The naira experienced a significant decline on Monday, reaching its lowest level against the dollar in two months, as foreign portfolio inflows slowed down, according to data from the FMDQ Securities Exchange.
At the official foreign exchange (FX) market, the naira fell to 1,419.11 per dollar, marking its weakest performance since March 13, 2024. This decline represents a 5.63 percent drop compared to the previous closing rate of N1,339.23 on Friday at NAFEM.
In contrast, at the parallel market, the naira appreciated to 1,360 per dollar, gaining 5.14 percent from the previous rate of 1,430/$1 recorded on Friday.
The slowdown in foreign portfolio inflows has raised concerns among experts. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, emphasized the volatility of such investments, warning that rapid withdrawals could leave the Nigerian economy vulnerable.
According to Olaolu Boboye, lead economist at CardinalStone Limited, geopolitical tensions, particularly in the Middle East, have prompted foreign investors to exit emerging markets like Nigeria in favor of safer assets, leading to a strengthening of the dollar.
Boboye also highlighted the lack of adequate fiscal support and the absence of hedge products in Nigeria as contributing factors to the decline in foreign investor confidence.
Segun Sopitan, Principal Partner at Woodridge and Scott Consulting, echoed these concerns, emphasizing the need for the Central Bank of Nigeria (CBN) to reassure the market and intervene to stabilize the naira.
Sopitan suggested that the CBN should collaborate with the FMDQ to develop hedge instruments and deepen the derivatives market to mitigate the impact of market volatility.
Overall, the decline in foreign portfolio inflows underscores the challenges facing Nigeria’s currency stability and the importance of proactive measures to restore investor confidence and safeguard the economy against external shocks.
