Ask Nigerians about the attractiveness of doing business in Nigeria and they may feel very different, but according to the Absa Africa Financial Markets Index (AAFMI) 2021 report, the country may have more reason to be confident than may seem.
According to the report, Nigeria has retained its spot as the third most attractive country in Africa for foreign investment in 2021. After a survey of 23 African countries using six pillars to rank the country’s abilities in terms of attracting foreign investments – including their openness and attractiveness, the countries have been ranked in the report with South Africa, Mauritius, and Nigeria coming in the first three positions.
Furthermore, the report noted that:
“South Africa, Mauritius, and Nigeria maintain their lead in the index, despite having lower overall scores than last year’s. Nigeria continues to make strides in creating an enabling investment environment for foreign investors, with the necessary regulatory developments and policy initiatives.”
The ranking of Nigeria in the six pillars used in the survey are as follows:
- Market depth – 62
- Access to Foreign Exchange – 20
- Market transparency, tax, and regulatory environment – 86
- Capacity of local investors – 44
- Macroeconomic opportunities – 69
- Enforceability of the standard master agreement – 100
The report tried to highlight the areas the made Nigeria retain its position as the third most attractive investment hub in Africa. It pointed out the country’s innovative strides in the financial markets and commended the governments’ effort in digital developments in terms of employing technology to help businesses understand regulations.
It read: “Nigeria’s SEC launched FinPort, a fintech and innovation portal to assist fintech businesses to understand the regulatory requirements for the Nigerian capital market. The SEC will also be rolling out a regulatory incubator for fintech seeking to conduct capital market activities.”
However, the AAFMI report noted that Nigeria has continued to perform poorly in access to foreign exchange while it has imposed administrative controls that expanded the number of goods subject to import restrictions, enforcing existing export repatriation rules and restricting the supply of FX to certain windows.
“While these measures restricted capital outflows and helped keep reserves stable, market liquidity remained below pre-pandemic levels.
“Due to the control measures and global macroeconomic imbalances, foreign portfolio investors’ appetite remained subdued. 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.”
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