PricewaterhouseCoopers (PwC) has said Nigeria may not attract as much foreign investors due to negative real interest rates resulting from inflation.
The institution said this in its outlook for 2025 titled “2025 Nigerian Budget and Economic Outlook.”
PWC said, “Declining interest rates in advanced economies are likely to lead to a reallocation of funds to more competitive markets offering higher real returns.
“However, Nigeria may not benefit significantly from this because its negative real interest rates may discourage investors.”
Investing in Nigeria has become challenging for foreign investors over inflation which rose to 34.80 per cent in December while the Monetary Policy Rate (MPR) is around 27.50 per cent.
PWC said a disincentivizing market may lead to capital outflow from Nigeria.
It noted, “If inflation rises in advanced economies in 2025, their central banks may increase policy rates, leading to a shift of funds towards these markets offering positive real returns.
“This may exacerbate capital outflows from economies like Nigeria, where negative real interest rates diminish the appeal of local assets to international investors.”
According to the report, total capital importation in Nigeria in the second quarter of 2024 grew by 152 per cent to $2.6bn which is a significant rise from $1bn in Q2 2023.
PWC highlighted that the growth was propelled by a surge in Foreign Portfolio Investments (FPIs) from $106.8m to $1.2bn.
Other investments similarly rose from $837m to $1.12bn. But Foreign Direct Investments dropped by 65 per cent in the period to $29.8m.
PWC hinged the growth in FPIs on the CBN’s MPR raise which elevated the demand for Nigerian money market instruments.
