African countries including emerging markets like Nigeria and South Africa lost $500 billion to foreign investors in the last one year.
According to a report by CNN Money, the loss occurred between July, 2014 and August, 2015, the first annual outflow in decades.
The report further revealed that Nigeria and South Africa are already reeling from low commodity prices and a slowdown in China, due to the strain of a stronger dollar.
It was learnt that with the US Federal Reserve’s decision to increase interest rates on dollar, portfolio investors may continue to desert the Nigerian market for other opportunity markets, since according to experts, the naira currency will continue to struggle to keep pace with the US dollar.
Last month, the Central Bank of Nigeria cut its interest rate by two percentage points to 11 per cent. The apex bank also imposed similar restrictions and froze its exchange rate at around N200 to the dollar.
Sammy Simnegar, a manager at Fidelity Investments’ $3.4 billion Emerging Markets Fund (EMF), explained that the federal reserve initial rate hike would have a minimal effect on emerging markets.
The chief investment strategist for Wisdom Tree Investments, Luciano Siracusano, said: “What matters most to these countries is the pace of dollar appreciation because that will impact interest and that interest has to be paid in dollars.”
In East Africa’s biggest economy, Kenya, the Central Bank lifted rates twice this year by a total of three per cent points to 11.5 per cent.
Angola and Mozambique also made it harder to take money out of the country or buy dollars, hoping to stem the mass exodus of foreign currency.
The report revealed that South Africa is also suffering because its economy is heavily dependent on mining, which has been crushed by low commodities prices.
Yesterday, December 22, Nigeria’s 2016 budget termed the “Budget of Change” was presented to the National Assembly by President Muhammadu Buhari.