Nigeria does not have the domestic savings necessary to drive rapid economic growth and will need to attract capital from overseas to do that, according to Charlie Robertson, Renaissance Capital’s Chief Economist.
“Attracting foreign investment is essential. Ideally as foreign direct investment (FDI) or via portfolio flows into domestic debt and especially into equity,” Robertson said at a conference in Abuja, Nigeria’s capital yesterday.
“Inflows to Naira assets is the low risk option for Nigeria. It reduces external debt default risks. If the investments are into equities, and the investment goes bad, Nigeria is not left with a debt burden. The risk (and profit) is taken by the equity investor.”
While a very high oil price surge or weak currency, would produce a current account surplus, the former is out of Nigeria’s control and a weak Naira is not the favored policy choice.
Nigeria’s fiscal space still has room to expand foreign borrowing, boy this will not be enough to address the country’s infrastructure needs, according to Robertson.
“Too much borrowing will lead to a debt crises. The private sector appears to have more room to borrow externally as Government debt is already very high versus revenues,” Robertson said.