Abuja, Nigeria — Naira don hold ground for foreign exchange (FX) markets on Monday, thanks to steady inflow wey come from non-bank financial institutions and exporters, wey contribute 62.44 percent of total supply. After market close yesterday, naira don appreciate by N5.72 as dollar dey quoted for N1,600.43, wey show gain of 0.4 percent compare to N1,606.15 wey we see on Friday, according to Central Bank of Nigeria (CBN) data.
Inflows into the Nigerian Foreign Exchange Market (NFEM) stand at $619 million, wey reflect 7.34 percent decline from last week $668 million, according to report from Coronation Merchant Bank. CBN contribute 18.00 percent of the total inflow; Foreign Portfolio Investors (FPIs) follow with 16.78 percent. Non-bank corporate dey lead with 34.27 percent while exporters contribute 28.17 percent, with other sources making up 2.78 percent.
For parallel market, also wey dem dey call black market, naira stable for N1,625 per dollar, according to market traders and data from online collating platforms. Last week, Naira lose 0.25 percent w/w against dollar for official spot market, wey close at N1,606.15/US$1, marking third week of decline wetin no gree stop even after CBN intervention. The 1-month forward rate last week close for N1,641.59/US$1 while 3-month forward rate close for N1,707.37/US$1. Meanwhile, 6-month forward rate settle at N1,799.21/US$1 and 1-year forward rate close N1,988.66/US$1.
Naira also lose 0.93 percent against dollar in parallel market, wey close at N1,625.00/US$1 for Friday. World Bank don talk say Nigeria’s FX market still dey dominated by CBN interventions and inflows from FPIs, despite the recent reforms wey dem don try put in place for market liberalisation.
This information dey contained for World Bank recent Nigeria Development Update report wey title ‘Building Momentum for Inclusive Growth’, wey dem release on Monday. According to the report, even though overall FX turnover don improve since dem change policies, market still dey rely heavily on CBN interventions, wey dey aimed at managing volatility and short-term foreign portfolio investment wey dey attracted by high yields.
“Although helpful as source of FX, debt financing, and external adjustment, FPI flows dey very volatile, especially when dem be short-term as we see for Nigeria,” the report state. “For full consolidation of FX market, traditional sources of inflows like oil exports and remittances must return to official window consistently.”
The report come also highlight the impact of monetary and regulatory reforms on FX market. Since dem overhaul FX regulations early 2024, market don see improved stability, and parallel market premium don dey largely eliminated by mid-year. Adoption of new interbank FX trading platform for December 2024 and new operational guidelines don help enhance transparency and price discovery.
In addition, CBN reform for bureau de change (BDC) segment, wey allow limited and temporary access to interbank market through authorised dealers, na step wey fit change the game. If dem fit keep am like that, World Bank talk say e go help reduce the gap between interbank and retail FX markets wey long dey dominated by informal transactions.
The unification and depreciation of naira don also play strong role in improving Nigeria’s external balances for 2024. The report show say current account balance (CAB) don soar by 185 percent to $17.2 billion, or 9.2 percent of GDP, driven by higher formal remittance inflows wey reach estimated $21 billion. Even though oil production rise, dollar earnings from oil exports decline, non-oil exports still increase by 25 percent, thanks to better competitive exchange rate.
World Bank come also report significant increase in FPI inflows wey grow by 110 percent to $13 billion for 2024, supported by higher yields on domestic debt instruments and clearer FX market. However, foreign direct investment (FDI) still dey weak, remain below 1 percent of GDP due to structural challenges wey still dey persist for business environment.
Meanwhile, ‘other investments’ category for financial account don record net outflow, largely because of heavy repayments of foreign loans, wey show sey Nigeria external financing conditions still dey strained despite the reforms.
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