Total inflows into the foreign exchange (forex) market rose by about 42 per cent in March to hit its highest level in the past five years as domestic and foreign investors continued to react positively to economic reforms.
New data from the Nigerian Autonomous Foreign Exchange Market (NAFEM) showed that the forex inflows has sustained double-digit growth .
NAFEM data, obtained from the FMDQ, showed that inflows rose by 41.7 per cent which translates to moving from $2.64 billion in February to $3.75 billion last month, the highest level since March 2019.
The increase was driven by significant increase in supplies from both domestic and foreign sources and notably driven by non-government sources, with less inflows from the Central Bank of Nigeria (CBN).
A breakdown showed that domestic sources accounted for 59 per cent of total transactions while foreign sources contributed 41 per cent.
Also, inflows from foreign sources jumped by 39.6 per cent from $1.10 billion in February 202 to $1.54 billion last month.
Inflows from local sources increased by 43.2 per cent from $1.54 billion in February to $2.21 billion last month,, with double digit growths across the non-CBN sources.
While inflow from the CBN dropped by 65.7 per cent, inflows from individual domestic sources quadrupled by 405.8 percent, non-bank corporate sources rose by 157.7 percent while inflows from exporters grew by 14.6 percent.
This means that the total monthly inflows into the NAFEM in first quarter of this year stood at $2.47 billion, representing an increase of 84.3 percent and 126.6 percent on monthly average of $1.34 billion and $1.09 billion recorded in first and fourth quarters of last year.
The naira continued its rally with 4.7 percent gain to close weekend at N1,251.05 per dollar. In the forwards market, naira appreciated across all tenors.
However, Nigeria’s forex reserves, which had gained $1.04 billion to close first quarter at $33.952 billion, dropped to $33.51 billion at the weekend.
“In the near term, we anticipate improvement in forex liquidity conditions, although still weak relative to historical standards,” Analysts at Cordros Capital Group stated, projecting sustained improvement in foreign inflows.
The analysts said CBN interventions have bolstered investors’ confidence, reduced speculative activities and market distortions, and improved liquidity in the forex market.
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“While 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,” Cordros Capital stated.
