CBN may raise rates to woo foreign portfolio investors –

The Central Bank of Nigeria (CBN) may well be at the crossroads going to this month’s Monetary Policy Committee (MPC) meeting on July 26.

It will either jettison its inflation targeting policy or hikes its monetary policy rate to attract foreign portfolio inflows.

Investigations reveal that analysts and market watchers seem to support the latter option.

Currently, the MPR at 12 percent is seen as negative since official inflation rate as at end of May trended 15.6 percent. This, according to economic watchers, makes real yields equally negative, serving as disincentive for foreign portfolio investments.

They averred that for the new foreign exchange policy to succeed, the CBN may need greater foreign portfolio inflows.

“The success of Nigeria’s currency liberalisation effort is likely to depend on its ability to attract greater foreign portfolio inflows. Further monetary policy tightening that restores positive real returns is necessary for Nigeria to attract more FX-sensitive, yield-seeking flows. It is also necessary to instill greater domestic confidence in the national currency, the naira,” analysts at Standard Chartered said.