Nigerian capital market operators have said the devaluation of naira will bring in new and existing foreign investors back to the Nigerian Stock Exchange (NSE).
According to them, the devaluation of the naira is long overdue for Nigeria as its currency has been badly hit by the consistent crash in oil prices.
They also noted out that the measures would end the sell pressure caused by speculation on possible naira devaluation.
The managing director of Highcap Securities Limited, Mr David Adonri, said, “Foreign investors participation in the Nigerian capital market have declined considerably due to the economic crisis and a lot of them have exited the market.”
Adonri attributed it to the issues centered on the prospects in the economy against the backdrop of declining crude oil price in the international market, saying that a lot of them have benchmark activities in the economy and the stock market against the movement in the price of crude oil. He said that depending on the direction of the movement of the price, investors would either decide to come in or exit and also noted that the price movement of crude oil price have direct bearing on the value of the domestic currency, the naira.
“If crude oil earnings decreases then it will affect the fiscal offers and the sovereign wealth funds that was accumulated. It is the offers that defended the value of the naira; with reduced foreign incomes and depletion of the sovereign wealth funds, fiscal offers are diminished and so the value of the naira from the analysis of foreign investors is that it cannot remain static when the fiscal offer that supports the value have depleted. Yet, the government is still keeping the value at rate as if nothing happened which they know is not sustainable,” he said.
He also said that the foreign exchange management system in the country is not a market driven system, noting that it is an administrative driven system wherein the Central Bank of Nigeria (CBN) fixes the price or rate of the naira. He further noted that for foreign investors to be attracted to the economy there must be a realignment of the exchange rate and the only way it can be realigned is through devaluation via running a dual exchange where the official market defies the exchange rate.
