US Dollar Liquidity in Nigeria’s Currency Market Falls by 57.4%
Volume of US dollar liquidity declined sharply at the Nigerian foreign exchange market (NFEM), with the naira retreating after previous gaining streaks.
Last week, Naira depreciated by N1.70 against the US Dollar at the Nigerian foreign exchange market window, closing at N1,530.26 per dollar – reversing previous trend.
The depreciation of the local currency was primarily driven by a moderation in FX liquidity and supported by outflows outpacing inflows, particularly from local sources including importers and non-bank corporates.
The naira gained against the dollar by 0.97%, closing at N1,545 in the parallel market on the back of reduced pressure after banks allowed naira debit card for online payment.
According to Coronation Merchant Bank research subsidiary, foreign exchange inflows declined to US$749.8 million last week, down from US$1.76 billion in the prior week.
This translates to 57.4% reduction in dollar volume, which mirrored pressure on the local currency exchange rate amidst dollar recalibration in the global market.
Coronation said foreign Portfolio Investors (FPIs) accounted for 46.13% of the total inflows, marking the eighth consecutive week of their dominance of market inflows which suggest sustained interest in Nigerian fixed income instruments.
The Non-bank corporates followed with a 33.68% contribution, while exporters contributed 18.45%. Although, inflows from local individual and international corporates were minimal contributing 0.93% and 0.66% respectively.
Data from the CBN showed that the gross external reserves rose by US$173.88mn (or +0.47%) to close at US$37.36 billion. This marks a reversal from the decline of US$138.30 million recorded in the prior week.
Looking ahead, analysts at Coronation Research said they expect exchange rate pressures to remain contained over the long term, supported by sustained dollar liquidity from CBN interventions and strong foreign portfolio inflows.
Additionally, the gradual resumption of international transactions on Naira debit cards as announced by some banks is unlikely to significantly disrupt market stability, given the sustained depth and participation in the official FX window. #US Dollar Liquidity in Nigeria’s Currency Market Falls by 57.4%#
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