According to the most recent monthly economic report from the Central Bank of Nigeria (CBN), the total foreign exchange inflow into the Nigerian economy on a year-on-year basis decreased by 19 percent to $5.7 billion. Analysts from FBNQuest attribute this decline in foreign exchange inflow to the limited increase in gross official reserves due to low crude oil production.
Throughout the year, Nigeria’s gross official reserves decreased by approximately $5.0 billion, resulting in an average monthly depletion rate of $456 million. FBNQuest also highlights other factors such as concerns regarding foreign exchange liquidity, the backlog of outstanding foreign exchange payments, and the CBN’s outstanding foreign exchange swaps to commercial banks.
These factors have deterred potential foreign investors from injecting new capital into the economy. Additionally, foreign exchange inflow through the CBN, which accounted for 43 percent of the total inflows, decreased by 6 percent month-on-month to $2.4 billion in August 2023.
The most recent data on capital importation from the National Bureau of Statistics (NBS) reveals a significant decline in the value of capital imported into the country in Q1 ’23. The figure dropped by 36 percent quarter on quarter (q/q) and 44 percent year on year (y/y), amounting to a mere $655 million.
This represents the lowest quarterly figure for capital inflows since Q1 ’13 and is notably lower than the average quarterly figure of approximately $5.0 billion prior to the onset of the COVID-19 pandemic in Q2 2020. However, the Central Bank of Nigeria (CBN) report indicates that total foreign exchange inflow into the Nigerian economy experienced a 10 percent month-on-month (m/m) increase, reaching $5.7 billion in August 2023.
This rise in foreign exchange inflow was driven by a 17 percent q/q increase in revenues from autonomous sources, amounting to $3.3 billion. On the other hand, aggregate foreign exchange outflows through the economy rose by 8 percent m/m to $3.4 billion. While foreign exchange outflow through the CBN increased by 6 percent m/m to $3.0 billion, the higher value of outflow was primarily due to a 22 percent m/m increase in outflows via autonomous sources, totaling $400 million.
Overall, the combined foreign exchange flows resulted in a net inflow of $2.3 billion, reflecting a 14 percent m/m increase. It is worth noting that the CBN has already settled approximately $2 billion from its backlog of foreign exchange in an effort to restore investors’ confidence and strengthen the naira exchange rate.
