In order to increase the amount of foreign currency coming into the economy, the Nigerian government has introduced a $10 billion Nigeria Diaspora Fund. This initiative aims to enhance the liquidity of foreign exchange and stabilise the value of the Naira, among other benefits. Dr. Doris Uzoka-Anite, the Minister of Industry, Trade and Investment, announced on her X profile that the Nigeria Diaspora Fund Multi-sectoral Investment Initiative would appoint fund managers based on an Expression of Interest (EOI) process to oversee its design and management. Winners of the exercise will be chosen to take on this role.
As a result, the ministry has released a call for proposals from fund managers to create a $10 billion Nigeria Diaspora Fund, which will be led by the private sector and cover multiple sectors. The Minister of Finance and Coordinating Minister for the Economy, Mr. Wale Edun, highlighted the significant role of Nigerians living abroad in boosting foreign capital investments. He also mentioned plans for the introduction of a diaspora bond in June. Meanwhile, the Naira experienced a notable increase in value, reaching ₦1,380/$1 in the parallel market recently. This represented a significant gain of ₦70 in just one day, compared to the previous rate of ₦1,450/$1.
Dollar sees a significant increase against Nigerian Naira.
In contrast, the local currency depreciated to ₦1,339.23/$1 on the Nigerian Autonomous Foreign Exchange (NAFEM) https://www.cbn.gov.ng/intops/fxmarket.asp/ window, marking a decrease of N29.42 from the previous day’s rate of ₦1,309.81/$1. Despite this, the daily turnover on the NAFEM dropped by 2.85%, falling to $309.01 million from $318.08 million. The peak rate reached ₦1,410, while the bottom rate was ₦1,051. Uzoka-Anite detailed that the fund, lasting for 10 years and potentially extendable by two more years, provides an anticipated investment term of three to five years, followed by additional investments.
According to the minister, the upcoming fund will be overseen by managers who meet the criteria outlined in the EOI. These managers will suggest different fund structures targeting different sectors and investment stages. Depending on the manager’s preferences, the fund will consist of multiple investment platforms to provide investors with various ways to contribute to the country’s economic development. She emphasized that the fund was designed to promote remittances, stimulate investments, and support charitable efforts to boost infrastructure, healthcare, education, and entrepreneurship in the nation.
Foreign companies can collaborate with established local fund managers.
Furthermore, the minister highlighted how the intervention was a key component in the ongoing initiatives to enhance connections between Nigeria and its diaspora, drive national progress, and utilise the power of The Diaspora Community as catalysts for transformation and growth in Nigeria. Additionally, the minister emphasized that the official launch of the fund nationally would be a platform to generate enthusiasm and knowledge about the fund with the goal of encouraging financial investments from the community.
The tender specified that in addition to meeting various other criteria, greenfield funds must be led by individuals with significant expertise in fund management, executing investments, engaging in multilateral development, and possessing a comprehensive knowledge of the Nigerian landscape. It was also suggested that foreign companies consider collaborating with established local fund managers who fulfil at least some of the stipulated criteria. Nevertheless, foreign companies seeking to invest in frontier and emerging markets must have a proven track record of experience in these types of investments.
Related Article: Naira stability can bring FDI to the country
Lastly, stability is crucial for attracting foreign investment, as investors are more likely to commit to projects in a country with a stable currency. The fund can help control inflation by effectively managing the money supply. By ensuring that there is not an excess of currency in circulation, the fund can help prevent rapid price increases and protect the purchasing power of the Naira. This is essential for stability and ensuring that the benefits of economic growth are felt by all segments of society. Overall, this would be a proactive step towards creating a more robust and resilient economy in Nigeria.
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