Nigeria’s FX Inflows Dip 5.7% in April Amid Global Trade Tensions, Weak Foreign Investor Sentiment

Nigeria’s foreign exchange market took a hit in April as total FX inflows fell by 5.7% month-on-month, dragged down by global trade tensions and persistent macroeconomic uncertainty. According to the latest economic update from Cordros Research, total inflows into the Nigerian Foreign Exchange Market dropped to $3.67 billion from $3.90 billion in March, with foreign-sourced funds taking the largest hit.

Foreign inflows dipped by 16.5% to just $657.40 million, marking a seven-month low, and now makeup only 17.9% of the total market liquidity. This suggests that foreign investors are becoming increasingly cautious, especially in the face of ongoing global volatility and the perceived risks in emerging markets. Foreign portfolio investments shrank by 15.7%, and inflows from foreign corporates fell sharply by 40.5%. On the brighter side, foreign direct investment surged by 112.7%, hinting at some level of long-term investor confidence.

Domestically, inflows, which represent over 80% of total market liquidity, dropped by a more moderate 2.9% to $3.02 billion. This was mostly due to lower activity from exporters, importers, and non-bank corporates, which saw declines of 23.9% and 23.3%, respectively. However, individual inflows jumped by an impressive 125.4%, and CBN’s interventions rose by 43.8%, offering some buffer against the broader decline.

Despite the downturn, total FX inflows in April were still above the 2024 monthly average of $2.54 billion, thanks to ongoing structural reforms and more assertive interventions by the Central Bank of Nigeria. The unification of exchange rates introduced in mid-2023 and the CBN’s push for a more liquid market continue to shape near-term FX performance.

Still, analysts are wary. Cordros warns that if global trade tensions worsen or investor confidence fails to rebound, Nigeria’s foreign exchange market could see further strain. As Q2 unfolds, all eyes are on how policymakers respond and whether the momentum in attracting sustainable capital can be regained.

Source: The Sun