Nigeria Remains Attractive to Investment, Says Coronation Merchant Bank

Obinna Chima

Despite the uncertainties in economy due to the impact of the COVID-19, Coronation Merchant Bank Limited remains optimistic about investment opportunities in the country.

This was disclosed by a team of analysts at a breakfast session tagged: “Discovering the New Normal: Impact of COVID-19 and Collapse of Oil Prices,” that was organised by the bank recently in Lagos.

The forum which held online, had in attendance business executives from various sectors of the economy.

In his opening remarks, the Managing Director of the bank, Banjo Adegbohungbe stated that: “There is a new reality that has enveloped the whole world and Nigeria is not immune to these changes.

“These are very uncertain times and our intention is to provide clarity. We believe this is the most critical thing organisations need to navigate their path forward in this unchartered terrain.”

Also, the Head, Research, Coronation Asset Management, Guy Czartoryski, analysed the shifts in economic power that the COVID-19 pandemic and the fall in oil prices have brought to the world and outlined what Nigerian companies needed to do about them.

Commenting on the impact of the twin crises of COVID-19 and low oil prices on the Nigerian economy, he said: “Although there are many uncertainties around the spread of the disease, one asset Nigeria has is its youth, with 93 per cent of its population under the age of 55 and 62 per cent under 25.

“It appears that the disease strikes hardest those who are elderly and with pre-existing medical conditions.

“Oil prices are rallying at the moment, with Brent crude up to $35.0/bbl from its lows of under $20.0/bbl in early April. However, there is no certainty about oil prices later this year, and we know that the nation’s finances work best when Brent crude is trading over $50.0/bbl.

“So, it is prudent to think about how to conduct business during a period of prolonged low oil prices, just in case oil prices do not reach $50.0/bbl soon.”

Also speaking about how businesses could hedge exchange risk in the current business environment, the treasurer of the bank, Iyobosa Sorae, said: “Businesses can go into a bi-lateral forward agreement with either a bank or an exporter to close forward transaction.

“This way, they can mitigate their exchange rate risk by agreeing on a forward rate and settling against that rate on a pre-determined date.

“In addition to this, the Central Bank of Nigeria has worked so hard, especially when you consider the NDF platform that has been put in place for the market.

“All of this was to take into consideration, ways by which we can mitigate exchange rate risk when FDIs and corporates inflow their funds into the country.

“So, what we have seen is that the window – in terms of the maturity bucket – for the NDF transactions has been extended further to about five years for loans and FDIs while import related transactions have been extended to about thirteen months.”

The Chief Risk Officer of the bank, Magnus Nnoka, explained that, “Historically, there has always been a new normal after every pandemic. To make it to this new normal, institutions will have to pass through two phases.

“First is the immediate phase – which is what most businesses have gone through – which speaks to the risk managers attitude and the actions they have put in place to cope with the pandemic thus far.

“For the next phase, institutions are expected to continuously reappraise their business continuity actions as well as the stress test carried out so as to ensure it is appropriate for the current mode in which the business is operating.

“More importantly, organisations need to begin to align their risk management practices to business objectives as well as identify new opportunities in the current situation.”

On his part, the Group Head, Corporate Banking, Demola Adekoya, said the pandemic, “presents an opportunity for us to further enlighten our clients as to how they can navigate these uncertain times.”