Nigeria’s US Dollar Inflows Slump to 5-Month Low
The volume of US dollar that flew into the foreign currency market hit a 5-month low in July, analysts said, citing data from the FMDQ platform. Despite lower inflows to the capital market, Nigeria’s gross external reserves maintained uptrend, hitting $36.797 billion, according to data from the Central Bank.
Total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) dropped to a five-month low in July, decreasing by 4.4% to USD1.92 billion from USD2.01 billion in June, Cordros Capital Limited said, citing data from FDMQ report.
Analysts attribute the in FX inflows in the period to a contraction in foreign inflows which accounted for 12.6% of total transaction value. The collections from foreign sources declined by 51.4% to USD243.30 million from USD500.20 million.
This happened because of weaker collections from foreign portfolio investments, down by 58.8% and other corporates which fell by 32.1% in the month. Meanwhile, the economy experienced rebound in foreign direct investment, up by 1,705.9%, said Cordros Capital Limited.
“We attribute the weaker foreign inflow to the frail foreign investor participation in the Nigerian Capital Market following the renewed concerns on increased currency conversion and market risk associated with the tight FX liquidity and the volatility in the naira”.
In July, FX inflows from local sources increased by 11.1% to USD1.68 billion from USD1.51 billion in the previous month. The surge was supported by larger inflows from the CBN and individuals segments.
According to analysts, US dollar supplied from the CBN increased by 348.1% in July, individual contribution to forex market liquidity rose by 12.3% in the month.
Meanwhile, US dollar inflows from non-bank corporates declined by 6.9% and on the exporters side, FX inflows dropped by -4.5% in the just concluded month.
Over the short term, analysts said they expect FX liquidity conditions to remain frail, mainly due to weak CBN intervention.
“In addition, we think FX liquidity concerns, the elevated global interest rates and geopolitical uncertainties may keep foreign inflows subdued in the near term”, Cordros Capital Limited said in an emailed note to investors. Lagos Govt Reiterates Commitment to Inclusive Planning for Badagry Sub-Region
