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Analysts Forecast 40% FDI Inflow to Power Sector

01 Apr 2013

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Prof  Chinedu Nebo, Power Minister

  • Say finding Sanusi’s successor will be a tall order

By Obinna Chima

Financial market analysts at the Financial Derivatives Company Limited (FDC) have estimated that 40 per cent of the total funds inflow to the power sector this year will be from Foreign Direct Investment (FDI).

This was just as the firm posited that the decision of the Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, to leave office upon completion of his first tenure would create a void that would be difficult to fill.
The FDC stated this in separate reports made available to THISDAY at the weekend. Stock of FDI inflows into Nigeria has been on a steady rise reaching a peak of $84.4 billion in 2012, according to the Economist Intelligence Unit (EIU) estimates.

FDI inflows from established and emerging economies to Africa had increased to cover the decline in the continent’s investments by developed economies in 2012.
For the power sector, all the preferred bidders for the 15 Power Holding Company of Nigeria (PHCN) successor companies recently met the deadline for the payment of the mandatory 25 percent of the offer value of their bids.  The Bureau of Public Enterprises (BPE) had explained that the 15bidders paid of a total of $559.446million.

“The anticipated increased FDI inflow into the power and petroleum sectors will have significant impact on the economy. Electricity is another factor which will impact Nigeria’s trade. The expected improvement in electricity in 2013 has the potential to be a game-changer for the manufacturing sector. The resultant increased production could cause a decline in the imports of some of the manufactured goods.

“Sectors with major FDI inflows over the years have been the oil and gas, manufacturing, infrastructure development, services and consumer goods sectors. We expect that the FDI inflows into the sectors will be sustained. Furthermore, the emerging opportunities in hospitality, tourism, shopping mall development and restaurants cannot be ignored as major grounds for FDI,” the Lagos-based investment and research firm said.

According to the FDC, opportunities also abound in infrastructure development in the air, road and rail transportation sectors, given government’s effort at improving the country’s infrastructural deficit. It also pointed out that developing infrastructure would result in additional inflows to other sectors like wholesale and retail trade, manufacturing, transportation, and will increase business services activities, leading to increase economic growth.

“Finally, the continuous development and introduction of additional re-forms in the agricultural are likely to attract significant foreign investments. Reforms such as zero duty on imported plant and machineries, and similar incentives, can help improve domestic production, establish new investments and reduce the country’s unemployment rate,” it added.

Meanwhile, commenting on the planned exit of Sanusi by June next year, FDC analysts said: “Finding a candidate with the appropriate qualities of courage, forthrightness and candor will be a tall order. What will happen to monetary policy between now and when he leaves is a source of concern.

“Will he be a lame duck, dead duck or keep on with the aggressive autonomy of instruments and policy as of today? While the decision has been met with mixed reaction from the public, its impact on the money, bond, foreign exchange and stock markets has been neutral. This is because market traders anticipated the status quo was going to be maintained.”

Monetary policy under Sanusi has been contractionary as the bank has implemented policy using the discretionary rule. 

Tags: Featured, Nigeria, Business, Chinedu Nebo

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