How Might Nigeria’s Investment Cycle Pan Out in 2021?

How Might Nigeria’s Investment Cycle Pan Out in 2021?

The COVID-19 pandemic was perhaps humanity’s first-ever health and economic crisis in the 21st century that brought the greatest of the nations to their knees.

No one knew how to handle the dilapidating economy, and people were at their wit’s ends when it came to containing the virus that claimed millions of lives across the globe. But life goes on, and nations had to pick what was left of them and start afresh.

It needs little mention that the global economy is in tatters, and most countries saw a sharp decline in their GDP and went into a phase of recession. Nigeria was one of those many nations that entered a period of recession and had to brave insurmountable economic challenges.

However, the Federal Government has asserted that there is hope for Nigeria to exit its phase of recession by Q1 2021 even amidst the second wave of the pandemic that has been disrupting the financial markets.

Nigerian investors and speculators, however, have taken cues from the first wave of the pandemic and are prepared better to deal with the economic crisis. They are anticipating more downside risks in the path of recovery to Nigeria’s economy in 2021.

How Might Nigeria’s Investment Cycle Pan Out in 2021?

What Does the African Development Bank Have to Say?

The African Development Bank, in a data that has been retrieved, revealed that Nigeria could expect growth in its Real GDP to 3.3 per cent in 2021. However, there are a number of factors that shall determine if such a growth shall materialize in reality. It depends on whether Nigeria’s fiscal officials emphasize on economic diversification and implement the Economic Recovery Growth Plan. The apex bank has directed the Nigerian banks to hold loan-deposit ratios of 60 per cent. Only when all these factors are put in place, the Nigerian economy shall recover, and the GDP can rise as is expected.

Nigeria’s Export Earnings and Stock Market:

Now coming to Nigeria’s export earnings, the sector witnessed an increase. The Brent crude futures trades improved the foreign exchange reserves which further provided the central bank with an impetus to intervene in the foreign exchange market of Nigeria.

The Nigerian stock market has also shown some positive results over the last couple of months, even with the pandemic in full swing.

The stock market closed Year-to-date return at 44.56 per cent, and the market capitalization was at N20.3 trillion. This led Nigeria to emerge as the best performing stock market in the world. It further promises to rebound higher in 2021.

How Might Nigeria’s Investment Cycle Pan Out in 2021?

How Does the Investment Sector of Nigeria Look in 2021?

Amidst all the growth and promising results, the question that is still bugging every investor and speculator is just one. How does the investment sector in Nigeria hope to look in 2021? It is still the beginning of the New Year, and there might be massive changes throughout the year, but some financial experts shared their wisdom and predictions.

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Some speculators say that it is still too soon to predict how the investment sector shall pan out in 2021, and the performance of the same shall depend on how quickly the virus is contained. With the new strain of the coronavirus at large, the growth of Nigeria economy might take a backseat too.

However, it is expected that with the gradual deployment of vaccines across the planet, the economy shall gain momentum. The prices of crude oil shall gradually pick up, economic activities shall increase that shall further drive capital flows and minimize uncertainties in 2021. It is also expected that the trend of tech companies’ stocks influenced investment behaviour shall continue well in the first half of 2021.

In 2020, the global economy was deluged with cheap funds, owing to very limited investment opportunities amidst the pandemic. However, this negative yield that we saw in the space of fixed investment promises to reverse in the first quarter. The government’s borrowing is expected to outrun the figures of 2020, and Nigeria’s administration shall successfully walk the economy out of its phase of recession in 2021.

This shall lead to the investors’ confidence to increase, and they shall once again be keen on investing in the right portfolios. More funds are expected to flow back into Nigeria’s economy and lead to higher yields. The sectors that are predicted to dominate the investors’ focus are the stocks in pharmaceutical, aviation and manufacturing.

The entertainment industry in Nigeria also looks hopeful with more and more investors showing interest in the gaming sector. These investments in the gaming sector shall help the sector grow in leaps and bounds and contribute to the economy. It is hoped that growth in this sector shall push the casinos in Nigeria to become almost equal to the online casino in Canada with the fastest payouts, which shall bring about a massive change.

The Takeaway:

Though there are several factors that hint at the steady growth of the Nigerian economy and show that the investment scenario in 2021 looks bright, Nigeria still has to enforce a number of economic reforms.

These economic reforms, when implemented rightfully, shall encourage foreign portfolio investors to invest more. A clear forex policy is the need of the hour to imbibe confidence amongst the investors in Nigeria.