•Rises $1.31bn …Swift actions needed to incentivise inflows –Analysts
By Chinwendu Obienyi
Despite fragile economic conditions, investigations revealed that total inflows into the Investors & Exporters Window (IEW) rose to a 3-month high, increasing 49.1 per cent month-on-month (m/m) to $1.31 billion.
This is against $881.40 million recorded in the month of August, according to the data obtained from the FMDQ’s website. The breakdown of data showed that the local inflows primarily drove the increase amid a decline in inflows from foreign sources.
The data revealed that local inflows increased by 55.2 per cent m/m to $1.26 billion as against $$810.80 million recorded in August, supported by higher inflows from non-bank corporates (+89.3 per cent m/m) and exporters (+49.7 per cent m/m).
Meanwhile, given that foreign investors remained cautious about returning in droves despite the significant currency depreciation since June, foreign inflows (-20.5 per cent m/m to $44.60 million) remain underwhelming.
Foreign portfolio investors remained disinterested in the country as a recent FPI by the Nigerian Exchange Limited (NGX) revealed that the equities market recorded a net FPI deficit of N32.3 billion in the first eight months of 2023.
According to the report, foreign investors accounted for only 9.2 per cent of the total trade, while domestic players contributed 90.58 per cent. Foreign participation declined in the review period compared to 15.97 per cent contribution recorded in the previous year, suggesting low interest in the Nigerian market, further tightening FX liquidity in the economy.
In nominal terms, foreign transactions dropped by 26.1 per cent from N301.4 billion recorded in 2022 to N222.78 billion in the period under review, while domestic transactions surged to N2.19 trillion from N1.59 trillion. A further analysis of the data from the NGX showed that N23.37 billion was recorded as foreign outflows in August 2023 as against N13.79 billion inflows.
This points to a scenario where foreign investors are withdrawing their investments from the Nigerian equities market rather than increasing their stakes in the local bourse. So far in 2023, a sum of N127.52 billion have been recorded as outflows compared to N95.26 billion inflows, indicating a net deficit of N32.26 billion for the market.
Reacting to the development, analysts at Cordros Research, said they expect FX liquidity conditions to remain frail in the near term as FX reform momentum has slowed considerably. They said, “We also anticipate weak foreign inflows in the short term, as foreign investors will likely adopt a wait-and-see approach in the near term as they await the CBN’s actions in clearing its FX backlogs and the direction of short-term interest rates amid high inflation”.