Nigeria’s foreign exchange (forex) reserves crossed a new threshold at the weekend.
It rode on the back of a sustained 10-week accretion to $40.08 billion – the highest in nearly three years.
Data from the Central Bank of Nigeria (CBN) at the weekend showed that forex reserves crossed the $40 billion mark to $40.08 billion, its highest level in 35 months.
The level was attained despite clearance of $7 billion forex backlog by the CBN.
The reserves rose last week by $270 million, its 10th consecutive weekly increase.
At $40.08 billion, the forex reserves have risen by about $7.17 billion so far this year. The nation’s forex reserves had ended 2023 at $32.912 billion.
The sustained build-up came amidst growing confidence in government’s macroeconomic reforms, underpinned by market-driven, increasingly transparent forex transactions.
Latest report on the Nigerian Autonomous Foreign Exchange Market (NAFEM) showed that total inflows have risen by 40.2 per cent to a five-month high of $3.04 billion as foreign investors stepped up demand for Nigerian assets.
The report showed that the positive overall performance of inflows was driven mainly by increases in foreign portfolio and direct investments.
Data, obtained from the FMDQ Securities Exchange, indicated that total inflows into NAFEM rose from $2.17 billion in September 2024 to $3.04 billion in October 2024, an increase of 40 per cent and its highest figure in five months.
The increase was driven broadly by stronger inflows from foreign sources, compared to declines in domestic sources.
Inflows from foreign sources rose by 292.7 per cent from $345.50 million in September 2024 to $1.37 billion in October 2024, representing 44.6 per cent of total inflows during the period and the highest level in seven months.
Inflows from foreign portfolio investors (FPIs) had grown by 510.9 per cent, underlining the increasing participation of foreign investors in the Nigerian market. Inflows from foreign direct investments (FDIs) were also considerably high, rising by 44.6 per cent during the period.
The increase has been attributed partly to purchases from foreign portfolio investors, who are currently trading at their highest turnover in five years.
The Nation had reported more than a double in foreign transactions and sustained upbeat by domestic investors, which pushed total transactions at the Nigerian stock market to its highest level by the third quarter 2024.
Official trading report at the Nigerian Exchange (NGX) had shown that total transactions at the stock market rose to N3.97 trillion in the first nine months of this year, the highest third quarter turnover according to available official records of the market.
The 2024 performance represented a new record against the market’s turnover in third quarter 2023, when the market had set a high of N2.71 trillion.
The closest records were in 2018 and 2014 when the market recorded N2.01 trillion and N2.04 trillion respectively.
The latest report also showed almost a double in the participation of FPIs in the Nigerian market, a situation that analysts attributed to the attractiveness of the Nigerian stocks and the relative liquidity occasioned by foreign exchange (forex) reforms.
The proportion of participation by FPIs increased from 9.51 per cent in third quarter 2023 to 17.56 per cent in third quarter 2024, the highest in the past three years.
Total foreign transactions at the NGX grew by 170.1 per cent from N258.02 billion in third quarter 2023 to N696.88 billion in third quarter 2024, the highest in six years.
While forex differential contributed to FPIs turnover, domestic investors have also shown sustained strong appetite for quoted equities with a turnover of N3.27 trillion in the last quarter, higher than total transactions in previous years of the market. Total domestic transactions had stood at N2.45 trillion in the third quarter of last year.
However, the increasing participation of foreign investors has reduced the proportion of domestic investors’ participation from 90.49 per cent in third quarter 2023 to 82.44 per cent in third quarter 2024.
Experts attributed the upbeat at the stock market to the increasing attractiveness of the Nigerian market to foreign investors, ongoing economic reforms, resilient earnings by Nigerian companies, exchange rate differential, ongoing banking recapitalisation and the reform in the oil sector.
Analysts at Cordros Capital at the weekend said the country has potential to outperform International Monetary Fund (IMF)’s projection of 2.9 per cent growth in 2023.
In the October edition of its World Economic Outlook (WEO), IMF lowered Nigeria’s growth projection to 2.9 per cent (20 basis points lower than July forecast of 3.1 per cent).
The revised growth forecast primarily reflected concerns about the weaker-than-expected economic activity in first half 2024, particularly in the agricultural and oil sectors, as flooding and security issues affected production.
Analysts at Cordros Capital said while they aligned with the IMF on Nigeria’s growth outlook, they expected the economy to outperform the IMF projection at 3.00 per cent.
“Specifically, while ongoing currency pressures, elevated energy costs, and restrictive financial conditions are likely to weigh on economic activity in the non-oil sector, we anticipate a boost from the oil sector due to higher domestic oil production,” Cordros Capital stated.