By Omobayo Azeez
Financial analysts at Cowry Asset Management Limited have predicted recent decline in the inflow of foreign direct investment (FDI) into Nigeria is likely to continue until the government can convince investors with its policies.
They pointed out that if this trend must be reversed, the government must come up with new policies that can guarantee investors on their FDI, as well as tackle head on the abyss of infrastructural deficit in the country.
The financial firm made this prediction in its latest “Cowry Weekly Financial Markets Review and Outlook (CWR),” obtained by business a.m. on Thursday.
Commenting on the recently released Q3’19 capital importation data from the National Bureau of Statistics (NBS), which showed that Nigeria’s capital importation moderated by 7.78 per cent quarter-on quarter, to $5.37 billion in Q3 2019, with FDI which constituted only 3.73 per cent registering a q-o-q decrease of 10.23 per cent to $0.20 billion (and falling by 62.29 per cent y-o-y), the firm stated thus: “The declining trend in FDIs is likely to continue until right policies and infrastructure which will reduce the cost of running business in Nigeria are put in place.”
The analysts, however, “expect the part of the Finance Bill set in motion which gives tax incentives to investments in infrastructure and capital markets to facilitate infrastructural developments through private sector funding and stimulate investors’ interests in the capital market, especially in the equities market as yields on fixed income securities turn southward.”
The Finance Bill 2019, which was submitted to a joint session of the National Assembly, alongside the 2020 Appropriation Bill (the 2020 Budget) by President Muhammadu Buhari on October 14, 2019, was passed by the House of Representatives last week, having been earlier passed by the Senate.
Analysts believe that aside from proposing fiscal measures in support of the Federal Government’s 2020 budget, the Bill has extensive tax implications for the country.
Indeed, according to President Buhari’s letter forwarding the Bill for legislative consideration, the five key strategic objectives of the Bill are: Promoting fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; supporting small businesses in line with the Federal Government’s on-going Ease of Doing Business Reforms and raising the needed revenue for government, by various fiscal measures, including a proposed increase in the rate of Value Added Tax (“VAT”) from five per cent to 7.5 per cent.