Views of foreign investors ahead of polls

President Muhammadu Buhari’s strong points in this election are his anti-corruption war and the strides his administration is recording in building much-needed infrastructure. His opponent, Atiku Abubakar has presented himself as a genial pro-business candidate. With this backdrop, what do foreign investors think? Rafiq Raji spoke to some of them.

Both candidates have a huge followership and strong political structures, the election is widely expected to be hard-fought and results likely tight.  But there are concerns that the polls might not be free and fair. These are not unfounded. The opposition complains about harassment and intimidation by the state. This sentiment is probably not unconnected to the corruption charges some of their members are currently fighting in the courts.

In light of these developments, what are the views of foreign investors?

New African asked Charles Robertson, global chief economist and head of macro strategy at Renaissance Capital, an investment bank focused on emerging markets, about what investors were telling him. “They are relaxed about the election,” says Robertson.

His feedback is corroborated by Malte Liewerscheidt, vice president at Teneo, a global risk consultancy. “Investor sentiment is somewhat indifferent”, says Liewerscheidt.

So why is the election not a key concern for foreign investors as  one would ordinarily assume? Teneo’s Liewerscheidt says: “overall, few investors expect much to change, regardless of who wins the general election, hence interest in the polls is muted.”

If foreign investors are not worried about the elections, why are they not putting their money where their mouths are then? Some foreign portfolio investors have reportedly been doing some quick trades in the markets as late as January. But flows have not nearly been as much as they used to be.

In response, Renaissance Capital’s Robertson says “they]are deterred from investing in Nigeria due to the low oil price and uncertainty on FX (foreign exchange) policy after the election.”

Growth expected to pick up

In its 2019 economic outlook, the African Development Bank (AfDB) says “the slide in oil prices from late 2018 coupled with an output cut imposed by the Organisation of Petroleum Exporting Countries (OPEC) poses a downside risk to [Nigeria’s] economic outlook.” It also sees the “parliament’s approval of the 8.83 trillion naira 2019 ‘budget of continuity’ being delayed due to the presidential elections”. 

In any case, economic growth projections for the year are quite decent. From the World Bank, International Monetary Fund to the AfDB, the expectation is that Nigeria would grow by at least 2% in 2019, from likely lower than that level in the previous year. So, what could be responsible for the improvement?

Mark Bohlund, Africa economist at Bloomberg Economics, tells New African that “Nigeria’s economy will probably accelerate in 1H19 [January-June, 2019], fueled by increased spending connnected to parliamentary and presidential elections in February.”

In other words, he sees the upcoming elections driving growth to some extent. However, Bloomberg’s Bohlund sees “that acceleration likely taperin] off over the year as the new government aims to improve longer-term fiscal sustainability.”

In short, as far as foreign investors are concerned, it’s business as usual in Nigeria, election or no election. NA