No fewer than 5,400 people previously classified as US dollar millionaires fell out of the ranks of the super-rich in the last seven years of President Muhammdu Buhari administration.
This is according to the latest report of African wealth by New World Wealth, a wealth intelligence firm, and Henley & Partners.
The report noted that Nigerians dropped out of the high-net-worth individuals (HNWIs) list because they no longer have up to $1 million in liquid assets.
This trend, which is also seen in many other African countries, was driven by both human and environmental factors, the report said. Analysts say poor economic policies were worsened by the coronavirus pandemic, and government response complicated the problem.
A comparison of the reports published in 2015 and 2022 on African wealth by New World Wealth, a wealth intelligence firm, and Henley & Partners, a firm that publishes residence and citizenship by investment, showed that overall, the number of HNWIs slipped from 160,000 in 2015 to 136,000 in 2022.
South Africa, Nigeria, and Egypt saw declines of 7,500, 5400 and 1,500 high net worth individuals respectively.
The 2015 report showed that the number of HNWIs in Nigeria increased by 305 percent to 15,400 in the 15 years between 2000 and 2014.
In 2015, the African economy was on the cusp of growth, recording over 160,000 people with personal fortunes of over $1 million, a two-fold increase over the number of wealthy individuals since the turn of the century, analysis shows, but much of this wealth has evaporated even as poverty deepened.
The total wealth held in Africa fell by 7 percent over the past decade (2011 to 2021) on the back of poor returns in the three largest African markets, namely South Africa, Egypt, and Nigeria. Angola also performed poorly.
Human costs including government economic policies were largely to blame. In Nigeria, the government has continued to fund petrol subsidies at the detriment of investments to improve human capital, healthcare and business-enabling infrastructure.
University lecturers have down tools for the past seven months agitating for better working conditions, while Nigeria plans to spend N6 trillion, more than the projected oil income for 2023, to fund subsidies on petrol.
President Muhammadu Buhari’s government shuttered the country’s borders to trade for a year, months after the country signed into a free trade pact on the continent, to ostensibly check rice smuggling stifling an economy already on the ropes.
Apart from the human cost, the coronavirus outbreak has had a severe economic impact on the continent. COVID-19 decimated the travel, hospitality, and entertainment sectors, causing many HNWIs in these sectors to lose significant portions of their wealth.
The pandemic has also caused HNWIs in Africa to change their habits. Recent new trends include: remote work, a move towards private jet travel, especially among the super-rich and outdoor hobbies, and sports that allow for easy social distancing (such as golf, hiking, fishing, cycling, and bird-watching) have become more popular.
Some of the poorly performing countries on the high net worth index point to a decline in the important factors that drive wealth.
Nigeria and South Africa especially present clear cases of how government policies have worked against wealth creation.
In Nigeria, the central bank’s so-called unorthodox foreign exchange management has strived to prop up the naira by maintaining an artificial exchange rate constraining outflows which have starved businesses of the opportunity to access forex.
“Between 2015 and 2022, the naira has depreciated sharply against the dollar. Ideally, when the Nigerian naira depreciates, their net worth reduces in dollar terms. And for investors who do their businesses in the country and earn naira in cash flows, their net worth must have reduced in dollar terms,” said Damilola Adewale, a Lagos-based economic analyst.
Adewale said everything is tied to poor policy choices of CBN as regards foreign exchange rate.