CEM REPORT, FINANCE | Nigeria’s foreign exchange reserves received a welcome boost in February 2024, with the Central Bank of Nigeria (CBN) announcing a significant increase in foreign inflows. This positive development comes amidst ongoing efforts to strengthen the country’s forex market.
Remittances Reach New Highs
A key driver of the surge was a dramatic rise in overseas remittances from Nigerians living abroad. According to Hakama Sidi Ali, the CBN’s Acting Director of Corporate Communications, remittance inflows quadrupled in February, reaching a staggering $1.3 billion compared to just $300 million in January 2024.
“The Bank’s data indicates that overseas remittances rose to US$1.3 billion in February 2024, more than four times the US$300 million received in January.
Foreign Investors Show Renewed Interest
The CBN report also highlighted a renewed interest from foreign portfolio investors in Nigerian assets. These investors purchased over $1 billion worth of naira-denominated assets in February, pushing the total portfolio inflows for the first two months of 2024 to at least $2.3 billion. This figure is already approaching half of the $3.9 billion recorded for the entire year of 2023.
“Foreign investors purchased more than US$1 billion of Nigerian assets last month, with total portfolio flows of at least US$2.3 billion recorded thus far in 2024 compared to US$ 3.9 billion seen in total for last year.”
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Experts Opinion
Remittances from the Nigerian diaspora have consistently played a vital role in the country’s economy. In 2022 alone, Nigerians abroad sent home an estimated $20.6 billion, according to the World Bank. This influx of funds contributes to national development, supports families, and fuels economic activity.
“This is a very positive development for the Nigerian economy,” said financial analyst, Aisha Mohammed. “Remittances are a crucial source of foreign exchange, and this significant increase will help to improve the country’s balance of payments and support the naira.”
“Recent adjustments to benchmark interest rates appear to be attracting foreign investors seeking higher returns on short-term sovereign debt,” explained Mohammed. “This renewed confidence in the Nigerian market is another positive sign for the country’s economic prospects.”
“The CBN’s efforts to stabilize the forex market, combined with the increasing attractiveness of Nigerian assets, are creating a more positive environment for foreign inflows,” concluded Mohammed. “While challenges remain, these developments offer a promising outlook for Nigeria’s foreign exchange reserves and economic growth.”
Looking Ahead: Continued Growth Expected
The positive trend appears to be continuing into March 2024, with the CBN reporting sustained growth in foreign exchange inflows. This momentum is likely fueled by the recent adjustments in interest rates, which have made Nigerian assets more attractive to foreign investors.
This surge in foreign inflows is a significant development for Nigeria’s economy. Increased remittances and renewed investor confidence will provide much-needed support for the country’s foreign exchange reserves and contribute to overall economic stability.
