Forex Inflow Into NAFEM In March Hits $3.75bn

Foreign exchange inflow into the Nigeria Autonomous Foreign Exchange Market (NAFEM) was on the upswing last month reaching the highest monthly level in over three years as total inflows into the market stood at $3.75 billion in March 2024.

Data from FMDQ showed that the March inflow was a 41.7 per cent improvement over $2.64 billion that was recorded in February this year with local sources contributing 59 per cent of the total transactions whilst foreign sources contributed 41 per cent of gross transactions.

An analysis of the breakdown, showed that inflows from local sources increased by 43.2  per cent month on month to $2.21 billion in March compared to $1.54 billion that was recorded in February driven by higher accretions from Individuals.

Accretions from individuals had risen by 405.8 per cent while Non-Bank Corporates and exporters had been up by 157.7 and 14.6 per cents respectively. However inflow from the Central Bank of Nigeria (CBN) had declined by 65.7 per cent.

Simultaneously, collections from foreign sources surged by 39.6 per cent month on month to $1.54 billion as against $1.1 billion that was recorded in February, representing a 50-month high as foreign investors reacted positively to the recent CBN initiatives and increased foreign exchange interventions aimed at ensuring liquidity and stability within the forex Market.

Overall, total inflows into the NAFEM window averaged $2.47 billion in the first quarter of 2024 compared to last quarter of 2023 when it averaged $1.34 billion and first quarter of 2023 when it averaged $1.09 billion.

Meanwhile the Naira continued to gain strength closing stronger at the end of trading activities on Friday. Compared to N1,303.33 which it began the week’s trading activities, the Naira closed at N1.251.05 to the dollar.

In the course of the week, trades were consummated within the N1,200 –N1,312 to the dollar band. In the Forwards market, the naira rates appreciated across all contracts with the 1-month up by 4.4 per cent to N1,277.79 to the dollar, the 3-month rose by 5.5 per cent to N1,302.91 to the dollar while the 6-month and 1-year contracts rose by 5.7 and 4.2 percents to N1,360.09 and N1,479.02 to the greenback.

Week on week, Nigeria’s foreign exchange reserves decreased by $317.95 million to $33.51 billion as at April 3, 2024 as analysts say they anticipate improvement in forex liquidity conditions.

Analysts at Cordros Research noted that, whilst forex liquidity remains weak compared 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 forex market. As a result, we anticipate sustained improvement in foreign participation over the short term.

“We acknowledge the CBN’s continuous efforts in the forex market to stabilise the naira, reflected in the sustained sale of US dollars to eligible BDCs and maintenance of high yields on naira-denominated assets to support FPI inflows.

“Whilst CBN’s intervention in the forex market is poised to remain frail in the near term given its low forex reserves, we expect the naira to remain stable in the short term, supported by tighter monetary policy conditions and improved forex liquidity.”