•Naira sheds 20% in 2 weeks
…Foreign investors return to Nigeria’s stock market
By Chinwendu Obienyi
Renewed demand for foreign exchange has crashed the naira value to N1,402/$1 at the parallel market on Thursday.
In a broader analysis of the current exchange rate, the naira has lost 19.64 per cent in two weeks when compared to N1,125/$1 quoted on April 12, 2023 on the parallel market.
Analysts infer that the supply dollars appears insufficient to support the Central Bank of Nigeria (CBN)’s resolve to boost confidence in the naira. The apex bank has raised interest rates to 600 basis points (bps) to fight inflation which is currently at 33.20 per cent.
However, volumes in the FX month have dropped to a two-month low of $86 million last week before recovering to $133 million on Tuesday.
At the official market, Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira has dropped about 11.43 per cent in three consecutive days. It also dropped further albeit mildly by 0.1 per cent to close at N1,309.88/$1
Compared to the level on April 12, 2024, the naira has weakened by 12.69 per cent from N1,142/$1 dollar in the last two weeks, data from the FMDQ Securities Exchange revealed.
Daily Sun investigations revealed that BDC operators around Ajah and Lekki axis sold the dollar at rates between N1,400-N1,402.
Furthermore, Daily Sun observed that the demand for dollars has pushed foreign investors back to the domestic bourse. According to the Nigerian Exchange Limited (NGX)’s latest report, foreign inflows into Nigerian stocks jumped fivefold in the first three months of 2024 to N93.37 billion from N18.12 billion in the same period last year.
This is also the highest amount of inflows in any three-month period since 2019. The highest inflows in the period under review came in the month of March when the figure jumped to N52.66 billion- exceeding the N40.71 billion inflows in January and February combined.
There was also some selling activity in the market as foreign outflows also surged in the three-month period to N119.81 billion, more than three times the N35.59 billion recorded in the same period last year.
That put the total transactions carried out by foreign investors at N213 billion and left a negative net foreign inflow of N26.44 billion, which is the difference between outflow and inflows.
Commenting on the development, economic analysts, while stating that the increased foreign investment in the nation’s bourse signals confidence in the country’s long term prospects, noted that the current situation with the depreciation in the nation’s currency will require urgent and strategic intervention by both the fiscal and monetary authorities.
Owing to the sensitivity of the matter, an economic analyst who craved anonymity, said that the rapid depreciation of the naira and high inflation rate pose challenges to Nigeria’s economic stability.
“We all knew this was not a long term remedy, rather it was a short term remedy employed by the CBN which has worked until now. I would suggest that the CBN and Nigerian government might need to revisit their monetary and fiscal policies to address the currency depreciation, inflation, and attract sustainable foreign investments. Balancing demand and supply in the FX market and restoring confidence in the Naira could be crucial steps”, he said.