Foreign capital inflows into the Nigeria's economy rose by 148 per cent to $4.15 billion, according to a report released yesterday.
The Financial Derivatives Monthly Economic Update titled: “Hot Money:
Foreign Direct Investment and the Central Bank of Nigeria’s Monetary Policy” attributed the increase to renewed investors’ confidence in the economy.
It said a further breakdown showed that foreign portfolio investment (FPI) — hot money —accounted for 67 per cent of inflows; foreign direct investment (FDI) and others accounted for the rest.
The report said policy makers were wary of relying on FPIs because they are considered to be highly volatile and politically sensitive. “Some nations have restricted the tenor of FPIs to a minimum stay of three years. In 2018, with the expectant increase in US interest rates, these investments could be subject to capital flow reversals.
In the run-up to a general election, any outward investment flows could be debilitating,” the report said.
It said with oil prices rising by 17 per cent since 2017’s average, staying at current levels, means oil revenues may help mitigate the consequences of any form of capital flight.
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