(Agence Ecofin) – The increase in net inflows of foreign capital essentially results from reforms gradually undertaken by the authorities to achieve an exchange rate determined by market forces.
Foreign capital flows received by Nigeria in the first half of 2024 recorded an increase of 177% compared to the same period of 2023, to stand at $5.98 billion, according to data released on Tuesday, October 8 by the National Bureau of Statistics (NBS).
This increase was mainly favored by the return of portfolio investors following the relaxation of exchange controls decided by the government, the same source added.
The United Kingdom and the Netherlands were the largest sources of foreign capital captured by Nigeria between 1is January and June 30 of the current year, while the banking sector received the bulk of portfolio investments.
Following the coming to power of President Bola Tinubu in May 2023, an in-depth reform of the exchange rate regime was launched, with the objective of returning to a market-determined exchange rate. In this context, the naira was devalued twice with the aim of closing the gap between the official exchange rate and the rate that prevailed on the parallel market. The authorities also put an end to the cap on exchange rates on interbank transactions as well as international money transfer operations.
The Central Bank of Nigeria has raised interest rates five times since the start of the current year, in a bid to combat inflation and attract portfolio investors hungry for returns. The institution also plans to automate foreign currency transactions from December 2024, in order to improve transparency and eliminate residual distortions in the foreign exchange market.
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