FX inflows into Nigeria’s foreign exchange market falls by 33%

FX inflows into the Nigerian foreign exchange market fell by about 33% week on week to $1.1 billion, an update from Coronation Merchant Bank Limited revealed.The merchant bank’s research subsidiary wrote in a report released on Monday that US dollar inflows through the Nigerian Foreign Exchange Market (NFEM) moderated to $1.10 billion from $1.64 billion in the prior week. Despite the huge weekly decline, foreign investors led the pack, driving the supply side amidst rising demand for US dollar at the official window. Offshore investors have continued to exhibit confidence in the forex market, and the positive sentiment remain major catalysts for naira’ stability.
Foreign portfolio investors (FPIs) remained the dominant source, Coronation said in its update, with contribution from this side accounting for 63.1% or $694.9million of total inflows. This was followed by exporters (15.3%), non-bank corporates (12.2%), the CBN (1.3%), and other sources (8.1%), the report added. Notably, foreign direct investment (FDI) inflows fell sharply to $0.20million (0.01%), compared to $122.2million (7.5%) the previous week. The FDI decline highlights lingering investor caution toward long-term capital commitments amidst economic reforms and projected economic growth. On the reserves front, gross external reserves rose marginally by 0.22% w/w ($92.5 million) to $42.68 bn, supported by moderate inflows and limited outflows. “Barring any large external shocks or significant outflows, the official rate is likely to remain within current bands, maintaining a broadly stable trajectory across FX segments this week,” Coronation said.