By Seun Ibiyemi
Total dollar inflows into Nigeria’s foreign exchange market declined by more than 26 per cent to $689 million during the review period, reflecting the impact of the Central Bank of Nigeria’s (CBN) continued absence from the market for six consecutive weeks.
According to data compiled by Coronation Research, the sharp decline in foreign exchange supply has increased reliance on autonomous sources to sustain liquidity in the Nigerian Foreign Exchange Market (NFEM) amid growing demand for foreign currency payments.
The report showed that exporters emerged as the largest source of official foreign exchange inflows during the week, contributing $298.30 million, representing 43.30 per cent of the total market supply.
Foreign Portfolio Investors (FPIs) accounted for the second-largest share, injecting $270.50 million or 39.26 per cent of total inflows into the market.
Non-bank corporates contributed $98.90 million, representing 14.36 per cent of total inflows, while other corporate and miscellaneous sources made up the remaining balance.
The reduction in overall supply exerted mild pressure on the official foreign exchange market, resulting in a depreciation of the naira at the NFEM window.
The local currency weakened by 0.48 per cent week-on-week to close at N1,370.46 per dollar, compared with N1,363.83 per dollar recorded in the previous week.
Analysts noted that although the naira began the week on a positive note, appreciating by 0.56 per cent to N1,356.27 per dollar, insufficient market depth and reduced supply eventually reversed the gains.
In contrast, the parallel market recorded a modest appreciation, with the naira strengthening by 0.36 per cent to close at N1,400 per dollar, compared with N1,405 per dollar in the preceding week.
The divergent performance across the two segments of the market narrowed the parallel market premium to 2.16 per cent, indicating a closer alignment between official and unofficial exchange rates.
Despite the pressure on market liquidity, Nigeria’s external reserves continued to strengthen during the period.
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Data showed that the country’s gross foreign exchange reserves increased by $529.71 million, representing a 1.05 per cent week-on-week rise, to reach $51.04 billion.
The growth in reserves is expected to provide additional support for market stability and strengthen confidence in the country’s external position.
Looking ahead, analysts expect the exchange rate to remain relatively stable around current levels, supported by sustained foreign portfolio inflows, exporter participation and other autonomous sources of foreign exchange.
They noted that while the CBN’s continued absence from direct market intervention has reduced supply, resilient inflows from private-sector sources and improving reserve levels could help moderate volatility in the near term.
