A think tank, the Independent Media and Policy Initiative (IMPI), says the decision by JP Morgan Chase to seek a merchant banking licence in Nigeria shows the country is becoming more attractive to foreign direct investment (FDI) and could draw other multinationals to follow.
In a policy statement signed by its Chairman, Dr Omoniyi Akinsiju, IMPI said moving from a representative office to a fully licensed merchant bank would let JP Morgan go beyond institutional coverage into trade finance, corporate lending, cross-border underwriting and balance-sheet execution.
It described the move as a significant shift in West Africa’s corporate finance landscape and an endorsement of the Tinubu administration’s market-oriented reforms, while cautioning that its impact should be assessed in terms of both opportunities and practical risks.
The group said high capital costs and the complexity of structuring project risk remain major barriers to FDI in the region. With direct merchant banking capabilities, it argued, JP Morgan can underwrite large energy, telecommunications and industrial projects and share risk with international consortiums.
A fully operational merchant bank would also cut delays for multinationals entering Nigeria by offering cross-border trade lines, structured commodity hedging and syndicated offshore and onshore financing without depending on local intermediary banks.
Nigerian sovereign and corporate debt issuers would gain more direct access to global capital markets, and the presence of the world’s largest investment bank would reinforce the story of Nigeria’s macroeconomic stability for pension funds, sovereign wealth funds and private equity firms.
IMPI said foreign investment conditions are improving under President Tinubu because of bold policy choices. Its analysis, it said, found that nearly four years of the administration have produced consistent current account surpluses, backed by a strategy that links FDI to domestic macroeconomic stability.
The group traced this to painful market corrections begun in 2023, mainly the unification of the foreign exchange market and the removal of the petrol subsidy. These steps first fuelled domestic inflation and currency depreciation, it said, but eventually reshaped Nigeria’s external balance sheet and renewed global investor interest.
The think tank also explained why Nigeria is starting to attract more FDI than foreign portfolio investment (FPI).
It said the Central Bank of Nigeria used high-yielding portfolio inflows to clear FX backlogs and defend the naira in the short term, while structural reforms rebuilt investor trust for long-term FDI.
Although the inflows lifted foreign reserves above $55 billion, they came at the cost of high borrowing rates for local businesses.
According to IMPI, foreign capital favoured government debt and Treasury bills for nearly two years because short-term paper yielded safely above 25 per cent.
As inflation eases and yields compress in line with the 23 per cent Monetary Policy Rate, it expects institutional capital and cross-border private equity firms to shift from volatile money markets into physical equity investments, infrastructure concessions and greenfield corporate projects.
