PriceWaterHouseCoopers (Pwc) said that the continued lack of clarity around foreign exchange risk discouraged foreign investment into the country in 2016.
Pwc in its 2016 Africa Capital Market Watch report released on its website on Thursday said that investments to Nigeria declined due to disconnect between official and parallel rates for the Naira.
The report by PWC explored new primary market equity Initial Public Offerings (IPOs) and Further Offers (FOs) by listed companies Stock Markets across Africa.
It said that the continent’s overall growth performance was negatively impacted in 2016 by sharp slowdown in larger economies such as Nigeria and Egypt and lackluster GDP growth in South Africa.
“While there has been some recent stabilisation in commodities prices, they remain persistently weak, with knock-on negative effects reaching numerous sectors within resource-driven economies.
“While some stability has recently been observed in exchange rate movements for currencies such as South Africa’s rand, the outlook for Nigeria’s Naira remains uncertain,” it says.
Pwc in the report was, however, optimistic that in 2017, there will be improvement in Nigeria’s business environment including the Equity Capital Market (ECM), expected to be driven by privatisation plans of the government.
The report however said that the non affordability of foreign exchange had become a blessing for local businesses as several corporations now seek to access local bond markets to refinance their foreign currency debt.
It said Nigeria’s market has also seen several commercial paper issuance from Guinness Nigeria, Access Bank and FSDH Merchant Bank providing local investment opportunities for growing private pension funds and local fund managers.
The report said with the increasing liquidity on local exchanges, growing demand for local investment options and more sophisticated regulations, there was significant room for growth and expansion in Nigeria’s domestic bond markets.
In general, the report showed that Africa is home to about 700 companies with annual revenues in excess of 500 million dollars, but only 40 per cent maintain a listing on the stock markets.
“Entry by these participants over the coming years will contribute to furthering depth and breadth of the Africa capital markets landscape.’