The federal government’s FX unification strategy has been praised by experts in the Nigerian financial services industry, who emphasize that it will draw FDIs, advance the growth of the capital market, and encourage inclusive economic growth.
In the short-to-medium term, the local bourse would gain traction thanks to a properly implemented FX unification and the clearance of backlogs, notably for foreign investors. In order to provide perspective, it should be noted that since 2015, the percentage of foreign investors participating in the domestic equity market has steadily decreased, going from 53.8% to 10.4% in February 2023.
By year’s end, we predict that increased market liquidity in the foreign exchange market and pricing that reflects the market might increase foreign participation to 20%. As a result, the increased transactions by foreign investors and continued involvement by domestic investors would be crucial to driving equity prices of undervalued fundamentally sound stocks closer to their intrinsic value.
