The inflow of impact investments will increase into Nigeria if the Central Bank of Nigeria allows a free float of the naira and more investors invest in local businesses, experts say.
The industry stakeholders stated this during the second day in Lagos, Nigeria’s commercial centre, for the Impact Investing Foundation Convening 2022, sponsored by the Impact Investors Foundation(IIF), in partnership with Bank of Industry (BOI), African Capital Alliance (ACA), BusinessDay Media Ltd and Ford Foundation.
Speaking on “Sustainable financing solutions in Nigeria: Opportunities and Challenges”, Anthony Asonye, chief operating officer, Credit Guaranty Limited said that the level of degeneration of the environment is a global phenomenon.
“The impact of climate change is becoming ever more prevalent, with unprecedented catastrophic events impacting individuals, communities and livelihood. The world is increasingly witnessing existential threats in the forms of intense drought, heatwaves, rising sea levels, storms, and melting glaciers which all affect the ecosystem and the living conditions.”
He added that in Nigeria, the impact of climate change manifested in the displacement of many households, and destruction of assets amounting to millions of dollars, emphasising that impact investing has successfully blended social and financial values and has more to offer to the country.
He listed the challenges of impact investing to include the fact that returns on investments usually come in the long run, data inaccuracy, and inadequate system of measuring the values realised from impact investing.
“In recent times, the headwinds are quite negative with supply chain disruptions due to the Russia-Ukraine war and the domestic implications like flood,” Asonye said.
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Julian Carvajal, assistant vice president, trading, TCX, a global solution for local currency, said the least developed countries import a lot of what they consume which on many occasions are very expensive, resulting in inflation.
He also mentioned that controlling the outflow of investment is not in the best interest of the nation as potential investors will reduce their investments, fearing that they might not be able to repatriate their dividends when the need arises.
“It takes time but it can be done with perseverance and making sure the government agencies and central bank understand the importance of having a free float of the local currency at the foreign exchange market,” Carvajal said.
He explained that capital markets in developing economies are relatively small and there is fiscal deficit which leaves room for foreign providers of capital to fill up and institutions like the World Bank, and African Development Bank provide loans in dollars which subject the recipient countries to FX volatility.
Amy Jadesimi, managing director of LADOL stated that “the most profitable investment strategy an investor can have is to focus on sustainable companies. She added that it is also good to invest in local businesses and use local currency.
She said investors needed to invest in businesses by making their capital to work sustainability, citing a company like Tesla is an example of the US investing in sustainability.
