Edited By Araba, Olawale Enifenilanfe:
Recent data indicates that total inflows into the foreign exchange (forex) market have reached a remarkable threshold of $4.05 billion, reflecting a substantial increase in confidence regarding Nigeria’s macroeconomic outlook. This represents an upward shift of more than $1 billion from the previous month, with inflows escalating from $3.04 billion in October to $4.05 billion in November, equivalent to a significant increase of 32.9%.
The findings were released by the Nigerian Autonomous Foreign Exchange Market (NAFEM) and underscore a consistent upward trend in forex inflows. This notable rise was particularly driven by foreign contributions, which attained their highest levels in nearly five years, amounting to $1.71 billion—a 26% increase from the preceding month.
The surge in foreign inflows can be attributed to foreign portfolio investors, whose contributions rose by 39.9%, along with a 43.9% increase from other corporate entities. Local sources also played a role in enhancing forex inflows, which increased by 38.5%, rising from $1.69 billion in October to $2.34 billion in November. The increase in local contributions is primarily linked to the Central Bank of Nigeria (CBN) and non-bank corporate entities, which saw respective growths of 27% and 56%.
However, it is noteworthy that inflows from individual investors and exporters experienced substantial declines of 88.5% and 63.5%, respectively. This favourable performance in the forex market coincides with the recent launch of the Electronic Foreign Exchange Matching System (EFEMS) by the CBN, aimed at optimizing forex transaction processes. Analysts from various financial institutions, including Cordros Capital and Afrinvest West Africa, anticipate that barring unforeseen circumstances, forex inflows are poised to remain robust in the short term, supported by an increase in market confidence and attractive yields on domestic assets.
In addition to the forex market, the Eurobond segment has exhibited promising performance, achieving an oversubscription rate of 300% for Nigeria’s recent $2.2 billion Eurobond issue. This overwhelming demand enabled Nigeria to tighten coupon rates considerably.
Furthermore, statistics from the Nigerian stock market reveal a substantial recovery in foreign portfolio investments (FPI), with inflows nearly tripling in the previous month. Total FPI transactions for October 2024 reached N33.31 billion, indicating an increase of 195.83% relative to the prior month. Consequently, Nigeria experienced an FPI surplus of N19.16 billion, marking the highest figure recorded this year.
Total transactions at the Nigerian Exchange (NGX) achieved a milestone of N4.47 trillion over the past ten months, reflecting a 52.6% increase compared to the same period in 2023. This growth has been driven by enhanced foreign participation, which has surged to 16.65%, compared to 9.93% in the previous year. Analysts attribute the increasing allure of the market to ongoing economic reforms, resilient corporate earnings, and a favourable exchange rate environment.
In particular, the banking sector has observed significant capital inflows, spurred by ongoing recapitalization efforts and positive corporate earnings reports. Projections from Afrinvest West Africa suggest that foreign portfolio investments may reach N1.1 trillion by the conclusion of 2024 and could expand to $5.2 billion across various sectors.
These figures reflect a strong recovery trajectory for foreign investments in Nigeria, driven largely by the ongoing reforms implemented by the CBN and other initiatives aimed at fortifying the forex market. In summary, the positive influx of funds and the successful introduction of novel market mechanisms indicate a favourable outlook for Nigeria’s forex and capital markets in the forthcoming months. The expectation of sustained investor interest, coupled with ongoing economic reforms, fosters a cautiously optimistic prognosis within the financial sector.
LaRoyal Global CommunityNews:
2024 (c) Edition.
