In a significant turnaround, the Nigerian Autonomous Foreign Exchange Market (NAFEM) has reported total inflows reaching a five-month high of $3.04 billion, reflecting a 40.2% increase month-on-month. This surge is attributed to a substantial rise in foreign inflows, which made up 44.6% of total inflows and rose by 292.7% month-on-month to $1.37 billion, marking the highest level in seven months. The increase highlights improved carry trade prospects within Nigeria’s capital market, with foreign portfolio inflows and foreign direct investments also showing remarkable growth.
Despite these positive figures, economic experts caution that the sustainability of this influx is uncertain, given Nigeria’s ongoing macroeconomic challenges, structural weaknesses in the foreign exchange market, and persistent naira volatility. The naira has recently depreciated significantly, hitting its lowest point in seven months, which has led to calls for stronger measures from the Federal Government and the Central Bank of Nigeria to stabilize the currency. Furthermore, while local inflows have decreased, corporate contributions have dropped by 15.1%, indicating potential weaknesses in domestic liquidity.
Market activity at the NAFEM window has improved, with total turnover increasing by 46.6% month-on-month to $166.6 billion. However, experts warn that limited inflows from the Central Bank of Nigeria could strain liquidity further, undermining market confidence and adding pressure on the naira. Analysts from Cordros Research express skepticism about the longevity of the recent liquidity influx, pointing to the unfavorable macroeconomic conditions and sustained volatility in the naira as potential barriers to continued growth.
