Naira Skids as Inflow Drops, CBN Sells Additional $116m
The naira fell against the US dollar to close at N1602 as data showed that total inflows at the Nigerian foreign exchange market dropped by about 6% in April. Forex market players at the Nigeria Foreign Exchange Market (NFEM) saw bids filled in the N1580–1603.50 range, with the pair closing at N1602.18, reflecting a marginal 16.5 basis points depreciation from N1599.54 at the beginning of the trading session last week.
The CBN intervened multiple times, selling a total of about $116 million across sessions, while subdued FX demand and moderate foreign portfolio inflows helped maintain relative stability, according to AIICO Capital Limited.
Notably, a late $50 million CBN sale early in the week pushed interbank rates as low as N1596. Improved liquidity and reduced volatility kept the NAFEX fixing soft while foreign reserves rose by $135.9 million to $37.93 billion. According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market declined by 5.7% month on month to USD3.67 billion in April from USD3.90 billion.
Analysts at Cordros Capital Limited attributed the outturn to the decline in inflows from foreign sources, falling by 16.5% in April to USD657.40 million from USD787.20 million in March, marking the lowest level of inflows in seven months
Consequently, inflows from the other corporates and foreign portfolio investors segments recorded lower accretion, while inflows from the foreign direct investors segment increased. Analysts reported that inflows from corporates declined by 40.5%; foreign portfolio investor inflows declined by 15.7% in the same month, while dollar supply by foreign direct investors rose by 112.7%.
At the same time, inflows from local sources declined marginally by 2.9% to USD3.02 billion from USD3.11 billion in March, driven by declines in inflows from the exporters/importers (-23.9% m/m) and non-bank corporates (-23.3% m/m) segments, amid a surge in the inflows from the individuals (+125.4% m/m) and CBN (+43.8% m/m) segments.
“We expect FX inflows to remain relatively strong compared to last year due to improved market structure and increased inflows from the CBN. However, the existing external pressures, including the global trade tensions and increased global uncertainties, are likely to constrain inflows from the foreign segment, ultimately affecting overall FX liquidity”, Cordros Capital Limited said.
In the forwards market, the naira rates appreciated across contracts as pressure emanating from increased demand began to ease.
FX forward for a 1-month contract gained +0.2% to N1,646.57 per US dollar. Also, the 3-month FX forward contract rose by +0.6% to N1,724.19. In addition, 6-month FX forward contract appreciated by +0.5% to N1,837.00, while the 1-year climbed by +0.9% to N2,056.24.
Analysts said while demand pressures in the FX market seem to have moderated, risks to stability remain heightened due to persistent global uncertainties that could continue to hinder capital inflows in the short term. FX liquidity may stay below optimal levels, sustaining pressure on the naira and likely necessitating ongoing CBN interventions to support the currency, analysts said.
Oil prices declined over 1% on Friday, marking their largest weekly loss since late March, as traders exercised caution ahead of an upcoming OPEC+ meeting that will determine June production policy. U.S. West Texas Intermediate (WTI) crude dropped 95 cents, or 1.6%, to close at $58.29 per barrel, while Brent crude futures fell 84 cents, or 1.4%, to $61.29.
Meanwhile, gold prices dipped slightly and were on track for a second straight weekly loss, pressured by easing U.S.-China trade tensions and strong U.S. employment data. #Naira Skids as Inflow Drops, CBN Sells Additional $116m Interest Rates on Nigerian OMO Bills Rise by 3.28%
