The Central Bank of Nigeria (CBN) report has shown significant drop in dollar inflows to the economy to $72.3 billion.
The forex inflows position, contained in the CBN’s quarterly bulletin for fourth quarter of last year, showed 23.3 per cent decline in forex inflows, compared to the $94.3 billion recorded the previous year and also a 37.4 per cent decline compared to $115.6 billion received in 2020.
Indications are that the situation could be worse in the first and second quarters of the year for which data are yet to be unveiled. A breakdown of the data showed that $29.89 billion came in through the CBN, while $42.49 billion came in through autonomous sources.
Conversely, a total of $40.99 billion was recorded as outflow in the same period, slightly lower than the $41.62 billion recorded in the previous year. This indicates a net surplus of $31.39 billion in the review year.
Nigeria has since been witnessing recurrent decline in dollar inflow, on the back of decline in foreign direct and portfolio investments. According to the National Bureau of Statistics (NBS), capital import declined by 20.5 per cent to $5.33 billion in 2022.
A further breakdown showed that Foreign Direct Investment (FDI) in Nigeria dropped by 33 per cent to $468.1 million compared to $698.87 million recorded in the previous year.
Similarly, foreign portfolio investment declined by 27.9 per cent to $2.44 billion in the review year. CBN’s dollar supply in the FX market has been impacted by the declining inflows of dollar into the economy. Data from the CBN showed that a total of $15.27 billion was supplied by the CBN into the economy, all of which were supplied to I&E window, SMEs and Invisibles.
Compared to the previous year, forex supply declined by 15.3 per cent from $18.03 billion recorded in 2021 and 31.1 per cent drop from $22.16 billion supplied in 2020. The decline in the amount of foreign exchange supplied by the CBN is partially attributed to the halt of sales to Bureau De Change (BDC) operators in previous year.
In the review year, the apex bank made no sale of dollar to BDCs, compared to $2.77 billion and $5.33 billion recorded in 2021 and 2020. The decline in foreign exchange inflows has also affected the nation’s external reserves as the apex bank continues to defend the Naira and fund import bills at the expense of the reserve level.
Nigeria’s external reserves declined by $3.44 billion in 2022 to close at $37.1 billion. Furthermore, the reserves level has dropped to $35.22 billion as of May 10, 2023.
Nigeria continues to experience decline in forex inflows following the impact of the COVID-19 pandemic on the world economy. This has had a ripple effect on the performance of the Naira at the official and black market. Despite the interventions by the CBN in the official Investors and Exporters window, the Naira depreciated by 5.7 per cent against the US dollar in 2022, while the exchange rate trend in the same direction at the black market by 23.1 per cent.
The industrial sector received a sum of $8.68 billion in 2022 from the CBN to fund their imports, accounting for 47.6 per cent of the total FX supplied for import use. The manufacturing sector, followed with $3.89 billion, representing 21.3 per cent of the total. Others include, food products ($2.77 billion), oil sector ($1.41 billion), minerals ($664.7 million), transportation ($521.11 million), and agriculture ($286.75 million). In terms of invisibles, most of the funds were allocated to financial services, as they received a whopping $8.32 billion in 2022, accounting for 70.7 per cent of the total amount, followed by educational services and business services with $1.01 billion (8.6 per cent) and $937.8 million (8 per cent) respectively.
The CBN also continues to adopt its policies towards increasing foreign exchange inflows into the country, especially through non-oil export. Although the impact of Naira4Dollar scheme, which offers recipients of diaspora remittances through CBN’s IMTOs to be paid N5 for every $1 received as remittance inflow. In the same vein, the RT 200 FX programme, which is aimed at getting $200 billion in Foreign Exchange earnings over the next 3-5 years from non-oil proceeds is also ongoing, and is expected to improve FX inflows in the Nigerian economy, in the short-to-medium term.
According to the CBN, foreign exchange repatriation attributed to the RT 200 FX programme increased by 40 per cent to $ 5.6 billion 2022.from $3.0 billion in 2021. It also noted that the year 2023 has started strongly and showing impressive prospects. In the first quarter of 2023, a total of $1.7 billion was repatriated to the economy, while about $970 million was sold at the I&E window year-to-date.