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CBN rules out control of foreign investment

By on March 17, 2015

The Central Bank of Nigeria has said that there are no plans to introduce capital controls despite the current economic challenges facing the nation.

According to the CBN Governor, Mr. Godwin Emefiele, capital control is a phrase used to describe a phenomenon where when investors bring in capital to a country, there may be some restrictions preventing them from liquidating the investment whenever they decide to do so.

He said although several people had asked him if the CBN was planning to introduce capital control, such a move was not being considered as the plan was for Nigeria to remain a free entry and free exit market.

Emefiele said, “Before 2009; yes, we had some capital control in the sense that if you brought in money and invested in Nigeria, we insisted that your investment had to be here for a number of years before you were allowed to take it out. But in 2009, capital controls were removed completely.

“At this time, we have what we call a free entry and free exit market, and that is the reason why if you look at the capitalisation of the Nigerian Stock Exchange today, 52 per cent of the market capitalisation is foreign and just 48 per cent is local, and that attests to the kind of flexibility that has been brought into the capital market and how it has reflected on the growth of the market capitalisation.

“Yes, as a result of the drop in commodity prices, we’ve seen a drop in our revenue earnings, while at the same time there is still pressure on the demand for foreign exchange. And a couple of people have asked me if we are considering capital control and I have said so very clearly and succinctly that capital control is not an option.

“Of course, we want to continue to make the market a free entry and free exit market where people are free. If you feel the investment climate is positive, you bring your money. If you bring your money today and tomorrow, you want to cash out because you’ve made profit from your investment; you are allowed to do so. So, capital control is not an option.”

 

[Punch]