Buhari’s lack of economic blueprint discouraging investors, experts say

President Buhari’s lack of economic blueprint and delay in appointing minister’s after a month of swearing in is discouraging foreign investors as they wait at the sidelines, experts say.

The experts noted that investors are not happy with the delay and this is making them hold back from buying Nigerian assets, which is increasing the risk of a deeper financing crisis for the country.

“Investors are dissuaded by the fact that the present government has not given a direction for the economy,” David Adonri, Chief Executive Officer of Lambeth Trust and Investment Co.Ltd, in a phone interview with Bloomberg.  After the peaceful elections and transition, investors were keenly awaiting government decisions on the oil and gas sector, power interventions, investment incentives and monetary policy including the exchange rate, but all this have stayed longer than expected, analysts said.

In a recent interview on the sidelines of the African Union (AU) summit in Johannesburg, South Africa, Buhari said he was in no hurry to appoint ministers and blamed the delay for the lateness in the submission of the report of his transition committee.

Some investors who spoke with BusinessDay said they are not happy with the delay and will not make any major investment until a clear direction is given on key sectors of the economy, and appointments of ministers.

Tumbling oil prices have eroded Nigeria’s lure for foreign investors, who are likely to venture back if the authorities can give clarity on policy direction and devalue the naira.

CBN recently, officially stopped the sale of dollars for rice importation and 40 other items as it sought to reduce pressure on the naira and preserve the nation’s external reserves.

Analysts say the measure by CBN to restrict FX will risk diverting dollar demand to the black market, worsening perception about economic policy and delaying the decision to devalue the naira.

This will widen the gap between the interbank forex market, and the bureau de change (BDC) market could create room for arbitrage and a speculative attack on the naira.

Nigeria currency and bond market have come under pressure since the oil price plunge last year.

“For foreign investors the key is that there is a working foreign exchange market and they are able to see how demand and supply interacts,” Razia Khan, Regional Head of Research for Africa, Standard Chartered Bank, in an interview with BusinessDay at the side line of the World Economic Forum (WEF).

“A lot of foreign investors are waiting on the sidelines, and you won’t see the big foreign portfolio coming in until we see that adjustment in currency,” she adds.

The Central bank stated last week Friday that it will not devalue the naira given the risks to inflation from a weaker currency.

The apex bank stated that inflation is still within the CBN’s single digit band, the exchange rate has stabilised around N197 per dollar for the last five months, GDP expanded by four per cent in the first quarter of 2015, and 469,070 jobs were created in the same quarter.

A devaluation to restore the economy to competitiveness is a matter of time, fund managers still believe and they are unlikely to bring back cash they pulled out before the election.

Josephine Okojie