The Central Bank of Nigeria (CBN) has revealed a substantial increase in overseas remittances, indicating a rise to $1.3 billion in February compared to a mere $300 million in the previous month.
Mrs. Hakama Sidi Ali, the acting Director of the Corporate Communications Department at the CBN, shared this information with journalists, highlighting a significant uptick in foreign investor activity in Nigerian assets.
According to Mrs. Ali, foreign investors injected over $1 billion into Nigerian assets last month alone, contributing to a total portfolio flow of approximately $2.3 billion since the beginning of the year. While this figure represents a decline from the $3.9 billion recorded in 2023, it underscores a notable resurgence in investor confidence amidst ongoing economic reforms.
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The CBN also reported a notable surge in foreign exchange inflows into the economy during February, attributed primarily to heightened remittance payments by Nigerians abroad and increased purchases of naira-denominated assets by foreign portfolio investors. This trend continued into March, driven by amplified investor interest in short-term sovereign debt following recent adjustments to benchmark interest rates.
Notably, government securities issuances witnessed significant oversubscription, with foreign investors accounting for over 75% of bids received at auctions conducted on March 1 and 6, 2024. This influx of foreign capital underscores growing confidence in Nigeria’s economic prospects and the efficacy of recent policy interventions.
CBN Governor, Mr. Olayemi Cardoso, outlined a comprehensive strategy aimed at curbing inflation, stabilizing the exchange rate, and bolstering confidence in the banking system and the broader economy. Speaking after the Monetary Policy Committee (MPC) meeting, he emphasized the importance of sustained increases in Nigeria’s foreign currency reserves and enhanced liquidity in the FX market to achieve these objectives. Mr. Cardoso reiterated the effectiveness of recent measures implemented by the CBN, attributing the positive outcomes to a clear strategy and plan.
He said, “All the different measures we have taken to boost reserves and create more liquidity in the markets have started to pay off.
“When people understand the real issues and see a strategy and a plan, things tend to calm down. Our objective today is to ensure that the market has supply, that the market functions, and that investors can come in and go out.”
In a bold move to address soaring inflation, the CBN MPC raised the Monetary Policy Rate (MPR) by 400 basis points to 22.75%, alongside adjustments to the asymmetric corridor and banks’ Cash Reserve Requirement (CRR). These measures aim to curb inflationary pressures and restore macroeconomic stability, reflecting the committee’s commitment to reversing the upward trajectory of inflation.
While acknowledging the inherent trade-offs between output growth and inflation containment, Mr. Cardoso emphasized the need to maintain low and stable inflation for sustained economic expansion. The significant policy rate hike seeks to drive down inflation substantially, according to the CBN governor.
He said the MPC remains steadfast in its commitment to fostering an environment conducive to robust economic growth while safeguarding price stability and financial resilience.
The central bank has been actively addressing the FX issue in the country with some reforms, such as clearing the backlog of forex obligations which it said would be fully cleared in days.
Also, the apex bank plans to establish a singular foreign currency (FCY) gateway bank that will centralize all correspondent banking activities and provide incentives to individuals who hold foreign currencies outside the formal banking system.
Other measures include investigating and resolving FX backlogs, restricting forex allocation for overseas education and medical trips, augmenting the minimum share capital for BDCs, and targeting FX market speculators.