South African investors are increasingly hesitant to explore Nigeria’s market potential due to the naira’s unpredictable devaluations. Between 2004 and 2024, the currency lost over 12 times its value against the US dollar, creating significant challenges for businesses trying to plan and hedge against currency risks. In contrast, South Africa’s rand, though depreciating, remains more stable, enabling businesses to adjust and mitigate risks more effectively.
The instability has already driven numerous South African firms, including retail giant Shoprite and packaging leader Nampak, to exit Nigeria. Foreign Direct Investment inflows from South Africa fell to a seven-year low of $378.49 million in 2023. Investors cite difficulties such as sudden devaluations, restrictive forex policies, and high inflation, which hamper profit repatriation and business sustainability.
Despite the setbacks, optimism remains. Recent reforms by Nigeria’s central bank, including a shift to market-based exchange rates, aim to stabilize the naira and attract foreign investment. However, critics argue these measures were premature, as they lacked the necessary dollar inflows to cushion their impact, leaving businesses grappling with sharp declines in currency value.
