•FX market dip by 16.4%
The 26 per cent year-on-year (YoY) decline in capital importation from $5.33 billion in 2022 to $3.91 billion in 2023 for the fourth consecutive year has been attributed to foreign investors’ apathy and low confidence.
According to analysts at Codros Capital Research, given the lingering FX liquidity constraints, uncompetitive domestic interest rate and the adverse macroeconomic environment, foreigners will continue to adopt a cautious stance in the near term, closely monitoring the activities of the apex authorities in improving FX liquidity and ensuring sustainability.
However, analysts anticipated an improvement in foreign participation over the medium term, to be driven by the complete clearing of the FX backlog, substantial inflows from foreign sources through multilateral borrowings or Eurobond issuances, meaningful intervention and support of forex liquidity by the CBN.
“We anticipate that foreign investors will adopt a cautious stance in the near term, closely monitoring the activities of the apex authorities in improving FX liquidity and ensuring sustainability. At the same time, we envisage an improvement in foreign participation over the medium term.
“To be driven by the complete clearing of the FX backlog, substantial inflows from foreign sources through multilateral borrowings or Eurobond issuances, and meaningful intervention and support of forex liquidity by the CBN,” it said.
It also anticipated that the non-oil sector to maintain its growth trajectory underpinned by a sustained growth in the services sector.
“Nonetheless, we think the lingering impact of naira depreciation will pose a downside risk to overall growth prospects. Overall, we project real GDP to settle at 3.32 per cent y/y in 2024 full year,” it said.
Meanwhile, the total turnover in FX spot and derivatives markets for the week ending on February 23, was $890.65 million, a decrease of 16.42 per cent ($175.01 million) from $1.06 billion reported for the previous week.
According to FMDQ Securities Exchange, the week-on-week (WoW) decrease in the total turnover was driven by the 16.53 per cent ($175.77 million) decrease in FX spot turnover, despite the 33.93 per cent ($0.76 million) increase in FX Derivatives turnover.
The exchange noted that the WoW increase in FX derivatives turnover was solely driven by the 33.93 per cent ($0.76 million) increase in FX Forwards turnover, whilst there were no trades executed in both the exchange-traded FX futures and cleared naira-settled non-deliverable forwards markets.
Additionally, in the FX spot market, the total value of transactions for the week ending on February 23, 2024, was $887.65 million, representing a decrease of 16.53 per cent (175.77 million) from the value of transactions executed in the week ending February 16, 2024 ($1.06 billion).
