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NigeriaDecides2023

Nigeria needs FX, subsidy reforms to attract foreign investment – Razia Khan

To attract investment Nigeria needs to liberalise its foreign exchange regime and complement it with fuel subsidy reform as soon as conditions allow, says Razia Khan, managing director, Chief Economist, Africa and Middle East Global Research, Standard Chartered Bank.

She said this on Thursday at the global research summit hosted by Standard Chartered Bank in Lagos.

She noted that there has been an element of foreign direct investor interest in Nigeria already.

“But we all know that the concerns around the FX regime, which we have heard from some participants in the room, has discouraged a longer term commitment to investment portfolio inflows. Nobody is going to be investing at a time when there is so much global market volatility. I am certainly not into a market that is not properly functional,” she said.

“So this is something that the authorities could start to move on, perhaps more gradually, at first, the hope would be that we will see the Big Bang liberalisation of FX, but it can happen quite quickly. Fuel subsidy reform, we understand that the full extent of that probably can’t happen ahead of the elections.

She said Nigeria’s economy is not going to be performing to potential until “we see foreign exchange liberalisation.”

Khan noted that there is a widespread understanding that the current system cannot support an economy on the scale of Nigeria with the parallel market increasingly under pressure, that is the pricing that is transmitted back to the rest of the economy.

Talking about the tighter global financial conditions that have come about and what it all means for African growth, she said We know that whenever there has been a global growth deceleration, there has been the same impact in Africa.

“Usually with the lag that might be a global growth shock, and we tend to see the more pronounced impact in Africa the year following that global shock, you can see that that relationship between Sub-Saharan African growth and global growth has been pretty much intact looking at it over a long term period,” she said.

In his welcome remarks, Lamin Manjang, CEO of Standard Chartered Bank Nigeria, noted the global high inflation resulting in a very aggressive tightening of monetary policy across all central banks around the world.

“This tightening of monetary policy is leading to some questions around – is it too aggressive? Will it lead to a hard landing, which means recession? Or will it be a soft landing, which means the final session, followed by a year of recovery? So, these are questions that we need to address,”he said.

Experts who spoke during the panel session decried the level of crude oil theft and uncertainties in the oil and gas industry.

“Reverse anything that is a problem and fix it”, they said.

“We have created this environment ourselves. Because none of the things I have talked about here have any foreign influence. It is all a Nigerian problem. And until we start addressing it internally, as a Nigerian problem, we cannot reverse that trend. Unfortunately, the outlook for the next year with all the elections coming up is that nothing concrete is going to happen,” the panelists said.

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