HSBC and USB pull out of Nigeria as investor confidence drops amid growing debt and Buhari re-election fears

FOREIGN banks HSBC and UBS have shut down their Nigerian offices and pulled out of the country as part of a worrying sign that international investors are losing confidence in the economy.

 

According to the Central bank of Nigeria (CBN), investment had fallen sharply from a year ago, with foreign direct investment dropping to N379.84bn ($1.2bn) in the first half of the year from N532.63bn ($1.7bn) a year ago. However, the CBN said the outlook for the Nigerian economy in the second half of the year was optimistic thanks to higher oil prices and production.

 

However, it warned that rising foreign debts and uncertainty surrounding the 2019 presidential election were drawbacks. Also, investor confidence in Nigeria appears to have been shaken since August when the CBN ordered MTN to bring back $8.1bn to the country, part of the profits the South African telecoms firm sent abroad.

 

A HSBC research note dated July 18 said a second President Muhammadu Buhari term raises the risk of limited economic progress and further fiscal deterioration, prolonging the stagnation of his first term. It added that this will particularly be the case if there is no move towards completing the reform of the exchange rate system or fiscal adjustments that diversify government revenues away from oil.

 

While international investors are pulling out, the CBN is having to grapple with the weakness of local banks as of late, three lenders failed to meet its minimum liquidity ratio of 30%. According to the CBN, non-performing loans had dropped to 12.4% as of June 2018 from 15%  a year ago, which is good but still a long way above its 5% threshold.

 

“To further consolidate on the improvement, the Central Bank of Nigeria directed banks to intensify efforts at debt recovery, realisation of collateral for lost facilities and strengthening their risk management processes,” the CB report said.

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