The Nigerian Autonomous Foreign Exchange Market (NAFEM) experienced significant growth in November, with total inflows rising by 32.9% month-on-month to $4.05 billion, up from $3.04 billion in October, according to FMDQ data. This surge was fueled by increased contributions from both local and foreign sources, which accounted for 57.8% and 42.2% of the total inflows, respectively. Local inflows grew by 38.5% month-on-month, driven by a 27% increase from the Central Bank of Nigeria (CBN) and a 56% rise from non-bank corporates. However, contributions from individuals and exporters declined sharply.
Foreign inflows reached $1.71 billion in November, marking their highest level since January 2020. This growth was attributed to a 39.9% increase in foreign portfolio investment (FPI) inflows and a 43.9% rise in other corporate inflows, despite an 84.2% drop in foreign direct investment (FDI). Analysts linked the robust FPI inflows to improved investor confidence and attractive naira yields, underpinned by the launch of the Central Bank of Nigeria’s Electronic Foreign Exchange Market System (EFEMS). This initiative has enhanced market transparency and bolstered confidence in the foreign exchange market.
The improved inflows supported the naira’s appreciation by 7.3% week-on-week to N1,558.65/$1 in the official market and by 11.3% in the parallel market to N1,545/$1. Meanwhile, Nigeria’s foreign reserves grew by $68.65 million to $40.30 billion. Analysts expect short-term FX market liquidity to remain robust, buoyed by the recently issued $2.2 billion Eurobond and steady FPI inflows. While market confidence is high, potential risks such as geopolitical tensions could pose challenges to sustaining the naira’s recovery.
