Nigeria is the third most attractive country in Africa for foreign investment, according to the Absa Africa Financial Markets Index 2021 (AAFMI).
The AAFMI assessed 23 African countries and ranked their openness and attractiveness to international investment using six pillars. According to the report, Nigeria came in third place with 63 points, while South Africa and Mauritius took top and second place with 86 and 70 points, respectively.
The six pillars were market depth, foreign exchange availability, market transparency, tax and regulatory environment, local investor capacity, macroeconomic opportunity, and financial contract enforceability.
Nigeria scored 62 points in market depth, 20 points in access to foreign exchange, 86 points in market transparency, tax, and regulatory environment, 44 points in capability of local investors, 69 points in macroeconomic potential, and 100 points in the enforcement of standard master agreement.
According to the research, nine of the index’s countries, including Nigeria, have introduced products that may be categorized as green or sustainable, and that “green bonds are the most popular instrument, available to investors in seven countries.”
The AAFMI assessed the development of financial markets in 23 countries, highlighting those with the most conducive conditions for efficient markets. The goal was to highlight the current state of affairs as well as how economies should improve market frameworks to improve investor access and long-term growth.
The report noted that Nigeria was also among countries that are using technology in their stock exchanges to boost retail participation.
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.
However, 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.
“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.
The Interim Chief Executive Officer, Absa Group, Mr. Jason Quinn, while commenting on the aims of the index said: “The index has become a benchmark for the investment community and Africa generally to gauge countries’ performance across a host of indicators important for financial market development.
“We are extremely proud of the annual report, which has become a critical toolkit for countries seeking to strengthen their financial markets infrastructure. Now in its fifth year, the index records countries’ openness to foreign investment and is an objective indicator of the attractiveness of Africa’s capital markets, intended for use by policy-makers, investors and asset managers around the world.”