Naira Rebounds as Firm Predicts Foreign Investors’ Return
The Nigerian local currency, the naira, regained value as foreign currency demand pressures eased at the country’s autonomous foreign exchange market. The rebound came as analysts predicted the return of foreign investors into the economy amidst reforms.
Trading data obtained from the FMDQ platform indicated that the Naira appreciated by 5.05% at the official market, closing at N878.61 to the US dollar from N925.34 the previous day.
In contrast to the most recent development, manufacturers and other FX users’ US dollar demand was met by the volume available on the supply side. Meanwhile, demand in the unorganised forex market triggered a further depreciation of the naira. In the parallel market, the Naira traded weak on Tuesday to close at N1372 against the US dollar.
In the global commodity market, WTI crude futures declined by 0.25% to $74.57 per barrel on Tuesday. Also, the Brent Crude declined by 0.22% to close at $79.88 per barrel.
FPIs to Return to Nigeria
Foreign Portfolios Investors (FPIs) are expected to gradually return on improved FX liquidity conditions. The prediction is anchored on the Central Bank moves to settle its FX backlog to boost market sentiment and drive US dollar inflows into the space. Analysts believe that ability to repatriate funds from the economy will boost foreign portfolio investors sentiment to do business in Nigeria.
In its outlook for the year, Investment firm Cordros Capital Limited said the prospect of FPIs returning to the market is a key factor to monitor in 2024…foreign investors’ interest in the Nigerian equities market has remained weak due to difficulty in accessing and repatriating funds.
It noted that several foreign airlines are contending with issues, with over USD700.00 million stuck in Nigeria due to FX illiquidity and the Central Bank of Nigeria’s (CBN) inability to settle outstanding FX forwards.
However, the investment firm noted that the CBN has recently implemented measures to address unmet FX obligations, starting with smaller segments of outstanding FX forwards at banks.
To boost forex liquidity in the market, the apex bank conducted Open Market Operations (OMO) auctions to manage financial system liquidity and attract Foreign Portfolio Investors. Naira Steadies as Banks Issue Update on FX Purchase
Investment banking firm Cordros Capital Limited said in an outlook that while these steps showcase the CBN’s dedication to resolving FX liquidity constraints, the expected return of FPIs will likely be gradual as re-entry hinges on resolving FX illiquidity challenges.
Analysts said they expect a modest improvement in FX liquidity conditions, although still weak compared to historical levels, they believe the CBN has regained momentum in implementing FX reforms. #Naira Rebounds as Firm Predicts Foreign Investors’ Return
