industry. Amaka Anku, head of Eurasia Group’s Africa practice, believes that strong and clear regulation is important for oil and gas companies that are pivoting towards cleaner gas.

The next president of Nigeria will also need to focus on managing the country’s debt, which is considered to be among the highest globally, according to ratings agency Fitch. While both Abubakar and Obi have proposed seeking “debt forgiveness” or engaging creditors for “debt restructuring and possible cancellation/forgiveness”, Carlos de Sousa, an emerging market debt portfolio manager at Vontobel, believes that none of the major candidates have pledged to raise taxes, which will be necessary to make debt manageable and provide citizens with services.

Despite these challenges, many investors remain cautiously optimistic about the outcome of the election. Joe Delvaux, a portfolio manager at Amundi, which holds Nigerian sovereign bonds, believes that if Tinubu emerges as the winner, there would likely be a smoother transition. A victory for Atiku, on the other hand, would probably mean more uncertainty as power shifts, while a victory for Obi would mean the challenge of implementing policies without the necessary machinery in place.

The outcome of the election is also important for the stability of Nigeria, which has suffered violence around elections in recent decades. A peaceful outcome is key for the country and its people.

The opinions expressed in this publication are those of the author.
They do not purport to reflect the opinions or views of the AMeAR|News, R2iNTEL or its members.

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