FX Inflows Down 69% as Foreign Investors Pullback
Foreign currency inflows into currency market dropped sharply in the month of April, according to FMDQ Securities Exchange report for the month. The sharply decline was seen across two major sources: local and foreign participants in the currency market.
Specifically, foreign investors slowdown participation in the financial market due to perceive negative sentiment, causing more than 69% decline in FX inflows into currency market in April.
The declined imaged the depreciation of the Nigerian naira following low US dollar injections by the apex bank, analysts said in a discussion.
In the period, total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) declined by 48.1% month on month to USD1.95 billion in April from USD3.75 billion in March, Cordros Capital Limited said in its review note.
Recall that exchange rate appreciated strongly in March as flood of foreign currency enterer the official market in addition to US dollars that were injected by the Central Bank of Nigeria to saturate the currency markets.
The breakdown provided showed a broad-based decline across the local which accounted for 75.4% of total inflows period, while inflows from foreign sources accounted for 24.6%.
Expressly, local inflows declined by 33.6% month on month to USD1.47 billion from USD2.21 billion in March due to weaker inflows from non-bank corporates, CBN, and Exporters.
Last month, foreign currency inflows from non-bank corporate channeled through the official window slumped by 47.4%, according to a review by Cordros Capital Limited.
FX flows from the CBN also nosedived by 35.1% in April and exporters flows declined by 19.1% in the same period. On the other hand, there was substantial increases in Individuals’ inflows, up 96.8% month on month.
Likewise, FX inflows from foreign sources came in lower, declining by 68.9% to USD478.10 million from USD1.54 billion as foreign investors began selling off risk assets to find safe havens amidst the lingering FX issues and weak macroeconomic environment.
“Looking ahead, we expect FX liquidity conditions to remain frail in the near term due to persistent demand-supply imbalances exacerbating distortions in the FX market.
“In addition, we think the elevated global interest rates and geopolitical tensions may keep foreign inflows subdued in the near term”, analysts at Cordros Capital Limited said in a note. FAAC Credits, Sliding FX Inflows Threaten Nigerian Naira
