The Pivotal Role of FPIs

Proshare

Wednesday, December 05,  2018 / 03:59 PM / FBNQuest Research

                                                                                          

Our chart today captures the net fx flows through the CBN for three successive 12-month periods through to October, the last month for which the data are available. It does not capture the flows through autonomous (other) sources. 

In 2015/16 inflows through the CBN and from autonomous sources were generally weak as a result of faltering oil production and soft crude prices. In this period the CBN was struggling to meet fx demand from manufacturers, airlines and business travellers, resulting in the pipeline of arrears, and leading to the opening of new fx windows.                                                                                                                  

At the beginning of 2016/17 there were net fx inflows as the CBN’s unofficial rationing of fx became acute. Once the windows were opened, the net inflows actually diminished as CBN outflows picked up against the background of rising autonomous inflows from foreign portfolio investors (FPIs). 

In 2017/18 those inflows remained healthy through to May/June when some FPIs began to have second thoughts due to monetary policy normalization in the US. The same narrative can be told through the balance-of-payments and the data for reserves. 

Autonomous inflows amounted to US$2.19bn in October 2016, US$5.10bn in October 2017 and US$4.64bn in October 2018. 

We can also see this trend in the data for the aggregate net inflow through the economy (CBN and autonomous sources combined): US$3.26bn in October 2018, compared with US$3.09bn the previous month and US$5.89bn in October 2017.

 

Net fx flows through the CBN (US$ millions)

Proshare Nigeria Pvt. Ltd.

 

Sources: CBN; FBNQuest Capital Research

 

The third factor to highlight is the contribution of Eurobond issues to CBN inflows. This was highly visible in November 2017, which saw the largest net inflow in the period under review. The data for November 2018 should also show a significant boost.

 

Proshare Nigeria Pvt. Ltd.


Related News

1.       Determinants of FDI and FPI Volatility: An E-GARCH Approach

2.      FPI Returns To Buoy Q2’17 Capital Imports

3.      Will Positive Real Yield Attract FPI?

4.      FPI flows exit Emerging Market dance floor

5.      FPI flows yet to find clear pattern

6.      CBN Introduces Special Intervention Of FOREX Cash Sales To BDC Operators Effective Dec 6, 2018

7.      Naira Succumbing To Speculative Pressures – N370 To A Dollar

8.     Forex: Central Bank of Nigeria Injects $210m in Wholesale Segment, Others

9.      Nigeria’s Central Bank Intervenes; Funds Forex Supply With $210m

10.  Forex: CBN Injects $318.03m, CNY 62.18m Into Retail SMIS

11. Naira Under Increased Pressure In The Forex Market

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP