FX Inflows into Nigeria Sinks Amidst Dollar Shortage
Amidst a persistent shortage of the United States dollar, the amount of foreign exchange inflows into Nigeria sinks significantly, according to Central Bank (CBN) latest report on the economy. However, outflow jerked up over higher imports bills.
According to the report for the month of October 2021, foreign exchange flow through the economy dwindled but the apex bank said naira appreciated in the investors and exporters FX window in the period.
Read: Naira Depreciates 10% as Dollar Shortage Messed up FX Rates
Due to lower export receipts and large import bills, net FX inflow have been unfavourable, though Nigeria needs substantial foreign inflows to sustain naira in the currencies market.
FX inflow from foreign portfolio investors into the Importer and Exporters foreign exchange window is trending below the pre-pandemic period when FPIs accounted by about 54% into the space.
In the report, the apex said aggregate foreign exchange inflow into the economy printed at US$7.00 billion, in October 2021, compared with US$13.38 billion in September 2021, translating to more than a 91% drop month on month.
The difference between the levels in October and the preceding month, according to CBN was mainly accounted for by the debt proceeds of Eurobonds. Nigeria’s Eurobond sales in the international debt capital market in September boosted receipts into the external reserve.
However, foreign exchange outflow through the economy increased by 32.3 per cent to U$4.31 billion in October 2021. Outflow through the Bank increased by 45.6 per cent, relative to September, which was mainly third-party MDA transfers and interbank sales.
On the other hand, the autonomous outflow was reported to have declined by 7.2 per cent to US$0.76 billion, on account of the decrease in invisible imports. Consequently, the economy recorded a net inflow of US$2.69 billion in the review period.
According to the report, CBN continued to deploy its foreign exchange management instruments to ensure liquidity and stabilise the foreign exchange market.
Total foreign exchange sales to authorised dealers by the Central Bank was US$1.51 billion in October 2021, representing a decrease of 7.9 per cent below US$1.64 billion in September 2021.
Disaggregation shows that foreign exchange sales at the Small and Medium Enterprises (SME) and Investors and Exporters (I&E) windows rose by 3.7 per cent and 80.4 per cent to US$0.12 billion and US$0.55 billion, respectively.
However, foreign exchange sales at the interbank, Secondary Market Intervention Sales (SMIS), and swap contracts fell by 27.7 per cent, 24.6 per cent and 74.3 per cent, to US$0.20 billion, US$0.60 billion, and US$0.04 billion, respectively, in October 2021, compared with the levels in September 2021.
Following increased liquidity in the Investors and Exporter’s FX window segment of the foreign exchange market, the exchange rate of the naira appreciated.
The average exchange rate of the naira per US dollar at the Investors and Exporters FX window appreciated by 0.4 per cent to ₦411.22/US$ in October 2021, compared with ₦412.78/US$ in September 2021.
The average foreign exchange turnover at the investors’ and exporters’ (I&E) window was US$209.29 million in October 2021, an increase of 3.0 per cent, relative to US$203.16 million in September 2021. #FX Inflows into Nigeria Sinks Amidst Dollar Shortage
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