Tracking investor sentiment ahead of Nigeria’s general elections

As Nigeria prepares for the 2023 general elections, investor sentiment and economic prospects are under scrutiny. Data from the National Bureau of Statistics (NBS) reveals a 29.4% increase in portfolio investments and a 16.4% growth in foreign direct investments in the fourth quarter of 2021. Matthias Chika Mordi, an Adjunct Professor at the School of Advanced International Studies at John Hopkins University, shared his insights on CNBC Africa. Mordi highlighted the challenges and opportunities facing Nigeria's economy amidst the upcoming elections. In a typical pre-election year, political risks escalate, making investors more apprehensive, especially in emerging markets like Nigeria. However, Mordi noted that this year presents a unique scenario due to several factors. Firstly, the incumbent is seeking re-election, offering a level of stability compared to previous election cycles. Additionally, global oil prices have surged, providing a boost to Nigeria's economy. Despite this, the country is grappling with low oil output, fiscal constraints, and inflationary pressures. Mordi emphasized the need for fiscal discipline to address these challenges effectively. The NBS data indicating that 24 states failed to attract investments in 2021 raised concerns. Mordi attributed this to fiscal challenges faced by both the federal and state governments, impacting investor confidence. He underscored the importance of structural reforms to enhance competitiveness and unlock productivity in Nigeria's economy. Despite these challenges, Mordi expressed optimism about 2023, citing reduced election volatility and low expectations that could be easily surpassed. To support the investment case, Mordi recommended building investor confidence through policy stability and addressing inflation. He emphasized the need to focus on industries with less exchange rate sensitivity and those that generate foreign exchange internally. While foreign investors often dominate discussions, Mordi advocated for bolstering confidence among local investors who play a significant role in capital formation. He highlighted the importance of ensuring market stability and security to curb capital flight and encourage local investment. Mordi concluded by stressing the need for a secure climate to attract and retain investors, citing the impact of security challenges on investment decisions. As Nigeria navigates the economic landscape ahead of the general elections, fostering investor confidence and addressing key challenges will be crucial for sustainable growth and stability.