A financial expert, Mr Johnson Chukwu, on Wednesday, said the retention of the Monetary Policy Rate (MPR) by the Monetary Policy Committee (MPC) was due to pressure in the foreign exchange market.
Chukwu, the Managing Director of Cowry Assets Management, stated this at the maiden one-day National Discourse organised by Pragmatic Shareholders Association of Nigeria (PSAN) in Lagos.
He spoke on “Portfolio Investments: Opportunities and challenges for Nigerian investors.”
The News Agency of Nigeria (NAN) reports that the MPC on May 22 voted to maintain the status quo for the 11th consecutive session by retaining the MPR at 14 per cent, as well as other rates.
He said the apex bank retained the rates because investors were selling their investments in fixed income instruments thereby putting pressure on the foreign exchange market.
According to him, the MPC retained the rates because foreign investors were beginning to withdraw their investments from the nation’s capital market.
He explained that the effect of the withdrawal was the main reason the nation’s foreign reserves dropped for the first time in eight months.
NAN also reports that the foreign reserves declined from 47.87 billion dollars on May 10 to 47.79 billion dollars as at May 14 for the first time in eight months.
Chukwu said the activities of foreign investors would continue to affect the nation’s capital market because they were the major players.
He identified unstable macro-economic environment as the major challenge affecting investment in the country.
Chukwu highlighted other challenges to include market abuses/low but improving sanctions regime, relatively weak investor protecting resources and absence of efficient commercial legal systems as some challenges affecting investment.
He said the absence of credit and high cost of funds made it impossible for retail investors to be active in the capital market, thereby making it sensitive to the influence of foreign portfolio investors.
According to him, in spite of the enormous challenges, Nigeria would remain an investment destination with the right economic policies.
He said Nigeria would continue at track attract investors being the largest economy in Africa with huge growing population. (NAN)