Nigeria's FX Inflows Jump 31.9% to $4.36 Billion in July

Nigeria's Foreign Exchange Market (NFEM) saw a substantial increase in total inflows in July, rising by 31.9% from the previous month to reach $4.36 billion. This marks the highest level of inflows recorded in the last five months, according to preliminary data from FMDQ analyzed by Cordros Securities.

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Preliminary data from FMDQ shows that total inflows into the Nigerian Foreign Exchange Market (NFEM) increased to its highest level in five months, rising by 31.9per cent m/m to $4.36 billion in July compared to June at $3.31 billion.

The surge in overall inflows was largely propelled by a significant boost from local sources. These domestic contributions accounted for 66.7% of the total inflows during July. Specifically, inflows from local sources surged by 79.8% month-on-month, climbing from $1.62 billion in June to $2.91 billion in July. This increase was attributed to heightened market intervention from the Central Bank of Nigeria (CBN), which saw an 11.8-fold rise, and increased inflows from non-bank corporates, up by 31.9%. These positive movements offset declines observed in inflows from individual (-54.0%) and exporter (-12.9%) segments.

Conversely, inflows originating from foreign sources experienced a decline of 13.9% month-on-month, falling from $1.69 billion in June to $1.45 billion in July. While inflows from Foreign Direct Investments (FDIs) saw a dramatic increase of 388.3%, this was insufficient to counteract the overall decrease. Reductions in inflows from Foreign Portfolio Investors (FPIs) (-18.5%) and other corporates (-48.4%) were the primary drivers of this downturn. The dip in FPI inflows was particularly influenced by decreases in both equity investments (-53.2%) and fixed income (-16.1%) sub-segments.

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The outturn was driven by the increases in inflows from local, 66.7per cent of total inflows sources.

This recent uptick in NFEM inflows occurs amidst the CBN's ongoing initiatives aimed at enhancing liquidity and improving price discovery within the foreign exchange market. The substantial increase in FDI provided some support to the foreign-source inflows category, but the overall trend for foreign capital remained downward due to other contributing factors.

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Meanwhile, inflows from foreign sources declined by 13.9per cent m/m to $1.45 billion (June: $1.69 billion), as the decreases from the FPIs (-18.5per cent m/m) and other corporates (-48.4per cent m/m) segments was enough to offset the increase in the FDIs (+388.3per cent m/m) segment.