…A response to an unsigned commentary on Nigeria’s capital inflows
INTRODUCTION
The unsigned commentary under review presents itself as a forensic examination of Nigeria’s recent capital-importation figures. Its central thesis is that because a substantial proportion of recent inflows entered Treasury bills and other money-market instruments rather than factories and industrial enterprises, the inflows should not be interpreted as evidence of confidence in Nigeria’s economy. Instead, they are characterised as speculative, transient and symptomatic of deeper economic weakness.
The argument is forcefully stated. Unfortunately, it rests upon a misunderstanding of how capital typically returns to economies emerging from periods of macroeconomic instability and undertaking major policy adjustment.
The Nature Of Portfolio Capital And Foreign Direct Investment
The first weakness in the argument lies in its treatment of foreign portfolio investment as though it were an inferior and economically insignificant form of capital. Economic history provides little support for such a
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