IMF warns Nigeria against reliance on hot money as foreign inflows surge - Businessday NG

…Urges CBN to maintain tight monetary policy

The International Monetary Fund (IMF) has warned Nigeria against excessive reliance on foreign portfolio investments, commonly known as “hot money”, even as the country records a surge in capital inflows, stronger foreign exchange liquidity and rising external reserves.

In its latest Article IV consultation on Nigeria, the IMF commended the authorities for reforms implemented over the past three years that have strengthened macroeconomic stability and improved resilience. However, it cautioned that Nigeria should reduce its dependence on portfolio flows, which can reverse quickly during periods of global uncertainty.

“Directors called for reducing reliance on portfolio flows with roll-over risk, phasing out remaining exchange restrictions, capital flow management measures, and remaining multiple currency practices as conditions permit,” the IMF said.

The warning comes as foreign portfolio investments continue to dominate capital inflows into Africa’s largest economy.