Foreign Currency Inflow into Nigerian Market Sinks by 95%
Total foreign currency inflows into the Nigerian currency market went down sharply by about 95%, a situation that explains the Central Bank’s persistent intervention to keep the naira stable.
The Apex Bank has been funding foreign portfolio investors’ exit from the market as market participants rebalanced their fixed-interest securities portfolio ahead of the New Year.
With FX sales to banks, and other authorised dealers, the foreign exchange market remained relatively stable, supporting the expectation that the naira will close the year strong.
The Naira strengthened across markets ahead of the Christmas break, closing at N1,443.38/US$ at NFEM, up 1.46% on the week. The local currency also picked up on Monday, gaining about 90 kobo per foreign transaction at the official window.
In the parallel market on Monday, the naira appreciated to N1,475, pointing to improved FX stability, with FX transfer from abroad strengthening dollar supply at the informal segment.
Weekly flow data show that total FX inflows declined sharply to about US$74.8 million, Coronation Merchant Bank Limited said in a research report, down roughly 95% week-on-week from US$1.46 billion previously.
The merchant banker reported that local sources dominated supply, accounting for 70% or US$52 million of US dollar volume, led by the CBN with US$19.6 million inflows and exporters/importers contributed US$16.5 million.
In contrast, international inflows remained muted at US$23.0 million, Coronation said, adding that foreign portfolio investors contributed about US$16.9 million, largely through fixed-income instruments investing.
The CBN’s gross foreign exchange reserves settled at US$45.24 billion, adding US$20.94 million or 0.05%, a mild rebound from declines in the previous week.
Oil prices hovered around $62 per barrel at global commodity market on Monday. The moderate uptick reflected investor reactions to stronger-than-expected U.S. economic growth data, which showed the economy expanding at its fastest pace in two years in Q3, supported by robust consumer spending and a sharp rebound in exports.
However, the data led to mixed sentiment, as the prospect of stronger oil demand competed with concerns that the Federal Reserve may tighten interest rates further to address inflationary worries.
Market sentiment softened as investors weighed the risk of an emerging global supply glut while monitoring geopolitical developments, including potential disruptions to Venezuelan supply and continued Russian-Ukrainian tensions affecting energy-related infrastructure.
Markets also kept an eye on a potential Ukraine peace deal ahead of planned discussions between Ukrainian President Volodymyr Zelenskiy and U.S. President Donald Trump.
Although recent short-term gains have helped prices recover from a near five-year low recorded on December 16, crude benchmarks remain on course for their steepest annual drop since 2020.
