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KPMG provide insights to aid domestic growth

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By Abdulwasiu Usman

Nigeria experienced a decline in capital importation in Q3 2023.

A professional services firm, KPMG, has emphasized the importance for Nigeria to find equality in enticing foreign investment and advancing domestic growth. They suggest that the nation must implement policies that not only encourage foreign investment but also create a favorable atmosphere for local businesses to flourish. KPMG’s flashnotes, published on January 4, 2024, draw attention to the concerning trend of decreasing quarterly capital inflow figures, which indicates ongoing obstacles in maintaining investor trust in Nigeria’s economy. The firm said establishing a balance to regain foreign investors’ confidence would also lead to reduced dependence on external funding while encouraging domestic development.

It revealed that Nigeria experienced a decline in capital inflow during the third quarter of 2023. This drop came after an initial increase in the second quarter. The decrease is believed to be a result of ongoing negative market sentiments towards the country, despite positive perceptions of initial reforms. Moreover, the trending trade credits, loans, and other forms of short-term capital inflows, particularly portfolio and foreign direct investment, is a significant cause for concern, stated KPMG.

Short-term nature of trade credit is a cause for concern.

Foreign investors are wary of Nigeria due to the country’s current economic climate, which is characterized by negative interest rates, a significant foreign exchange imbalance, low and falling forex reserves, and a lack of clarity on monetary and fiscal policy. The problem has been exacerbated, according to KPMG, by the departure of multinational corporations like GlaxoSmithKline and Procter & Gamble (P&G), which have ceased their operations on the ground and have instead established business models that are led by imports and distributors.

Concerningly, the firm stated that the short-term nature of trade credit, loans, and related kinds of capital inflows is a cause for concern, since they currently constitute the majority of capital inflows. Rapidly diminishing since the onset of Q1 2023, portfolio investment, encompassing investments in stocks, bonds, and various other securities, has undergone a staggering decline from $649.28 million to a mere $87.11 million during the third quarter of 2023. This alarming plunge has left the economy vulnerable to foreign exchange illiquidity as well as currency depreciation, consequently posing substantial risks.

Investors are still hesitant to commit or stay in Nigeria.

This decline in portfolio investment has exerted immense pressure on consumer price inflation and significantly reduced purchasing power, ultimately leading to a deceleration in economic growth, with a target rate of 3.75 percent in 2024, decreased employment growth (particularly due to ongoing declines in foreign direct investment), and instability in the broader macroeconomic landscape. In light of the ongoing global poly-crisis, KPMG warns that the economy becomes increasingly susceptible to international economic shocks, raising concerns. The reduction in foreign capital inflows, due to this vulnerability, restricts access to essential external funding for infrastructure projects, technological advancements, and various development initiatives.

Consequently, the cost of doing business escalates, investment opportunities lose their appeal, and the country’s competitiveness on a global scale dwindles. KPMG highlighted that, despite the acknowledged potential of Nigeria, investors are still hesitant to commit or stay in a nation plagued with concerns pertaining to infrastructure, logistics, connectivity, and operational efficiency. According to the firm, the investor community desires a stable and predictable business environment. However, the absence of these elements hinders the flow of capital.

Related Article: KPMG predicts Nigeria inflation to hit 30%

The firm urges immediate action to overturn this trend and regain investors’ trust within the Nigerian economy. This can be achieved by enhancing current measures to establish a secure and supportive macroeconomic atmosphere and implementing policies that are consistently favorable for investors. Nigeria has the potential to counteract this prevailing trend through enhanced infrastructure, bolstered competitiveness in macroeconomic principles, and the removal of hindrances posed by structural and regulatory obstacles that impede inflow and outflow of capital. This initiative requires effort by the Nigerian government and other key players must work together, KPMG said.


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AN-Toni
Editor
1 month ago

KPMG provide insights to aid domestic growth. Nigeria experienced a decline in capital importation in Q3 2023. – Express your point of view.

Taiwo
Member
1 month ago

KPMG offers insights to support homegrown expansion. In Q32023, capital imports into Nigeria decreased. We have received advice from KPMG on how to strengthen our home economy. The government must consider these findings from a broad perspective and consider how they might benefit us.

Kazeem1
Member
1 month ago

That Nigeria’s capital imports decreased in Q3 2023 is a regrettable development. KPMG’s insights to support domestic growth are remarkable. Nigeria might look into ways to draw in more investments and strengthen its economy with their knowledge and direction.

Adeoye Adegoke
Member
1 month ago

It’s unfortunate that Nigeria experienced a decline in capital importation in Q3 2023. However, it’s great to hear that KPMG is providing insights to aid domestic growth. Their expertise and guidance can be invaluable in identifying opportunities and strategies to boost the economy. By analyzing the market and offering recommendations, KPMG can help Nigeria navigate through challenges and attract more investments. It’s crucial to leverage such insights to create a favorable business environment and stimulate economic growth. Let’s hope for a turnaround in capital importation and a thriving domestic economy! 💼📈

SarahDiv
Member
1 month ago

KPMG’s insights underscore the urgency for a balanced approach to attract foreign investment and foster domestic growth. The decline in Q3 2023 capital inflow signals a need for immediate actions to restore investor trust. Enhancing the macroeconomic environment, improving infrastructure, and implementing consistent investor-friendly policies are crucial steps. The focus should be on creating a stable and predictable business environment to enhance Nigeria’s competitiveness and unlock its vast potential.