*Says Naira depreciation scaring investors away

By Emeka Anaeto & Babajide Komolafe

Against the backdrop of lingering economic recession, the latest Moody’s Report on Nigeria has indicated that consumer demand would remain depressed within the next 18 months.

But the New York-based global economic research, credit and rating agency also indicated that Nigerian economy would still be attractive for domestic and foreign investment in the next three years.

The rating agency also said foreign investors were scared of investing in Nigeria due to the parallel market exchange    of N450 per dollar which indicates the likelihood of further official devaluation of the naira.

In a statement released yesterday, titled: Corporates Nigeria: US Dollar Scarcity Remains Key Challenge to Improvement in the Corporate Sector, the Moody’s Report expects Nigerian consumers’ purchasing power to remain under pressure over the next 18 months.

But it also expects both domestic and foreign investment to take advantage of Nigeria’s compelling economic fundamentals, which, it said, were likely to rebound once the economy had fully stabilised.

It stated: “Looking ahead, growth prospects remain attractive for corporates over the next three years.

“Nigeria remains the largest economy in sub-Saharan Africa on a purchasing power parity basis, offering a sizeable market for corporates.

‘’A growing middle class – both in percentage and absolute terms – and increasing consumer wealth levels will continue to support higher levels of discretionary income expenditure.”

In the report, analysts at Moody’s, however, noted that the economy was undergoing stress in the external sector where oil revenue had gone down, putting pressure on the external reserves and foreign currency denominated trades.

According to Aurélien Mali, Moody’s Vice President and local market analyst for the government of Nigeria, “Nigeria is still undergoing a severe economic realignment to adjust to lower oil prices and the knock-on effect on its US dollar oil exports, which have led to reduced US dollar supply and lower GDP growth”.

Also Douglas Rowlings, another Assistant Vice President at Moody’s and the report’s co-author, stated: “the Naira’s depreciation by nearly 60 per cent in June partially cleared accumulated US dollar demand and stabilised foreign currency reserves.”