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Recession: Investment Inflow Shrinks by N642bn Under Buhari

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Muhammadu-Buhari

The Nigerian economy recorded a total decline of $2.1bn in investment inflow in the first 12 months of the administration of President Muhammadu Buhari.

The $2.1bn, when converted based on the N305.5 per dollar official exchange rate of the Central Bank of Nigeria, translates to about N642bn.

Investigations by our correspondent showed that since July 2015, the country had been experiencing persistent decline in the value of direct and portfolio investments.

An analysis of the capital importation report obtained by our correspondent from the National Bureau of Statistics revealed that the country attracted a total investment inflow of $2.75bn in the third quarter of 2015.

However, owing to the harsh operating environment coupled with exchange rate uncertainties, the inflow had declined by $2.1bn to $647.1m at the end of June this year.

The report stated that all the three major components of investment such as Foreign Direct Investment, portfolio investment and other investments recorded huge declines in the one-year period.

In terms of FDI inflow, an analysis of the report showed that the economy attracted the sum of $717.72m as of the third quarter of 2015.

The inflow, according to the report, dropped to $133.02m at the end of the second quarter of this year.

For portfolio investment, which is made up of equity, bonds and money market instruments, the report stated that the sum of $1.09bn was invested in the third quarter of last year.

The $1.09bn investment, it added, dropped by $673.68m to $245.32m at the end of June this year.

For other investments made up of trade credits, loans, currency deposits and other claims, the report stated that the sum of $1.02bn was invested in the economy as of the third quarter of last year as against $268.77m in June this year.

The NBS attributed the decline in investment to the harsh economic climate, stating that the investment attracted within the first six months of this year was the lowest in Nigeria’s history.

It said, “The continuing decline in the value of capital imported into the economy is symptomatic of the difficult period that the Nigerian economy is going through.

“The second quarter saw the economy enter into the first recession during the rebased period, according to the technical definition of two consecutive periods of decline.

“This may suggest less profitable opportunities for investment. In addition, in the second quarter, there was considerable uncertainty surrounding future exchange rate policy, which may have deterred investors.”

Commenting on the drop in investment inflows into the country, financial analysts said the current fiscal and monetary policies of the government were not friendly to investors.

The President, Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, told our correspondent that a lot of investors were unwilling to bring in their funds due to the tough economic environment in the country.

He said the tough operating environment had led to the closure of so many companies in Nigeria, adding that there was a need for the government to address the structural challenges, which had made the operating environment hostile.

He listed some of the areas that were scaring away investors to include uncertainty in the foreign exchange market, hostile business climate, infrastructure deficit and the absence of adequate incentives to attract investors into key sectors of the economy.

Ejinkeonye told our correspondent that what the country needed currently was for the government to implement a well-articulated industrial plan.

This, according to him, is needed in order to begin a new era for industrial development in Nigeria.

He said, “The Abuja Chamber of Commerce and Industry has made it known to the government that the issue of power and energy must be urgently addressed in order to promote industry, boost productivity, and attract both foreign and local direct investments.

“Power and energy sufficiency is the fulcrum of any meaningful development of the economy. This is the time for us as a nation to start implementing consistent policies geared towards attracting investments that will revitalise our industries.”

The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr. Godwin Eohoi, advised the government to look inwards by encouraging the patronage of locally-produced goods to boost investment activities.

He said, “We have to look inwards to reflate the economy by ensuring the encouragement of local content through patronage of locally-made goods. This will help stimulate production by local industries and thus boost investment.

“The government should come up with policies that will encourage investors to set up plants in Nigeria for production rather than spending money importing all these items that are depleting our foreign exchange reserves.

“The government should also reduce the interest rate to make funds available for investment in critical sectors of the economy such as agriculture, manufacturing and others.”

Eohoi added that since foreign investors were shying away from investing in the country, Nigeria should look inwards and encourage local industries by reducing interest rate and making foreign exchange available to them to continue production.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Investment

Yield-starved Investors Should be Exploring Less Traditional Opportunities

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Now is the time for investors to consider diversifying into less traditional asset classes, affirms the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.

The assessment from deVere Group’s Nigel Green comes as global stocks continue to experience turbulence.

He says: “The three major equity indexes on Wall Street are experiencing their worst stretch of losses in decades, and this is being echoed globally.

“It comes amid investors’ concerns over inflation, which is forcing central banks to slam the breaks on their economies, the ongoing war in Ukraine, Covid lockdowns in China’s manufacturing heartlands known as the ‘factory of the world’, and some household name companies posting weak results.

“This backdrop is creating a yield-starved environment for investors.”

He continues: “As such, for those looking for both capital appreciation and capital preservation, now is the time to consider diversifying into less traditional, return-enhancing asset classes.

