Nigeria has risen to become the third largest investment management hub in sub-Saharan Africa, following South Africa and Morocco, with approximately N3.5tn ($7.8bn) of assets under management at the close of 2022.
A study by Agusto & Co indicates that this marks a 25% increase from the previous year.
The surge was fueled by a boost in investor trust due to the gradual increase in returns on naira-based investments in the latter part of the year, and growth in dollar-based portfolios as savvy Nigerians hedge against the ongoing devaluation of the naira.
Despite this progress and substantial foreign exchange remittance inflows from Nigerians abroad ($20.9bn or N9.3tn in 2022), the study observes that the asset management sector in the country continues to underperform.
Factors including a large informal sector, a high poverty rate, and limited investment options offered by the Nigerian capital market have stymied the industry’s growth.
Exchange Rate And Inflation Impacts
“The challenging operating environment in Nigeria has led to an erosion of real incomes and purchasing power, prompting a surge in investors’ inclination towards dollar-denominated assets,” the report stated, adding that escalating inflation and a substantial gap between the parallel market and official exchange rates have diminished the attractiveness of naira-based investments.
According to the report, in 2022, segregated portfolios, which are tailored to the unique risk profiles and investment goals of individual clients, made up more than half of all managed assets (52%).
Meanwhile, collective investment schemes accounted for 42% of assets under management, with alternative assets making up the remaining 6%.
The report noted a growing investor preference for privately managed portfolios as they seek higher returns.
