…Based on the data obtained from FMDQ, total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) declined to a six-month low in June
…The total turnover (as of 04 July) at the market decreased by 43.0% WTD to US$678.58 million
SAT JULY 06 2024-theGBJournal| The naira depreciated further by 0.3% w/w to NGN1,509.67/USD at the Nigerian Autonomous Foreign Exchange Market (NAFEM) as activities in the FX market this week reflect frail liquidity.
The fragility is sustained by the weak inflows from the CBN – despite the recent accretion to FX reserves, as well as low confidence in the FX market.
The total turnover (as of 04 July) at the market decreased by 43.0% WTD to US$678.58 million, with trades consummated within the NGN1,430.00/USD –NGN1,550.00/USD range.
In the forwards market, the naira rates on the 1-month (-0.9% to NGN1,535.26/USD), 3-month (-1.0% to NGN1,594.38/USD), 6-month (-1.5% to NGN1,677.57/USD) and 1-year (-1.9% to NGN1,847.48/USD) contracts declined.
Based on the data obtained from FMDQ, total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) declined to a six-month low in June, dropping by 53.7% m/m to USD1.45 billion (May: USD3.12 billion).
Cordros Research analysts attribute the decline to low market confidence stemming from frail CBN intervention in the FX market.
Analysing the breakdown provided, we highlight a broad-based contraction across both the local (70.0% of total transaction value) and foreign (30.0% of total transaction value) investors.
Precisely, inflows from local market participants dipped by 52.6% m/m to USD1.01 billion in June (May: USD1.42 billion), due to a slowdown across the Individuals (-68.0% m/m), non-bank corporates (-35.7% m/m) and Exporters (-33.5% m/m).
Additionally, there were no inflows from the CBN. In the same vein, inflows from foreign sources decelerated by 55.9% m/m to USD434.10 million (May: USD: 984.40 million) as foreign investors remained cautious awaiting signals on the CBN’s plans to improve FX liquidity.
Looking ahead, we expect FX liquidity conditions to remain tepid in the near term should inflows from the CBN remain weak, undermining market confidence and increasing pressure on the naira.
Meanwhile, this week, Nigeria’s FX reserves rose to a 13-month high as the gross reserves level increased by US$465.21 million w/w to USD34.66 billion (04 July).
X-@theGBJournal|Facebook-the Government and Business Journal|email:gbj@govbusinessjournal.com|govandbusinessj@gmail.com
