Why Nigeria’s Naira experienced decline in May, forex flow at 10-month low
By Olumidagreaton June 7, 2018
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Data extracted from FMDQ, FX inflow via the Investors’ and Exporters’ foreign exchange window I&E, dollar inflow rose from $0.31 billion in April 2017 to a record high of $3.6 billion in March 2018.
Average inflow from August 2017 to April 2018 was $2.6 billion. Expectedly, the impressive increase was consistent inflows from Foreign Portfolio Investors (FPIs) which rose from $0.02 billion in April 2017 to $1.72 billion as at April 2018.
However, in May 2018, total inflow into the segment tumbled 55.0 percent m/m to $1.1 billion as supplies from FPIs drop to $0.6 billion.
Notably, the I&E window was created in April 2017 to allow investors, exporters and other prescribed players to autonomously exchange currency.
FMDQ data shows that inflows via FPIs remained the highest at 49.6 percent total supply. Interestingly, this is followed by local corporates at 25.8 percent while the CBN occupies the third spot with 10.0 percent.
Others include Foreign direct investors (7.4 percent), Exporters (3.7 percent), other foreign corporates (3.5 percent) and individuals (0.1 percent).
Evidently, this supports the equities market downturn in May 2018 as well as the recent pressure witnessed in the currency market which drove parallel market rate to 366 naira to the dollar.
While this does not provide evidence as to whether or not FPIs are exiting, it buttresses claims by traders that the Nigerian stock market downturn in May was driven by the absence of demand.
(C) United Capital