The Nigerian naira fell to its lowest value against the dollar since March 13, 2024, reaching 1,419.11 per dollar at the official foreign exchange (FX) market. This depreciation comes as foreign portfolio inflows decline, according to data from the FMDQ Securities Exchange.
The latest figures show a substantial 75.23 percent decrease in net inflows from Foreign Portfolio Investors (FPIs), totaling $182 million in April 2024 compared to $735 million in March 2024. This downward trend has resulted in a 5.63 percent depreciation of the naira compared to its Friday closing rate of N1,339.23 at NAFEM.
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Conversely, the naira saw a slight appreciation to 1,360 per dollar at the parallel market, marking a 5.14 percent increase from Friday’s closing rate of 1,430/$1.
Analysts attribute foreign investors’ exit to various factors, including geopolitical tensions, lack of adequate fiscal support, and policy uncertainties. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, cautioned against over-reliance on FPIs, highlighting their potential to swiftly withdraw investments and leaving the economy vulnerable.
Olaolu Boboye, lead economist at CardinalStone Limited, pointed to geopolitical tensions, particularly in the Middle East, prompting investors to seek safer assets like gold and the dollar. He also emphasized the need for robust fiscal support and policy clarity to attract and retain foreign investment.
Segun Sopitan, Principal Partner at Woodridge and Scott Consulting, highlighted a crisis of confidence in the market and urged regulatory intervention to reassure investors. He called for the introduction of hedge instruments and derivatives to manage currency risks effectively and align market movements with policy objectives.
As the naira’s value continues to fluctuate, stakeholders look to regulatory bodies, particularly the Central Bank of Nigeria (CBN), to implement measures to stabilize the currency and restore investor confidence in the market.
Credit: Businessday NG (Text Excluding Headline)