Non-Bank Corporates Drive Inflow into FX Market, Offshore Bets Ease
Non-bank corporates drove FX inflows into the Nigerian market, as data shows that foreign portfolio investment bets shrank amidst year-end exits and book balancing.
Foreign exchange inflows through the Nigerian Foreign Exchange Market (NFEM) increased marginally to US$844.70 million, Coronation Merchant Bank research unit reported – tracking below approximately $1.4 billion reported in Oct.
The FX inflows posted last week at the official window of the Central Bank of Nigeria (CBN) represent an increase of 4% week on week from US$841.10 million.
The miniscule US dollar volume boosts came amidst surging demand for international payments. The liquidity in the Nigeria forex market has been significantly tightened due to investors trimming positions in the financial markets amidst uncertainties.
The CBN has been playing an active role with its FX intervention sales to keep the market liquid by introducing restrictions or delaying payments, as data from the external reserves revealed.
Data from the CBN showed that the proportion of blocked US dollars to gross external reserves has remained at 1.22%, declining from 1.31% in the past month.
In its update, Coronation Merchant Bank Research subsidiary said Non-Bank Corporates contributed 25.52% or US$215.60 million, of the total FX inflow, the largest share, a position held by foreign portfolio investors.
This was followed by Individuals (18.38%), Exporters (18.15%), CBN (16.79%), and Foreign Portfolio Investors (16.48%), while other sources contributed 1.01%.
Gross external reserve has surged to US$45.111 billion, supported by stronger inflows during the week. External reserves expanded amidst fluctuation in the global commodity market.
Oil prices slipped 2% on Monday after Iraq restored production at one of its oilfields, which accounts for 0.5% of world oil supply, while investors weighed ongoing talks to end the war in Ukraine.
Brent crude shed 131 cents, or 2.05%, to $62.44 per barrel, while U.S. West Texas Intermediate (WTI) lost 127 cents, or 2.11%, to $58.81.
Similarly, gold prices edged slightly down, as investors stayed cautious ahead of the U.S. Federal Reserve’s two-day policy meeting and Chair Jerome Powell’s remarks for clues on future monetary policy.
Spot gold decreased by 0.24% to $4,187.10/oz, while U.S. gold futures dipped 0.70% to $4,213.15/oz.
Markets are likely to remain cautious tomorrow as investors await the Federal Reserve’s upcoming rate decision — with oil and gold markets already reacting to softer dollar and rate-cut expectations.
Analysts at Coronation expect the exchange rate to remain within a similar band below the N1,500/US$1 level, supported by stable liquidity conditions and continued CBN interventions.
