According to data obtained from FMDQ’s website, total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) increased by 41.7 per cent m/m to $3.75 billion in March as against $2.64 billion recorded in February – the highest level since March 2019 ($6.07 billion).
The data revealed that the increase in inflows is attributed to both local and foreign sources. Local sources accounted for 59.0 per cent of total transactions, while foreign sources contributed 41.0 per cent of gross transactions.
Analyzing the breakdown, inflows from local sources increased by 43.2 per cent m/m to $2.21 billion in March as against $1.54 billion in February driven by higher accretions from Individuals (+405.8 per cent m/m), Non-Bank Corporates (+157.7 per cent m/m), and Exporters (+14.6 per cent m/m) segments, while inflow from the CBN (-65.7 per cent m/m) declined.
Simultaneously, collections from foreign sources surged by 39.6 per cent m/m to $1.54 billion (February: $1.10 billion), representing a 50-month high.
Overall, total inflows into the NAFEM window averaged $2.47 billion in Q1 2024, compared to $1.34 billion in Q4 2023 and $1.09 billion in Q1 2023. According to analysts at Cordros Research, the data indicates a notable increase in total inflows into NAFEM in March 2024, driven by higher inflows from both local and foreign sources.
They noted that there is an anticipation of improvement in FX liquidity conditions in the near term, although still weak relative to historical standards
“In the near term, we anticipate improvement in FX liquidity conditions, although still weak relative to historical standards. We acknowledge that the increased CBN interventions have bolstered investors’ confidence, reduced speculative activities and market distortions, and improved liquidity in the FX market. As a result, we anticipate sustained improvement in foreign participation over the short term”, they said.
Meanwhile, the naira appreciated by 4.7 per cent to N1,251.05/$1 at NAFEM as total turnover at the window (as of 04 April 2024) decreased by 70.7 per cent Week-to-Date (WTD) to $633.65 million, with trades consummated within the N1,200.00 – N1,312.00/$1 band.
It will be recalled that owing to CBN’s reforms, the country’s currency has consistently appreciated against the US dollar and other foreign currencies since the first week of March 2024.
Currency dealers in Nigeria’s foreign exchange market attributed the stronger naira in the parallel market to decreased speculation as foreign exchange hoarders unloaded their holdings, following the Central Bank of Nigeria’s FX policy measures. Following the Central Bank of Nigeria’s (CBN) decision to pay out all verified foreign exchange backlogs (including the final tranche of $1.5 billion), the naira had bounced on gains coupled with improved market liquidity.
SOURCE: THESUN
