After surveying 23 countries in Africa, using six pillars, the Absa Africa Financial Markets Index 2021, AAFMI has ranked Nigeria the third most attractive country in Africa for foreign investment. Nigeria gained 63 points followed by Mauritius’ 70 points to rank second and south Africa’s 86 points to rank first.

Yardstick

The yardstick identified as six pillars of the report is identified thus;

  • Market depth;
  • Access to Foreign Exchange;
  • Market Transparency, Tax, and Regulatory Environment;
  • Capacity of Local Investors;
  • Macroeconomic Opportunity; and
  • Enforceability of Financial Contracts.

Nigeria’s performance across the six pillars is identified below:

  • Market depth, 62;
  • Access to Foreign exchange, 20;
  • Market transparency, Tax, and Regulatory Environment, 86;
  • Capacity of Local Investors, 44;
  • Macroeconomic Opportunities, 69 and
  • Enforceability of Standard Master Agreement, 100.
The 2021 index was produced by the Official Monetary and Financial Institutions Forum (OMFIF) and sponsored by Absa Group Limited.

Roadmap to Nigeria performance

  • The introduction of innovative products across nine countries indexed including Nigeria is a major reason why it ranked high.
  • It noted that Nigeria’s Securities and Exchange Commission, SEC launched FinPort, a fintech and innovation portal to assist fintech businesses to understand the regulatory requirements for the Nigerian capital market.
  • It added that the SEC would be rolling out a regulatory incubator for fintech seeking to conduct capital market activities.
  • Also, Nigeria performed well when AAFMI evaluated financial market development in 23 countries and highlighted economies with the most supportive environment for effective markets.
  • The report also showed that only seven countries scored up to 50 basis points against 14 countries that reached 50 points last year.
  • Nigeria according to the report was among countries that are using technology in their stock exchanges to boost retail participation.
  • Some of Nigeria’s other approach includes; Strides in creating an enabling investment environment for foreign investors with the necessary regulatory developments and policy initiatives. Further to enacting enforceable netting-off provisions in the country’s Companies and Allied Matters Act of 2020, ISDA.

Dangers to overcome

On the flip side, the AAFMI stated that Nigeria has continued to perform poorly in access to FX and has imposed administrative controls that expanded the number of goods subject to import restrictions, enforcing existing export repatriation rules and restricting FX supply to certain windows.

According to the report,

“While these measures restricted capital outflows and helped keep reserves stable, market liquidity remained below pre-pandemic levels. The volatile FX market and the delays in the repatriation of foreign currency out of Nigeria caused further problems. Despite a rebound in oil prices and remittances, the FX shortage persists as imports recover faster than exports. All these factors contributed to Nigeria’s poor performance in Pillar 2,” the report said.

However, the report stated Nigeria has the best debt profile,

“At 8.4 percent of GDP, it has the best debt profile, boosting its ranking by five places to fifth. However, with oil prices expected to remain relatively low, the debt ratio is expected to go up,”

The rationale behind the report

The Absa Group through its Interim Chief Executive Officer had revealed that the report aimed to show present positions, as well as how economies could improve market frameworks to bolster investor access and sustainable growth.

You should know that,

  • ABSA is a South African-based financial services group
  • The 2021 index also stated that digital developments such as digitalization, fintech innovation, and exploration is critical to growth in Africa
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