Market News

Nigeria’s double-digit inflation and the weak naira are eroding the real value of returns on many investments, despite headline rates that may appear attractive to investors, according to experts.

Speaking at an investment summit in Abuja, Andrew Enofe, Chief Executive Officer and founder of Golden Gate Investments, said many high-yield opportunities, including real estate, fail to deliver positive real gains once inflation and currency depreciation are taken into account.

“Some people say, ‘Oh, I get 40% return when I invest my money in Nigeria.’ Great, but let’s look at the reality. With inflation at around 18% in Nigeria and the naira losing value against the dollar, the real return on Nigerian investments is often negative,” Enofe said.

He added that while nominal returns may appear strong, the combined effect of price increases and currency losses can result in actual losses. “What looks like a profit could actually be a loss in real terms,” he said.

He contrasted the situation with Canada, where inflation is around 2%, thus investments are considered to carry much lower solvency and political risk compared to Nigeria.

Despite the challenges, Enofe described Nigeria’s investment climate as full of opportunities for long-term players who understand the market. “Challenges are opportunities. There are a lot of challenges in the Nigerian market. We don’t see it as challenges; we see it as opportunity, room to grow,” he said.

“For example, they talk about security. If you have issues with security, you can start a security company and make money from it”, he added.

Also speaking, Archibong Bassey, managing director of Imperial Homes Investment, said that the multiplicity of currencies across Africa makes European and North American markets more desirable for investment.

“A continent of 54 countries with 54 currencies is not very encouraging because of the militating factors and the difficulties in the conversion rates,” he said.

Bassey urged the Nigerian government to do more in stabilising the currency. He advised that government can boost the economy for a more stable naira by increasing oil production, and creating a mire favourable environment for Small and Medium Enterprises to thrive.

“All we need is the government to come out with a steady and reliable exchange rate. Maybe not more than 800 Naira to a dollar for instance and increase the oil production. If we can hit 4 million barrels before the end of next year, we’ll be home and dry”, he said.