SAT DEC 07 2024-theGBJournal|The Naira strengthened by 7.3% w/w to N1,558.65 against the U.S dollar by the close of trading on Friday, following stronger foreign portfolio inflows (FPI).
In the forwards market, the naira rates increased across the 1-month (+5.1% to N1,620.44/USD), 3-month (+3.8% to N1,711.20/USD), 6-month (+5.6% to N1,788.12/USD), and 1-year (+5.5% to N1,995.14/USD) contracts.
Total NAFEM turnover (as of 5 December) decreased by 26.3% WTD to USD1.80 billion, with trades consummated within the N958.00/USD – N1,710.00/USD band.
Based on data from FMDQ, total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) rose by 32.9% m/m to USD4.05 billion in November (October: USD3.04 billion).
This was driven by a broad-based increase across local (57.8% of total transaction value) and foreign (42.2% of total transaction value) inflows.
Inflows from local sources rose by 38.5% m/m to USD2.34 billion (October: USD1.69 billion) due to increases from the Central Bank of Nigeria (CBN) (+27.0% m/m) and non-bank corporates (+56.0% m/m) segments, while inflows from Individuals (-88.5% m/m) and exporters (-63.5% m/m) fell.
Similarly, inflows from foreign sources reached its highest level since January 2020, increasing by 26.0% m/m to USD1.71 billion (October: USD1.36 million), reflecting sharp increases in inflows from FPI (+39.9% m/m) and Other Corporates (+43.9% m/m), amid a decline in FDI inflows (-84.2% m/m).
The FX market liquidity is expected to remain strong in the short term on attractive naira yields and a more efficient FX trading system, and the implementation of EFEMS is expected to continue to support inflows from FPIs.
Additionally, analysts anticipate the recently issued Eurobond (USD2.20 billion) will bolster the CBN’s capacity to support market liquidity. This is likely to further strengthen the naira in the near term.
Meanwhile, the country’s FX reserves level grew by USD68.65 million w/w to USD40.30 billion (3 December).
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