Finance experts see investment surge in Nigeria in 2021, but warn risks remain

Three experts in the financial sector have projected that a lot of investment outlays should happen in Nigeria in 2021.

This stems from the fact that most companies in the Nigerian financial sector have adjusted their operations to fit into the economic realities brought about by the coronavirus pandemic, they said.

The experts, who spoke during a pre-awards conversation at the 2020 edition of the Banks and Other Financial Institutions (BAFI) Awards organised by BusinessDay on Saturday, however, warned that the risks inherent in Nigeria will not disappear.

“There are so many opportunities that people who are brave can cash in on to turn the corner,” said Banji Fehintola, president of the Nigerian arm of Chartered Financial Analysts (CFA) Society, during the discussion tagged ‘Interpreting an Irrational Year: Coping, Adjusting and Thriving in a Wicked Learning Environment’.

According to him, there is a perception and a reality of risk in Africa and Nigeria in particular. However, there has also been a bridge in the gap as investors now see that the opportunities that lie therein outweigh the risks.

“Nigeria is blessed fundamentally with vast resources and a huge thriving population, and investors see this. We see a lot happening in the Fintech space which should continue next year,” Fehintola said.

Bayo Olugbemi, president, Chartered Institute of Bankers of Nigeria, said due to the pandemic, most banks have gone digital, employing technology to drive financial services.

“A lot of investments are happening in the technology space by the banks because they know that minus tech, they can’t go anywhere in their journey to moving services online to promote less of contacts,” Olugbemi said.

“We see this trend continuing next year. However, there is a downside to this which is cybercrime, and I believe they are conscious of that as well,” he said.

The economy has been battered by the economic and health impact of the COVID-19 pandemic that has caused a plunge in government revenue, pushing Africa’s biggest economy into its worst recession since 1987.

Many companies are struggling to keep up with operations amid weak demand/income, FX crisis, increasing commodity prices/cost of production and strict regulations.

Companies would need to take new actions which must be guided by the inherent risk, according to Magnus Nnoka, president, Risk Management Association of Nigeria (RIMAN).

He noted that the economic realities that people are seeing as the new normal this year would be the normal next year as companies are being forced to adjust to economic realities.

“What we have seen today might not likely change, so institutions that are prepared today are the ones that will scale through the new normal,” Nnoka said, noting that the risk outlook would not get better.

For banks, he said the non-performing loans are likely to be on the upward curve because of the banks’ conscious effort to extend loans in the pandemic, “although the increasing bad loans will not be as much as what was seen years ago”.

Commenting on the impact of the coronavirus-induced recession, Fehintola noted that Africa in general and Nigeria in particular have to go into huge spending, and that cannot come from the government alone and should be complemented by private capital.

“The size of investment needed to turn the corner for Nigeria cannot come from the government. The financial sector has a role to play in mobilising capital and getting the capital to create employment,” Fehintola said.

“A lot needs to be done, the financial sector is struggling with so many policies which might be challenging for the sector in 2021,” he said.

Olugbemi reiterated the comment of the Central Bank of Nigeria governor that the economy is resilient with the foreign reserves able to cover eight months of import.

He advised investors not to speculate but rather see a positive light so as not to put pressure on the naira.

The 2020 edition of the BAFI Awards was graced by dignitaries who are business leaders in the banking and financial sector, many of whom were appreciated for their hard work and innovations in the industry.