In April 2024, Nigeria experienced a notable surge in capital outflows, reaching a total of $1 billion, marking a significant 35.14% increase compared to the $740 million recorded in March. This surge was primarily fueled by capital reversals, which constituted a substantial 78% of the total outflow, amounting to $780 million, according to data from the Central Bank of Nigeria (CBN).
The CBN’s April 2024 Monthly Economic Report highlighted that loan repayments also contributed to the rising outflows, increasing to $160 million from $120 million in March. However, dividend repatriation saw a decline, dropping to $40 million from $90 million in the previous month.
The report underscored the dominance of capital reversals in the overall capital outflows, noting that this trend has been persistent throughout the year. Notably, February 2024 saw the highest outflow of $1.31 billion, primarily driven by capital reversals, before the figures moderated in March and climbed again in April.
Capital reversals occur when foreign investors withdraw or repatriate their investments from a country, often in response to economic instability, unfavorable policy changes, or more attractive opportunities elsewhere. This trend leads to increased demand for foreign currency as investors convert their holdings into dollars or other currencies, exerting downward pressure on the naira and exacerbating inflationary pressures in the economy.
The CBN’s efforts to stabilize the naira have faced significant challenges, as reflected in the depletion of Nigeria’s foreign exchange reserves by $2.16 billion in just 29 days during April 2024. Additionally, the spot foreign exchange market turnover in April was reported at $9.12 billion (N11.14 trillion), representing a 27.68% decline from the $12.61 billion recorded in March.
Despite these challenges, the naira showed some resilience, appreciating against the US dollar with the spot exchange rate averaging N1,244.66/$1 in April, a notable improvement from the N1,524.04/$1 recorded in March. However, exchange rate volatility remained a concern, with the naira trading within a wide range of N1,072.74/$1 to N1,419.11/$1 during the month.
As Nigeria navigates these turbulent economic waters, the dominance of capital reversals in the country’s foreign outflows highlights the ongoing challenges facing the nation’s economic stability and the urgent need for measures to restore investor confidence and strengthen the naira.
