Foreign Portfolio Pressures, Global Trade Woes Stifle Nigeria’s NFEM – Experts

The growth of the Nigerian Foreign Exchange Market’s (NFEM) overall liquidity is allegedly constrained by a significant drop in inflows from local sources and the persistent global trade uncertainties, which analysts say pose a downside risk to foreign exchange inflows from Foreign Portfolio Investors (FPIs).

They warned that inflows from local sources fell to a four-month low, falling by 61.4% m/m to USD2.11 billion (May: USD5.48 billion), after individual inflows fell by 91.6% m/m, CBN by 77.2% m/m, exporters/importers by 74.4% m/m, and non-bank corporates by -17.6% m/m. portions

The persistent uncertainties surrounding global trade, they argued, continue to pose a danger to strong inflows from foreign counterparts, which could limit the expansion of total forex liquidity.

The Nigerian Foreign Exchange Market’s (NFEM) overall inflows decreased by 28.1% month over month to USD4.84 billion in June (May: USD6.74 billion), according to data from FMDQ.

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Local inflows, which accounted for 43.7% of total inflows, significantly decreased, which was the main cause of the outturn.

Following reductions in inflows throughout the individual (-91.6% m/m), CBN (-77.2% m/m), exporters/importers (-74.4% m/m), and non-bank corporates (-17.6% m/m) sectors, inflows from local sources fell to a four-month low, falling by 61.4% m/m to USD2.11 billion (May: USD5.48 billion).

In contrast, foreign inflows (56.3% of total inflows) climbed by 116.8% month over month to USD2.73 billion (May: USD1.26 billion), the highest level in 29 months, helped by a rise in market confidence and an easing of international pressures.

Consequently, the FPI (+133.6% m/m) category saw a greater rate of accretion, whilst inflows from FDIs (-31.6% m/m) and other corporates (-39.8% m/m) decreased.

Following declines in inflows across the individual (-91.6% m/m), CBN (-77.2% m/m), exporters/importers (-74.4% m/m), and non-bank corporates (-17.6% m/m) segments, Cordros Securities Researchers reported in their Weekly Economic and Market Report that inflows from local sources had fallen to a four-month low, plunging 61.4% m/m to USD2.11 billion (May: USD5.48 billion).