FDC ECONOMIC MONTHLY PUBLICATION – FEBRUARY 15, 2018 (Re : The Dark Side of Hot Money)

Dear Subscriber,

In Q3’17, foreign capital inflows into Nigeria increased by 148% to $4.15bn. This phenomenal increase is as a result of renewed investor confidence. A further breakdown shows that foreign portfolio investment (FPI) – hot money, accounted for 67% of inflows, while foreign direct investment (FDI) and others accounted for the rest.

Since FPIs are considered to be highly volatile and politically sensitive, policy makers are usually wary in relying on them. Some nations have restricted the tenor of FPIs to a minimum stay of 3 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.

Thankfully, oil prices are now 17% higher than 2017’s average. This means that if they hold at current levels, oil revenues may help mitigate the consequences of any form of capital flight.

In this edition of the FDC Monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and investment decisions.

Enjoy your read.