Forex Inflows to Nigerian Market Hit 3-Year High – Report

In March 2024, forex inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) soared to their highest level in over three years, a recent report reveals. 

Total forex inflows for the month reached $3.75 billion, marking a significant increase.

According to data from the Financial Markets Dealers Quotations (FMDQ), the surge in March’s inflow represented a 41.7% improvement over February 2024’s figure of $2.64 billion. 

A Breakdown of top sources of Forex inflows

The breakdown of the top sources of forex inflows shows that local sources dominated, accounting for 59% of total transactions, while foreign sources contributed 41%.

Local sources witnessed a notable increase of 43.2% monthly, reaching $2.21 billion in March compared to $1.54 billion in February. 

This rise was attributed to individual accretions, with inflows from individuals increasing by 405.8%, and those from non-bank corporations and exporters rising by 157.7% and 14.6%, respectively.

 However, inflows from the Central Bank of Nigeria (CBN) saw a decline of 65.7%.

Meanwhile, foreign sources saw a monthly spike of 39.6%, totaling $1.54 billion compared to $1.1 billion in February.

Investors showed positive interest in CBN’s initiatives and improved FX interventions aimed at enhancing liquidity and stability in the Forex market.

Reports indicate that total inflows into NAFEM averaged about $2.47 billion in Q1 2024, a significant increase compared to the last quarter of 2023, which averaged $1.34 billion. Similarly, Q1 2024 saw a substantial improvement over Q1 2023, which recorded an average of $1.09 billion.

The surge in dollar inflows has bolstered the performance of the naira. On April 8, 2024, the naira appreciated against the US dollar, trading at N1,230.60 per dollar on the official forex market, despite a decline of $1.5 billion in Nigeria’s Forex reserves.

At the close of trading, the naira gained about 1.66%, trading at N1,230.61 per dollar, surpassing the previous trading session’s rate of N1,251 per dollar.

In the parallel market, the naira also performed well, trading at N1,200 per dollar compared to N1,245 on the previous day. 

This improvement followed the Central Bank of Nigeria’s decision to reduce the dollar buying rate for Bureau de Change operators to N1,101 per dollar, down from N1,251 the previous week.

Analysts believe that the Nigerian currency has gained significantly against the US dollar, with rates collated from street traders indicating a 52.08% increase, equivalent to about N625. 

This move by the CBN to lower the dollar price for BDCs came shortly after the operators requested a review of the buying rate. 

According to a new circular from the apex bank, BDCs are now authorized to sell $10,000 at N1,101 per dollar, ensuring greater accessibility to forex at a more favourable rate.