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A CHEERING ECONOMIC INDICATION FOR NIGERIA

This government, unlike the previous ones, has displayed a high sense of financial and monetary discipline in this election year that have favorably impacted the economy in general in a very short time, thereby giving a clear indication of hope for the future. This could be seen in the stability of our foreign exchange market before and after the presidential election.
Nigeria’s foreign exchange market is at its most liquid since 2015. FX trading activity between Nigerian banks and their clients rose to a four-year high in February, as foreign investors pile into the bond market after a somewhat successful presidential election that saw President Muhammadu Buhari secure a second term in office.
Total foreign exchange transactions in the month of February settled at a record $8.15 billion, implying a daily turnover of $407.38 million, according to figures released by FMDQ OTC, a securities trading platform.
That’s about the most liquid the fx market has been since 2016 when acute foreign exchange shortages sent foreign investors fleeing and contributed to the country’s first economic contraction in a quarter of a century. The situation has been much better since then, and on the evidence of the recent fx activity, investor confidence is probably at its best since then.
The increased foreign inflows in the past one month is no wonder the naira has strengthened to N357/$ in the parallel market from N363 at the beginning of the New Year, while the Central bank’s external reserves have improved to $43 billion as at the end of February from $40 billion in January. Increased autonomous foreign inflows put less demand on the CBN’S dollar reserves.
Most of the foreign cash that has piled into Nigeria since February went to fixed income government securities especially one year treasury bills, judging by the recent decline in yields.
Since the start of the year, yields on government treasury bills are down some 200 basis points on average, with most of that decline happening in February, the month when Nigerians handed President Buhari a second term.
Tracking FX inflows through the Investors & Exporters (I&E) window confirm strong foreign portfolio participation in the fixed income market, post-election.
Some $4.28 billion was traded in the first week of March at the I & E window, an increase of 120.62 percent or $2.34 billion. The increased activity is attributable to the relatively peaceful conclusion of the presidential elections and investors’ expectations for a stable currency following President Buhari’s win.

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