The number of dollar millionaires in Nigeria shrank by 30 percent in the last decade, a new report has shown, with analysts attributing the decline in private wealth to naira depreciation and other economic headwinds.
Africa’s biggest economy saw the largest decline in private wealth on the continent between 2012 and 2022, according to the Africa Wealth Report 2023 by Henley and Partners, a London investment migration consultancy.
The other countries that recorded declines are Angola (28 percent), Algeria (26 percent), Egypt (25 percent), South Africa (21 percent) and Botswana (10 percent).
“Total high-net-worth individual numbers in Africa have fallen by 12 percent over the past decade. Performance was constrained by poor growth in the three largest African markets, South Africa, Egypt, and Nigeria,” the report said.
It said Rwanda was the top-performing market in Africa during the period, with millionaire growth of 72 percent, followed by Mauritius, the Seychelles, Uganda, and the Democratic Republic of Congo.
“Morocco and Kenya’s high-net-worth individual populations also grew solidly. Ethiopia and Ghana, whose millionaire populations had been growing rapidly until 2019, have struggled over the past few years, which have pulled back their 10-year growth rates,” it added.
The report provides a comprehensive review of private wealth in Africa, including high-net-worth-individual, luxury, and wealth management trends, as well as expert insights on investment, the investment migration sector, and economic mobility on the continent.
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The wealth categories are split into millionaires — individuals with a net worth above one million dollars; centimillionaires — individuals with a net worth above $100 million, and billionaires — individuals with a net worth above one billion dollars.
A breakdown of the 138,000 millionaires in Africa show that South Africa has 37,800 millionaires; Egypt, 16,100; Nigeria, 9,800; Kenya, 7,700; and Morocco, 5,800.
Mauritius has 4,900; Algeria, 2,800; Ethiopia, 2,700; Ghana, 2,600; and Tanzania 2,400.
Analysts attributed the shrinking dollar millionaire club in Nigeria to the significant depreciation in the value of the naira against the dollar.
“Ideally, when the naira depreciates, millionaires’ net worth reduces in dollar terms. And for investors who do their businesses in the country and earn naira in cash flows, their net worth must have reduced in dollar terms,” Damilola Adewale, a Lagos-based economic analyst, said.
He said everything is tied to poor policy choices of the Central Bank of Nigeria as regards foreign exchange rate. “Some of the issues we have with FX rate are widening disparity between official and parallel market rate.”
Two economic recessions in the last seven years have weakened Nigeria’s foreign inflows, resulting in a liquidity challenge in the country’s FX market. Last year, the naira depreciated against the dollar, dropping to as low as 448/$1 from 157/$1 in 2012 at the official market. It depreciated to 740/$1 from N159/$1 at the parallel market.
The FX liquidity challenge is also a major contributing factor to the country’s inflation rate, which hit 21.34 percent in December 2022, the highest in 17 years, from 12 percent in the same period of 2012, according to the National Bureau of Statistics.
“Most wealthy Nigerians have their business in the country, which means their wealth is in naira,” Temitope Omosuyi, investment strategy manager at Afrinvest Limited, said. “So, as a result of the depreciation of the currency due to complexities in the foreign exchange and the policy around it, their wealth is worse off.”
Omosuyi added that the recent global economic challenges have also affected companies that are not globally competitive, particularly the ones that are not in the technological space.
“Most wealthy people play in the primitive sector or less innovative sectors, which are not so resilient to the global shocks.”
The Henley and Partners report revealed that despite the drop in the number of millionaires in South Africa, Egypt and Nigeria, the countries still remain among the top five wealth markets.
“The ‘Big 5’ wealth markets in Africa — South Africa, Egypt, Nigeria, Kenya, and Morocco — together account for 56 percent of Africa’s high-net-worth individuals and over 90 percent of the continent’s billionaires,” it said.
It, however, said their continued dominance was far from assured, and they could soon be challenged by the likes of Mauritius and Rwanda, which are fast gaining ground. “Namibia’s new residence by investment offering positions it as a future potential rival as well.”
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