Risk off sentiment slows Nigeria’s FX inflow

The recent decline in Nigeria's Foreign Exchange (FX) inflows into the Nigerian Autonomous Foreign Exchange Market has been attributed to risk-off sentiment in the global space and a slowdown in Open Market Operation (OMO) bill issuances. Rhode Luemba, Head of Flow Sales, Global Market at Standard Bank Group, shed light on the situation in a recent interview with CNBC Africa. Luemba highlighted that despite a slight improvement in investor sentiment leading to a 570.1% growth in portfolio investment, the net FX inflows from current sources have not seen a major change. The Central Bank of Nigeria (CBN) has been instrumental in supporting FX inflows from foreign investors, but local FX flows have been on the decline. Luemba predicted that the Naira's exchange rate could close the year at around 1,290, slightly lower than the beginning of the year but still above previous levels. Shifting focus to Angola, Luemba discussed the country's impressive GDP growth of 4.6% in the first quarter of the year, the highest in nine years. However, questions arise regarding the accuracy of this data as other macroeconomic indicators paint a different picture. With inflation at 30.2% and an unemployment rate of 32.4%, concerns arise about whether this growth is translating into development. Luemba expressed skepticism about the reported GDP figure, suggesting a more realistic growth rate of around 2.0% to 2.3%. Despite the growth in the oil sector, which saw a 6.9% increase supported by increased production, the performance in other sectors does not align with the reported GDP growth. Inflation in Angola is expected to remain above 32%, with persistent risks contributing to a potential increase. Although oil production in Angola reached 1.2 million barrels per day in recent months, supported by government incentives and investments, further growth is anticipated. Luemba emphasized the positive developments in the oil and gas industry, pointing to ongoing investments and new discoveries that are likely to sustain and increase production levels in the coming months. While Angola's GDP growth raises eyebrows amidst challenging macroeconomic conditions, Nigeria's FX market grapples with risk-off sentiment and declining local FX flows. Analysts and investors are closely monitoring these developments for insights into the economic trajectories of these African nations.