Market News

From Chinwendu Obienyi, Abuja

Despite the uncertainty and currency pressures in the foreign exchange market, latest data from the Financial Market Dealers Quotation (FMDQ), a capital market holding company and financial market infrastructure (FMI) group in Nigeria, has revealed that total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) experienced a significant rise, reaching a five-month high of $3.04 billion at the weekend.

>span class="s5">According to the data, the growth was primarily driven by a surge in foreign inflows, which accounted for 44.6 per cent of total inflows. Notably, foreign inflows rose by 292.7 per cent m/m to $1.37 billion, marking the highest level in seven months and reflecting improved carry trade prospects in Nigeria’s capital market.

>span class="s5">Furthermore, local inflows saw a decrease for the second month in a row, declining by 7.5 per cent m/m to $1.69 billion. The reduction was led by drops in individual contributions (-30.6 per cent m/m), Central Bank of Nigeria (CBN) inflows (-14.3 per cent m/m), and non-bank corporate inflows (-8.6 per cent m/m), with only the exporters/importers segment showing a slight increase (+0.6 per cent m/m).

Economic experts, while reacting to the development, noted that despite the recent surge in foreign liquidity, sustainability is uncertain due to Nigeria’s challenging macroeconomic conditions, structural weaknesses in the FX market, and ongoing naira volatility. >span class="s2">declined 2.7% m/m to close at N1,726.00/$1, sparking calls to the Federal Government (FG) and the Central Bank of Nigeria (CBN) to find ways of adopting stronger measures to stabilize the currency.

However, activity level at the NAFEM window improved as total turnover increased 46.6% m/m to $166.6 billion.Deputy Managing Director, Afrinvest West Africa Limited, Victor Ndukauba, explained that limited inflows from the CBN could further strain liquidity, potentially undermining market confidence and exerting additional pressure on the naira.“Looking ahead, we expect the Naira to trade within the current band with little room for volatility provided there is no significant inflow to boost FX supply”, He said.For their part, Cordros Research, in an emailed note, said, “While we acknowledge the recent liquidity influx from foreign investors, we believe this is unlikely to be sustained given the unfavourable macroeconomic conditions, still weak structure of the Nigerian FX market, and sustained volatility in the naira.Additionally, we anticipate that the limited inflows from the CBN may pose downside risks to overall liquidity conditions in the near term, potentially dampening market confidence and heightening pressure on the naira”.