KPMG Raises Concerns Over Investor Confidence as Major Firms Exit Nigerian Market in 2023

The global audit, tax, and advisory services firm, KPMG, has expressed apprehension about eroding investor confidence in Nigeria, citing the exit of nearly 10 major firms from the market in 2023. According to KPMG, the departure of longstanding companies is influenced by factors such as the necessity for macroeconomic stability, a negative interest rate environment, a widening foreign exchange (FX) gap with declining reserves, and global reclassifications by FTSE Russell and MSCI, negatively impacting external sentiments.

KPMG attributes the decline in capital importation to Nigeria in Q3 2023 to continuing negative market sentiments despite initial positive reactions to reforms in Q2 2023. The firm emphasizes that the decreasing trend in portfolio investment, which includes financial assets like stocks, bonds, and securities, poses a significant risk to Nigeria’s economy. This decline not only affects consumer price inflation and purchasing power but also hampers economic growth and job creation, particularly due to a persistent reduction in Foreign Direct Investment (FDI).

In its analysis of the recent National Bureau of Statistics (NBS) capital importation report, KPMG notes a sharp decrease in portfolio investment from $649.28 million in Q1 2023 to $87.11 million in Q3 2023, indicating an 86.58% drop. The firm warns that this fall exposes the economy to risks of foreign exchange illiquidity, currency depreciation, inflationary pressure, reduced purchasing power, slower economic growth, lower job creation, and overall macroeconomic instability.

KPMG cautions that without foreign investment, the cost of doing business may rise, impacting the attractiveness of investment opportunities. However, the firm suggests that the decline in foreign inflow could promote self-sufficiency, encourage alternative financing sources like domestic savings and capital markets, and foster local entrepreneurship.

As Nigeria faces economic challenges, KPMG underscores the need for strategic interventions to stabilize the financial landscape and promote sustainable growth.

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