The recent decision by the monetary authorities in Nigeria to hold monetary policy rate at 14 percent following the cancellation of the first Monetary Policy Committee’s meeting for the year, has been described as favourable to foreign investors, particularly portfolio investors who take interest in investment instruments in both the money and capital markets.
Ayodeji Ebo, managing director of Afrinvest Securities Limited, which is well known for midwifing foreign investors interests in Nigerian equities and other asset classes, said at a forum organised by the Finance Correspondents Association of Nigeria (FICAN) in Lagos, that keeping that rate will attract foreign investors who are needed by the Nigerian economy to move it out of its present ailing state.
Ebo said while the 14 percent rate would keep the investors happy, they would be further pleased by the stability currently existing in the market as it helps them know that the Nigerian economy was stable for their investments.
“Foreign portfolio investments provide liquidity and confidence to the market. And keeping the interest rate at 14 percent will help keep them coming,” he said.
He noted that the Nigerian central bank had been able to achieve a rate convergence, adding that with low exchange rate margin, speculators have virtually abandoned the market.
“Foreign investors also consider the margin between both official and parallel market level. When there is little or no volatility in the market, that gives foreign investors’ confidence,” he said.
Ebo said the year 2018 provided an opportunity for investors to make money in both equities and fixed income securities, but advised investors to time their entry and exit accurately in order not to lose their funds.
Speaking on loans to small and medium enterprises, he said delay and outright non-payment of borrowed funds by small and medium enterprises (SMEs) was making it difficult for key lenders within the sector, including the Bank of Industry to grant further credits to operators, adding that it is only when loans are repaid on timely basis that the lender has more capacity to lend to their borrowers.
He observed that the Central Bank of Nigeria (CBN) had spent a total of $15.9 billion in nine months in its weekly intervention in the foreign exchange (forex) market.
Eboh said these interventions were for nine months, starting in April and ending December, last year, stating that the figure was an improvement over the $9.6 billion spent during the same period in 2016.
The Afrinvest boss also noted that the Investors’ & Exporters’ Forex Window had recorded over $27.8 billion in turnover, a development he said brought about transparency and stability in the market.
He added that current account stabilised in a surplus position, expanding to $9.6 billion annualised in nine months, from $2.7 billion in the fiscal year 2016.
On inflation rate, he stated that it was still higher than Monetary Policy Rate, which makes it easier for investors to go for fixed income securities such as treasury bills, bonds and other instruments that help them create lasting wealth.