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Foreign Capital Inflow to Nigerian Banks Slumps to $832.64m in 2023

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Naira Exchange Rates - Investors King

The Nigerian banking sector experienced a significant downturn in foreign capital inflow in 2023 with figures plunging to $832.64 million, a 60% drop from the previous year’s record.

According to the latest capital importation report from the National Bureau of Statistics (NBS), this decline underscores challenges facing the sector amidst evolving economic dynamics.

The report revealed that the first quarter saw the highest inflow of foreign capital into Nigerian banks, a total of $304.56 million. This was followed by $194.58 million in the second quarter.

However, the third quarter proved to be the worst performer with a mere $50.20 million in foreign capital injection.

CitiBank Nigeria Limited emerged as the top recipient of foreign capital, securing over $1.03 billion throughout the year, with a significant portion accrued in the first quarter.

Following closely was Stanbic IBTC Bank, which received $919.32 million, primarily during the fourth quarter, and First Bank of Nigeria with $447.69 million, predominantly in the second quarter.

Despite the decline, the banking sector remains a crucial recipient of foreign investment, reinforcing its pivotal role in the economy.

Oluseye Olusoga, CEO of Parthian Partners, highlighted the importance of financial services in facilitating economic activities.

He explained the positive aspect of foreign capital inflow and suggested that while it primarily benefits the banking sector, its eventual trickle-down effect could bolster other industries.

However, challenges persist as foreign capital inflow into Nigerian banks faces a downward trajectory, reflecting broader economic uncertainties.

As stakeholders assess the implications, attention turns towards fostering resilience and exploring strategies to revive investor confidence in Nigeria’s banking sector amidst evolving market dynamics.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Forex

Zimbabwe Urged to End Dollar Dependence, Boost Local Currency

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U.S dollar - Investors King

Zimbabwe must take decisive steps to reduce its reliance on the US dollar and promote the use of its own currency, according to Information Secretary Nick Mangwana.

In an opinion piece published in the Herald newspaper, Mangwana outlined the urgent need for de-dollarization to achieve economic sovereignty, stability, and growth.

“The benefits of de-dollarization far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar grip,” Mangwana asserted.

His call comes as more than 80% of the nation’s transactions are currently denominated in dollars, a situation exacerbated by the lifting of a ban on the US currency at the start of the coronavirus pandemic in March 2020.

This move was initially intended to ease an acute shortage of foreign exchange.

Mangwana said reducing reliance on the greenback is a critical step toward regaining economic control.

“De-dollarization will help promote our local currency and diversify the country’s reserves,” he said.

By encouraging the use of the Zimbabwean dollar, the country can work towards stabilizing its economy and fostering sustainable growth.

The push for de-dollarization is part of a broader economic strategy. Last week, President Emmerson Mnangagwa hinted that Zimbabwe’s bullion-backed Zimbabwean dollar (ZiG), its sixth attempt in 15 years to establish a stable currency, may become the sole legal tender before 2030.

This move is seen as a long-term solution to the ongoing currency instability.

Mangwana’s advocacy for de-dollarization reflects a growing consensus among government officials that economic independence is vital for Zimbabwe’s future.

“Reducing our dependence on the US dollar will not be without challenges, but the long-term benefits are undeniable,” he said.

The transition to a more self-reliant economic model is expected to involve significant policy changes and strategic planning to ensure a smooth and effective implementation.

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Forex

Nigeria’s Foreign Reserves Rebound to $35.05bn Under Tinubu Administration

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Forex Weekly Outlook March 6 - 10

Nigeria’s foreign reserves climbed to $35.05 billion as of Monday, according to the latest data from the Central Bank of Nigeria (CBN).

This represents a significant recovery to levels not seen since the early days of President Bola Tinubu’s administration.

The current reserve level represents a return to the $35 billion mark last recorded on June 2, 2023, when it stood at $35.02 billion. A day after President Tinubu’s inauguration, the reserves were reported at $35.09 billion.

Since then, Nigeria’s foreign reserves have fluctuated, frequently falling below the $35 billion threshold.

The reserves dipped to a low of $32.11 billion on April 19, prompting speculation about the CBN’s intervention in the currency market to support the naira.

The naira, which was officially floated on June 14, has lost approximately 70 percent of its value against the US dollar since the market segments were harmonized.

Despite these challenges, the recent rise in reserves indicates a positive trend. In response to concerns about market intervention, CBN Governor Dr. Olayemi Cardoso said the apex bank is committed to a market-driven approach.

“We encourage a willing buyer, willing seller dynamic and aim for minimal central bank intervention, except in very unusual circumstances,” he said during the last IMF Spring meeting.

The Monetary Policy Committee (MPC) of the CBN has also highlighted the importance of improving liquidity in the foreign exchange market.

Personal statements from the committee’s 295th meeting in May, recently published on the CBN’s website, reflect a focus on maintaining a vibrant currency market.

The MPC raised the Monetary Policy Rate (MPR) to 26.25 percent while retaining other policy parameters.

Since the April low, Nigeria’s foreign reserves have appreciated by $2.98 billion, showcasing a significant recovery amidst ongoing economic reforms.

This rebound provides a measure of optimism for the nation’s economic stability, particularly as it grapples with the broader impacts of currency devaluation and inflation.

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Naira

Naira Plummets to Three-Month Low of N1,530 Per Dollar on Black Market

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New Naira notes

The naira has plunged to a three-month low of N1,530 per dollar on the parallel market, also known as the black market, amid renewed pressure on demand for the greenback by end users.

This represents a 0.65 percent or N10 decline from the N1,520 rate quoted last Friday.

According to data from online sources and street traders, this is the weakest level since March 19, 2024, when the naira was quoted at N1,570 per dollar.

“The dollar’s value has risen due to increased demand from travelers and importers. Currently, we purchase dollars at N1,520 and sell them at N1,530,” a street trader stated in Lagos.

On the official Foreign Exchange (FX) market, however, the naira saw a slight gain.

It appreciated by 0.70 percent on Friday, closing at N1,509.67 per dollar compared to N1,520.24 on Thursday, according to data from the FMDQ Securities Exchange Limited.

Despite this appreciation on the official market, the parallel market continues to experience significant volatility.

The dollar supplied by willing buyers and sellers decreased by 32.64 percent, falling to $116.88 million on Friday from $173.51 million recorded on Thursday. This drop in supply further exacerbates the pressure on the naira in the parallel market.

The intraday high on Friday closed at N1,535 compared to N1,550 on Thursday, while the intraday low was quoted at N1,450 on Friday, down from N1,430 on Thursday.

Economic analysts suggest that the disparity between the official and parallel market rates indicates underlying issues in Nigeria’s foreign exchange management and economic policies.

The continuous demand for dollars by travelers and importers highlights the challenges faced by the Central Bank of Nigeria (CBN) in stabilizing the naira.

As the demand for the dollar remains strong, the naira’s depreciation could have far-reaching effects on the economy, including increased inflation and higher costs of imported goods.

The CBN may need to implement additional measures to address the ongoing demand and supply

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