Get Guardian on GoogleThe entry of global banking giant JP Morgan Chase into Nigeria’s merchant banking industry could attract more long-term foreign investments into the country, the Independent Media and Policy Initiative (IMPI) has said.
The policy think tank said the bank’s application for a national merchant banking licence signalled growing international confidence in Nigeria’s economy and could encourage multinational corporations and global investors to commit capital to the country.
In a policy statement signed by its Chairman, Dr Omoniyi Akinsiju, IMPI described the development as a significant shift in West Africa’s corporate finance landscape, noting that JP Morgan’s expansion would strengthen Nigeria’s access to international capital markets.
The group said the transition from a representative office to a fully licensed merchant bank would enable the American financial institution to provide trade financing, corporate lending, cross-border underwriting and other investment banking services directly in Nigeria.
According to IMPI, the development would also reduce some of the financial and operational bottlenecks facing multinational companies seeking to invest in Nigeria, particularly in energy, telecommunications and industrial infrastructure.
It said JP Morgan’s presence could facilitate large-scale project financing by enabling international investors to share risks through financing partnerships and consortiums.
The think tank added that Nigerian sovereign and corporate debt issuers would benefit from more direct access to global capital markets, while the bank’s presence could strengthen the country’s investment profile among international pension funds, sovereign wealth funds and private equity firms.
However, IMPI said the potential benefits of the expansion should be assessed alongside practical investment risks, stressing that improved access to international finance must translate into actual investments in productive sectors.
The group attributed the renewed interest in Nigeria to the economic reforms introduced by President Bola Tinubu’s administration, particularly the unification of the foreign exchange market and removal of the petrol subsidy in 2023.
It said the policies, despite triggering initial inflationary pressures and currency depreciation, had helped reposition the country’s external accounts and renewed global investors’ interest in the economy.
IMPI noted that Nigeria’s foreign investment landscape was gradually shifting from short-term foreign portfolio investments to longer-term foreign direct investments, which support physical infrastructure, industrial production and business expansion.
It explained that the Central Bank of Nigeria‘s strategy had initially relied on attracting high-yielding portfolio investments to address foreign exchange backlogs, strengthen external reserves and support the naira.
While the strategy helped push foreign reserves above $55 billion, the group said it also came with the cost of high domestic borrowing rates for businesses.
It argued that moderating inflation and declining yields on fixed-income securities could encourage institutional investors and cross-border private equity firms to move capital from government debt instruments into infrastructure, industrial projects and greenfield investments.
“For nearly two years, foreign capital prioritised government debt and Treasury bills (FPI) over physical infrastructure (FDI) because short-term paper yielded safely above 25 per cent,” the group said.
IMPI added that as yields on fixed-income securities adjusted to the 23 per cent Monetary Policy Rate, long-term investments in productive sectors could become more attractive.
It said the challenge for Nigeria was to convert renewed international investor interest into sustainable investments capable of creating jobs, expanding industrial capacity and strengthening the economy.
