More than 2,000 Nigerians lost their dollar millionaire status in one year on the back of the naira depreciation and other economic headwinds.
According to the latest global wealth report by global financial services companies, Credit Suisse and UBS, the number of dollar millionaires in Africa’s biggest economy fell by 2,761 to 38,556 in 2022 from 41,317 in 2021.
“The wealth of people in the millionaire club is usually in naira. But when they are converted to dollars, quite a number will opt out because the naira is losing its strength against the dollar,” Moses Ojo, a Lagos-based economic analyst, said.
He added that the country’s harsh operating environment also affected a lot of businesses, thereby affecting their people’s wealth.
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.
Read also: Nigeria seen losing 300 dollar millionaires this year
The FX liquidity challenge was 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.
“The recent global economic challenges affected companies that are not globally competitive, particularly the ones that are not in the technological space,” Temitope Omosuyi, investment strategy manager at Afrinvest Limited, said.
He said most wealthy people play in the primitive sector or less innovative sectors, which are not so resilient to the global shocks.
The 14th edition of the report which covers estimates of the wealth holdings of 5.4 billion adults globally and across the wealth spectrum revealed that over 3.5 million people lost their dollar millionaire status to 59.4 million in 2022.
“For the first time since 2008, global household wealth in US dollar terms decreased on aggregate as well as on a per adult basis, both in nominal and real terms. The 3.4 percent household wealth growth in 2022 was the lowest rate recorded in any year this century apart from 2008,” authors of the report, said.
They said it was also the only year this century, other than 2008, in which the total value of household financial assets declined even when exchange rate changes were discounted.
“The key contributors to this situation were the reduced value of financial assets, a stronger US dollar and elevated inflation.”
A breakdown of the wealth report shows that, the number of Nigerian adults with assets worth one million – five million dollars declined to 34,615 from 36,955 followed by 2,412 people whose assets of $5 million -$10 million fell from 2,664.
In 2021, 1,539 had assets of $10 million- $50 million but dropped to 1,381 in 2022. Seventy-six adults had assets of $50-$100 million in 2021 but fell to 71 last year.
In 2021, 65 adults have assets of $100 million- $500 million but reduced to 60. While the number of adults with assets worth more than $500 million declined to 17 from 18.
The country’s 38,556 millionaires is also less when compared to its African counterparts such as South Africa and Egypt which have 84,614 and 76,163 millionaires respectively.
“Wealth inequality has trended upward in Nigeria this century in line with the large increase in the relative importance of financial assets in household portfolios. It has also risen in South Africa since 2007, although it was relatively constant before that,” the report said.
According to the report, at the end of 2022, the Gini coefficient for wealth was 86.5 in Nigeria and 88.8 in South Africa, up from 72.1 and 80.4, respectively, in 2000. “The share of the top one percent reveals a similar story in Nigeria, increasing from 28.3 percent to 44.5 percent over these years.”
A similar report by Henley and Partners, a London investment migration consultancy in April, reported a decline in the number of dollar millionaires in the country as it shrank by 30 percent in the last decade.
Africa’s most populous country saw the largest decline in private wealth on the continent between 2012 and 2022.
Analysts at Credit Suisse and UBS project that global wealth will rise by 38 percent over the next five years, reaching $629 trillion by 2027 as growth by middle-income countries will be the primary driver of global trends.
“We estimate wealth per adult to reach $110,270 in 2027 and the number of millionaires to reach 86 million while the number of ultra-high-net-worth individuals is likely to rise to 372,000,” they said.
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