The Managing Director of Coronation Asset Management Limited Mr. Aigbovbioise Aig-Imoukhuede has said that controlling inflation is critical to attracting and sustaining both domestic and foreign investments in Nigeria.
Aig-Imoukhuede who stated this in a report tagged ‘Nigeria’s Financial Outlook in an Evolving Landscape’ said while the departure of multinational companies highlights a challenging investment climate, Nigeria’s future lies in its capital markets.
He noted that these markets must be robust enough to attract and sustain both domestic and foreign investments.
“Controlling inflation is critical to achieving this goal, as inflation undermines business planning and investor confidence. Once inflation is stabilised, consensus on the naira/dollar exchange rate can be established, fostering a more predictable and attractive investment environment,” Aig-Imoukhuede said.
He noted that the Central Bank of Nigeria’s recent shift towards orthodox monetary policies marks a significant development.
Aig-Imoukhuede said with Nigerian Treasury Bills yielding around 25.0 per cent for one-year T-bills and OMO bill auction yields reaching 29 oer cent, there is a renewed attraction for investment in the financial system. These high returns are enticing foreign portfolio investors and bolstering the naira.
“However, there are trade-offs. High-interest rates impose a burden on borrowers but simultaneously strengthen the case for saving in naira.
This policy approach is crucial for stabilising inflation and, by extension, the currency. As these policies take root, Nigeria can expect a more stable and prosperous financial landscape,” Aig-Imoukhuede said.
He noted that Nigeria’s financial institutions are navigating a landscape fraught with risks. High-interest rates, while offering opportunities for profit, also pose significant challenges.
He added that borrowers are under stress, and the valuation of investments must reflect these elevated rates, introducing volatility into financial statements.
Aig-Imoukhuede said the adoption of mark-to-market accounting, championed by the Fund Managers Association of Nigeria, is a crucial step towards mitigating these risks.
“This accounting method ensures that financial statements accurately reflect current market conditions, fostering transparency and stability in the capital markets,” he said.
He said sustainable finance is gradually taking root in Nigeria, integrating environmental, social, and governance (ESG) considerations into financial activities.
He added that regulatory policies by the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) are paving the way, adding that these policies encompass principles of environmental and social risk management, financial inclusion, and guidelines for green bonds.
Aig-Imoukhuede said banks and financial institutions are also investing in capacity building and training, equipping themselves to better assess and manage ESG risks. Despite progress, challenges remain.
“Limited awareness, inadequate regulatory enforcement, and a nascent market for green financial products hinder widespread adoption.
However, the global shift towards sustainnability presents significant opportunities for Nigeria to leverage its natural resources for sustainable development,” he said.
He stated that technological innovations, particularly blockchain and artificial intelligence (AI), hold transformative potential for Nigeria’s financial industry.
Aig-Imoukhuede added that blockchain can enhance security and transparency in financial transactions, while AI can drive efficiency and inclusivity.
“However, realising this potential requires a supportive ecosystem.
Collaboration among stakeholders—government, financial institutions, technology providers, and academia—is crucial. By fostering such partnerships, Nigeria can harness these technologies to spur innovation, improve financial services, and stimulate economic growth,” he said.