- External Reserves Climb to Five-Month High Ahead of MPC
Nigeria’s external reserves climbed to a five-month high amid rising foreign portfolio investments and stable global oil market.
The reserves rose from $42.309 billion in February to $43.507 billion in March, according to the data published by the Central Bank of Nigeria on its website. This is the highest external reserves since October 9, 2018.
The external reserves surged ahead of the 266th Monetary Policy Committee (MPC) meeting that is scheduled to commence on Tuesday.
Following the successful completion of the general elections, Nigeria’s Foreign portfolio investment jumped by 91 percent to N43.93 billion in February as foreign investors continued to take advantage of the fixed income market.
Foreign investors, however, withdrew N55 billion from the Nigerian Stock Exchange market despite current administration assurance. Suggesting that investors’ confidence in the stock market remained low as they await policy direction.
The MPC meeting will commence tomorrow to decide the appropriate policy rate for borrowers.
The committee left policy rate unchanged at 14 percent in the last policy meeting, while citing high inflation rate as one of the factors responsible for the decision and the need to lure foreign investors to the economy to further enhance foreign direct investment.
Still, experts think the lack of rate hike in the U.S. in 2019, the economic slowdown in China and weak growth in Europe Area would aid foreign direct investment in emerging economies like Nigeria, however, other domestic factors like policy uncertainty and security-related issues seem to be impacting capital inflows into the Nigerian economy.
Therefore, the MPC is likely to maintain the high interest of 14 percent at the 266th meeting tomorrow to sustain capital importation despite the need for lower borrowing cost.
The high borrowing cost is hurting the private sector and job creation in a period when the unemployment rate has risen to 23.1 percent.
