KPMG predicts continuous naira fall

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Klynveld Peat Marwick and Goerdeler, globally well known as KPMG has predicted a continuous naira fall in the face of decline in foreign capital inflows. KPMG in Nigeria says the naira faces the risk of further depreciation in 2023 due to the recent decline in foreign capital importation into the country. In an article released recently and titled ‘Precipitous Decline in Foreign Capital in a Transition Period’, the professional services firm predicted that the country might also struggle to attract foreign capital during the year unless crude oil and non-oil exports are increased. According to the statistics office, the total capital imported into the country in the period under review was valued at $1.06 billion – down from $1.16 billion in Q3 2022. 

KPMG, in its analysis, attributed the decline in capital importation to the rounds of global economies’ monetary tightening as well as low investor confidence due to the ambiguous foreign exchange regime. Other factors include challenges in accessing foreign exchange, foreign exchange volatility, unflattering ratings by Moody’s and Standards and Poors’, continuous security challenges, high cost of doing business, weak growth and high inflation, interest rates, fiscal and monetary constraints. It said investors might also find it difficult to make certain investment decisions in a period of tense political transition. “Capital importation figures have now shown a persistent decline from $23.9 billion in 2019, $9.65 billion in 2020, $6.70 billion in 2021, and $5.32 billion in 2022,” KPMG said. 

“The importance of capital inflows in a country where foreign exchange is in high demand to stimulate economic activity is very clear.   Accordingly, the continuous decline in foreign capital inflows in the presence of dwindling crude oil sales and generally poor and unstable export earnings has slowed down foreign reserves accretion and widened the foreign exchange supply gap thereby putting pressure on the exchange rate which has depreciated for the most part since 2022. Additionally, inadequate access to foreign exchange has constrained inputs for production leading to higher production costs, lower revenues and slower economic growth.” 

The firm said that the country is currently experiencing an economic slowdown which suggested weakened consumer demand, hyperinflation, high interest rates and more volatile fiscal and monetary conditions. “While substantial reforms may yet be done to reverse the trend of declining foreign capital in the long term, we believe that in the meantime, the country will struggle to attract increasing foreign capital for most of 2023 and struggle to keep the exchange rate from depreciating further, unless it is able to boost its crude oil and non-oil exports, especially now that oil prices are once again rising,” KPMG said.  

Fidelis Chukwu

In a related development, the recent signing of the Business Facilitation and Enabling bill has been described as part of efforts aimed at ensuring that the initiatives to enhance the ease of doing business in Nigeria are aligned with government’s objectives. Business expert, Fidelis Chukwu, made this disclosure while speaking on the signing of the Business Facilitation Bill into law by President Muhammadu Buhari in Abuja.

Mr Chukwu who spoke on Business Nigeria on TVC News said the move was to align all efforts to ensure that ease of doing business is enhanced in Nigeria. He said the act would in giving effect to some of the federal government’s policies to ensure the success of the move to improve the ease of doing business in Nigeria. The Act would also help in ensuring that the business environment in Nigeria is friendly and in line with international best practices.

According to him, the Presidential Ease of Doing Business Council led by Vice President Professor Yemi Osinbajo had done a lot to enhance the ease of doing business in Nigeria. He observed that the challenges to the ease of doing business in Nigeria were enormous and they just cannot address all the issues holistically with new issues coming up any time one is resolved.

He noted that the changes that occurred daily in the business environment especially with transparency on how things could be done in getting licenses, permits and other government documents or certification had been a major source of irritation and delay for businesses. He also decried the issue of duplication of duties by multiple agencies of government leading to unnecessary delay in getting things off the ground for businesses in Nigeria.

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