Nigeria’s foreign exchange (FX) inflows have surged by 57% over the past year, signaling newfound stability for the Naira.
Analysts attribute this growth to the Central Bank of Nigeria’s (CBN) consistent policies, which have bolstered investor confidence and enhanced market stability in Africa’s most populous nation.
Data from the CBN reveals that FX inflows rose to $8.86 billion in February 2024, compared to $5.66 billion in February 2023.
This increase is a testament to the effectiveness of the CBN’s strategic measures. Similarly, foreign exchange turnover skyrocketed 180% year-on-year to $240.64 million in February 2024.
“The upsurge in FX inflows reflects the positive impacts of increased interest rates and the relative stability of the exchange rate,” said Ayokunle Olubunmi, head of financial institutions ratings at Agusto Consulting.
He noted that high interest rates in Nigeria are attracting investors seeking better returns compared to developed countries.
The CBN has actively engaged with foreign investors, addressing concerns and providing insights into monetary policy actions.
Olayemi Cardoso, the CBN governor, emphasized that investor confidence has been restored, partly due to the bank’s clearance of a $7 billion foreign exchange backlog.
New investments into Nigeria also increased significantly, reaching $1.24 billion in February 2024, compared to $0.33 billion in January 2024. This uptick is indicative of a more stable and attractive investment climate.
Analysts point out that improved oil production and higher global oil prices have significantly boosted FX earnings.
Also, government policies aimed at attracting foreign investment, along with strategic management of the exchange rate, have played pivotal roles in this economic revival.
The CBN’s efforts to diversify the economy and boost non-oil exports are starting to yield results.
Increased diaspora remittances, facilitated by better official channels and incentives, have further contributed to the rise in FX inflows.
While challenges remain, the positive trend in FX inflows suggests a more robust and stable economy, encouraging further investment.
Consistent and transparent economic policies are expected to enhance investor trust, stabilizing the Naira and fostering a more favorable exchange rate environment.