Analysts: Global Trade Shocks, FPI Pressures Hindering Growth of Nigeria’s NFEM
According to analysts, a significant drop in inflows from domestic sources and the ongoing uncertainty surrounding international trade pose a downside risk to foreign exchange inflows from Foreign Portfolio Investors (FPIs), which could theoretically limit the growth of the Nigerian Foreign Exchange Market’s (NFEM) overall liquidity.
After declines in inflows among individuals (-91.6% m/m), CBN (-77.2% m/m), exporters/importers (-74.4% m/m), and non-bank corporates (-17.6% m/m), they warned that inflows from local sources fell to a four-month low, dropping by 61.4% m/m to USD2.11 billion (May: USD5.48 billion). sections
They underlined that the persistent uncertainty surrounding international trade still poses a risk to strong inflows from overseas peers, which might limit the expansion of total forex liquidity.
The total inflows into the Nigerian Foreign Exchange Market (NFEM) decreased by 28.1% month over month to USD4.84 billion in June (May: USD6.74 billion), according to data from FMDQ.
A significant drop in inflows from local sources (43.7% of total inflows) was the main cause of the outturn.
Local inflows fell to a four-month low, falling 61.4% m/m to USD2.11 billion (May: USD5.48 billion), after declining inflows for the exporters/importers (-74.4% m/m), individuals (-91.6% m/m), CBN (-77.2% m/m), and non-bank corporates (-17.6% m/m) categories.
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However, due to a rise in market confidence and an easing of international tensions, inflows from overseas sources (56.3% of total inflows) climbed by 116.8% m/m to USD2.73 billion (May: USD1.26 billion), the highest level in 29 months.
As a result, while inflows from other corporates (-39.8% m/m) and FDIs (-31.6% m/m) decreased, the FPI (+133.6% m/m) category had stronger accretion.
In their Weekly Economic and Market Report, Cordros Securities Researchers reported that inflows from local sources fell to a four-month low, falling 61.4% m/m to USD2.11 billion (May: USD5.48 billion). This came after declines in inflows across the following segments: individuals (-91.6% m/m), CBN (-77.2% m/m), exporters/importers (-74.4% m/m), and non-bank corporates (-17.6% m/m).
