Lukman Otunuga, Research Analyst at FXTM has said that the outcome of the 2019 presidential election could have positive impact on investors’ confidence only if the federal government intensifies effort to diversify economy away from oil reliance.
He stated this in an exclusive chat with Nigeria CommunicationsWeek Media on Wednesday, in Lagos.
According to him, “The immediate outcome of Nigeria’s presidential election will certainly have an impact on investor confidence.
“I believe foreign investors need to see Nigeria intensifying its efforts to diversify away from oil reliance, while also boosting infrastructure spending across major sectors.
“If the correct steps are taken towards stabilizing local macroeconomic conditions and shielding against external forces, Nigeria could move a step closer to nearing its optimal potential.
“While the elections will affect investor confidence, it’s the steps taken after that will shape sentiment towards the nation.
“With the economy being one that is still heavily reliant on oil exports for a big chunk of its government revenues, the outlook remains influenced by external forces.
Giving an insight into the post election effects on the fluctuation of Naira in foreign exchange market, Otunuga said that there was speculation that increased government spending ahead of the elections will lead to rising inflationary pressures and ultimately weakening the Naira.
He however noted that the effects have yet to be reflected in the parallel markets, stressing also that we will witness post-election anxiety and that some element of uncertainty will potentially weakening the Naira on the forward markets in the near term.
“There was speculation that increased government spending ahead of the elections will lead to rising inflationary pressures – ultimately weakening the Naira.
“However, the effects have yet to be reflected in the parallel markets. We see post-election anxiety and some element of uncertainty potentially weakening the Naira on the forward markets in the near term.
“The local currency will also be influenced by external risk factors such as global growth fears, oil prices and ongoing trade developments.
“While the Naira may witness further stability on the parallel markets, the question is – for how long?
“With the Central Bank of Nigeria already injecting roughly $39.9 billion to defend the Naira last year, can they adopt a similar approach in such unfavourable global conditions?” he stated.