Citigroup Inc. has revealed that despite the sharp depreciation of their currencies, Nigeria, Angola, and Kenya are among the African nations that are anticipated to attract additional international investment flows.
This came just a week after global financial services giant JP Morgan announced that Nigeria’s net FX Reserve is believed to be at $3.7 billion, far lower than the previously reported net value of $14 billion, placing the country’s foreign exchange market under more strain.
According to Bloomberg, Citi’s Head of Markets for Sub-Saharan Africa, George Asante, indicated during an interview in Nairobi that these countries with big forex adjustments are clear winners from an investment standpoint.
“Countries where we’ve seen significant FX adjustments are clear winners from an investment standpoint, all of them present prospects in the local market,” Asante added.
The naira is said to be one of Africa’s worst-performing currencies, having dropped to a record low versus the dollar following the unification of the currency rate and the withdrawal of the petrol subsidy.
According to Asante, the removal of the petrol subsidy is a critical reform for Nigeria, and efforts to consolidate various exchange rates would also assist in increasing liquidity.
He stated that the government’s next responsibility is to ensure that the official FX market can continue to operate properly in the aftermath of the adjustments.
“I believe this will be a significant catalyst for flows back into the Nigerian market,” he said.
The Ivory Coast and Senegal are expected to generate the most attention.
Concerning the potential for Eurobond issuance by African governments, Asante stated that market darlings such as Ivory Coast and Senegal will likely garner the most investor interest when the market reopens, noting that both countries have long-term foreign debt ratings from Moody’s Investors Service.
“These two countries have fairly consistently high growth rates, diverse economic bases, large IMF program with associated concessional financing, and a track record for economic reforms and fiscal prudence, as well as low debt service costs,” he said.