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Lagos - Nigeria's central bank should impose restrictions on short-term portfolio investment flows to prevent damage caused to Africa's biggest economy if investors exit at short notice, a member of its monetary policy committee (MPC) has said.
Chibuike Uche, an academic, said history had shown that such speculative capital inflows only offer temporary relief, mainly in the arena of exchange rates and generally cause more harm than good, minutes from the 12-member MPC March meeting showed.
"I see no harm for the country to insist that the only types of foreign capital it will welcome are those that have long term investment intentions," he said.
Nigeria witnessed increased foreign investment in local currency denominated bonds prior to last year's foreign exchange restrictions introduced to conserve depleting forex reserves.
The country, Africa's top crude exporter, faces its worst economic crisis in years as a result of dwindling oil revenue, which last year prompted the central bank to impose a currency peg to conserve foreign exchange reserves.
JP Morgan last year removed Nigeria from its Government Bond Index in protest against the currency controls, which it said make transactions on local currency denominated bond too complicated.
Most foreign portfolio investors sold off their local bond holdings, triggering significant capital outflows.
