The Forex crisis has the potential to dissuade foreign investors, warns Comercio Partners

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A recent report by Comercio Partners, titled “Finding Rain in Drought” within its Macroeconomic Outlook 2024, suggests that foreign investors may delay investments in Nigeria due to the ongoing forex crisis.

 

The report highlights concerns about the forex backlog, external challenges amid global uncertainties, and warns of heightened pressure on Nigeria’s exchange rate.

It emphasizes the ominous scenario exacerbated by factors like diminishing external reserves and unpredictable fluctuations in crude oil prices.

The report underscores that the specter of exchange rate strain adds volatility and uncertainty to the local bonds market.

 

Local investors, wary of potential currency devaluation impacts, approach the market cautiously, while foreign investors may opt for a prudent approach, staying on the sidelines amidst the turbulent economic conditions.

Moreover, the report indicates that Nigeria faces economic headwinds, with the interplay of inflationary pressures, tightening measures, liquidity dynamics, and currency challenges shaping its uncertain economic future.

 

The report emphasizes the pivotal juncture the nation stands at and the keen anticipation of investors, both domestic and foreign, as they brace for the unfolding economic developments.

Recent weeks have seen the naira subjected to relentless devaluation pressure, dropping from N899/$ as of December 31, 2023, to N1,534/$ on February 12, 2024.

 

This depreciation followed the Central Bank of Nigeria’s decision to adjust the metric used for calculating the exchange rate, leading to the worst official exchange rate since the currency floatation in June 2023.

The report also touches on the global macroeconomic landscape, including scrutiny and pressure faced by governments worldwide.

 

Comercio Partners provides a detailed macro analysis covering areas such as the global outlook, inflationary challenges, long-term interest rates, global equities, and commodities.

 

The report aims to offer precision and analysis, focusing on African Eurobond markets, geopolitical fallout affecting countries like Egypt, and challenges faced by nations like Kenya and Ghana entangled in election uncertainties and fiscal sustainability concerns.

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