By Ishaya Ibrahim
The Naira has been rising in value for over two weeks with no sign of relapse, at least in the foreseeable future. The rally is attributed to foreign exchange (FX) inflows into Nigeria which surged to a five-year high in the month of March as investor confidence improves on the back of the Central Bank’s reforms.
Analysts predict a sustained rally for the Naira as the inflows continue which is fueled by rising crude oil price and policies of the CBN which has now seen more remittances passing through the banks.
Managing Director/CEO of Financial Derivatives Company Limited, Bismarck Rewane, has predicted that naira will sustain the ongoing rally at both official and parallel markets as dollar liquidity rises.
According to data obtained from FMDQ’s website, total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) increased by 41.7 percent to $3.75 billion in March as against $2.64 billion recorded in February – the highest level since March 2019 ($6.07 billion).
Inflows from foreign sources spiked 39.6 percent to $1.54 billion, the highest in over four years.
The data revealed that local sources accounted for 59 per cent of total transactions, while foreign sources contributed 41 per cent of gross transactions.
Analysing the breakdown, inflows from local sources increased by 43.2 percent to $2.21 billion in March as against $1.54 billion in February driven by higher accretions from Individuals (+405.8 percent), Non-Bank Corporates (+157.7 percent), and Exporters (+14.6 percent) segments, while inflow from the CBN declined by 65.7 percent, a sign of the growing maturity of the market.
Overall, total inflows into the NAFEM window averaged $2.47 billion in Q1 2024, compared to $1.34 billion in Q4 2023 and $1.09 billion in Q1 2023.
The improved liquidity in the official market has helped the naira to a three-month high with analysts expecting the currency to sustain its rally. The naira closed at N1,251 per US dollar last Friday at the official market, according to data by FMDQ.