“These could include venture capital, structured products, cryptocurrencies, high dividend stock, hedge funds, managed futures, and direct real estate, amongst others.”

“Such investments could also be useful tools to improve the risk-return characteristics of your investment portfolio. This is because they increase diversification and reduce volatility, due to their low correlations to more traditional investments such as stocks and bonds; and they can hedge some portfolio exposures.”

However, says the deVere CEO, considering that these investments are often more complex than their traditional counterparts, working alongside a good fund manager will likely be critical to ensuring return-boosting results.

He goes on to say that whilst less conventional asset classes should also be considered, investors should remain invested in the traditional markets too “because financial history teaches us that stock markets go up over time.”

Nigel Green concludes: “Yield-starved investors should explore less traditional opportunities, not only for potentially higher returns, but also as they provide diversification and downside protection for their portfolios.”

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Private Sector to Invest N169.72bn Tax Credit in Four Roads Construction

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lekki

The Federal Government of Nigeria, through its Executive Council, on Wednesday, approved N169.7bn private sector investments for at least four road infrastructures under the government’s Tax Credit Scheme.

Minister of Works and Housing, Babatunde Fashola, made this known to the State House correspondents after the council meeting. At the meeting presided over by President Muhammadu Buhari, Fashola disclosed that the scheme was initiated in 2019 through Executive Order 7 signed by the President, and that the arrangement allowed private sector players to finance public infrastructure instead of paying taxes and then offset it over time using tax credits. 

In the statement made available to Investors King, the four roads include a 234 kilometre stretch from Bali to Sheti through Gashaka to Gembu in Taraba State at the sum of N95,232,474,010.72 and the second road, which is also a tax credit scheme, is made up of three roads worth N74,486,577,050.

For the 234-kilometre road in Taraba costing N95.23bn, Fashola noted that N20bn under the NNPC Tax Credit Scheme would be disbursed to begin the project soonest.

“The two main memoranda relate to the uptake by the private sector in response to the tax credit programme, which we initiated in 2019, by Mr. President signing of Executive Order 7 to allow private sector finance public infrastructure in lieu of tax and then to offset it over time using tax credits.

“So the first road that was awarded today on that policy initiative is the rule road from Bali to Sheti through Gashaka to Gembu in Taraba State. A total of 234 kilometres reconstruction of that road in the sum of N95,232,474,010.62.

“The existing road, for those who are familiar with it, has no concrete stone base. It is just laterite on the asphalt so it doesn’t last and it’s breaking up and leading to potholes.

“So we’ve rewarded this now for reconstruction under the tax credit scheme, there’s a N20bn provision under the NNPC tax credit scheme that will be used to kickstart this immediately,” he said. 

Fashola added that “the second road which is also the tax credit scheme, which was approved by the Council is actually three roads. The applicant, in this case, is Mainstream Energy Solutions, a major energy player in the country and is now seeking to also participate in this policy by investing a total of N74,486,577, 050.”

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72% of North American Quant Fund Managers Struggle to Access High Quality Data

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Stocks - Investors King

New research with fund managers in North America who collectively manage around $600 billion, reveals they are placing a growing emphasis on both the quality of the data used in their investment processes and on having access to the technological capabilities to efficiently process data (please see the attached press release). Six out of ten (60%) believe this is crucial to achieving above-average returns in the future.

The study, which was commissioned by quant technologies provider SigTech, found that 94% of fund managers find the process of evaluating data, ensuring it meets quality standards and negotiating with data vendors challenging. 72% say it is difficult to source data that is cleaned, validated and ready to use from vendors.

When it comes to onboarding new data sets, nearly six out of ten North American fund managers say they encounter problems, with 56% saying it takes between 1 and 6 months to have new data fully operational internally.

As a result of the many challenges North American fund managers encounter when sourcing and managing data, 64% expect to increase their budget in this area over the next few years.

When asked to pick the two asset classes where they encounter the greatest difficulty in accessing high quality data, 62% of North American fund managers cited fixed income, followed by 54% who selected commodities. In terms of the two financial instruments where they have the greatest difficulty in securing high quality data, 66% cited forwards, followed by cash/spot (58%) and then futures (40%)

In terms of outsourcing of data services, the study found that 64% of fund managers have increased their level of outsourcing over the last two years. Going forward, 77% plan to outsource more between now and 2024, with none seeing a decrease. When asked which factors are fuelling the growing trend towards data services outsourcing, a shortage of qualified in-house subject matter experts and resources was cited as the biggest driver.

Half of those surveyed (50%) found negotiating with data vendors the most frustrating part of the data onboarding process, and 60% say that evaluating the different vendors is challenging.

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