A total of $17.18 billion was attracted into the Nigerian economy in the first quarter of the year (Q1 2023), representing an increase of 7.5 per cent compared to $14.62 billion in the preceding quarter.
But the federal government’s fiscal operations resulted in a deficit of N1.43 trillion in the review quarter.
These information were contained in the Central Bank of Nigeria’s (CBN) Economic Report for Q1, which provided insight into current developments in the real, fiscal, financial, and external sectors of the Nigerian economy, as well as on global issues of interest.
The report showed that foreign exchange inflow through the CBN increased to $7.17 billion, compared to $6.21 billion in the preceding quarter, while inflows through autonomous sources increased to $10.08 billion, from $8.41 billion in Q4.
On the other hand, FX outflow through the economy increased by 12.8 per cent, to $9.98 billion, compared to $8.85 billion in Q4.
Outflow through the central bank increased by 17.9 per cent, to $8.86 billion, compared to $7.51 billion in the preceding quarter, while autonomous outflow fell by 16.2 per cent, to $1.12 billion, from $1.34 billion in the preceding quarter.
As a result, net FX inflow through the economy increased by 24.7 per cent to $7.20 billion from $5.78 billion in the preceding quarter while net inflow through autonomous sources rose to $8.89 billion compared to $7.08 billion in the preceding quarter.
However, a net outflow of $1.69 billion was recorded through the apex bank, compared to $1.30 billion in Q4.
Nonetheless, the federal government’s provisional fiscal deficit was 9.6 per cent higher than N1.31 trillion recorded in the preceding quarter but 22.1 per cent below the target.
The CBN report stated that the federal government’s provisional aggregate expenditure for the period under review amounted to N2.77 trillion, with recurrent, capital expenditures, and transfers accounting for 84.6 per cent, 9.8 per cent, and 5.6 per cent, respectively.
The country’s current account recorded a surplus of $2.49 billion, buoyed by positive trade performance, particularly crude oil export, lower payments for services, and sustained surplus in the secondary income account.
The financial account showed a net reduction in financial liabilities of $0.52 billion, reflecting uncertainties surrounding the country’s general elections.
The international reserves at $35.14 billion was equivalent to 6.7 months of import for goods and services or 9.1 months for goods only, while the international investment position recorded a net financial liability of $76.62 billion.
Public sector external debt stock and external debt service payment stood at $41.69 billion and $0.80 billion, respectively at the end of December 2022, according to the report.
The report further noted that improved crude oil export earnings, the lower deficit in the services account, and increased surplus in the secondary income account resulted in a higher current account surplus of $2.49 billion (2.2 per cent of GDP), from $2.35 billion (1.8 per cent of GDP) in Q4, due to favourable trade balance, lower demand for services, and increased surplus in the secondary income account.
Furthermore, a breakdown of the external reserves showed that the share of CBN stood at $34.20 billion, federal government $0.94 billion, while the federation accounted for the balance of $0.007 billion.
In terms of currency composition, the US dollar amounted to $26.19 billion or 74.5 per cent of total external reserves while Special Drawing Rights accounted for $5.08billion or 14.4 per cent.
The Chinese Yuan accounted for $3.48 billion (9.9 per cent); British Pounds $0.20 billion (0.6 per cent); Euro $0.19 billion (0.6 per cent) while other currencies accounted for the balance.
The report also stated that higher dividend payments to non-resident investors widened the deficit in the government’s primary income account which widened by 18.7 per cent to $2.69 billion in Q1, due, primarily to the 34.9 per cent increase in investment income payments, which amounted to $3.09 billion, from $2.77 billion in Q4.
Under the review period, income on direct investment in the form of dividends rose by 12.1 per cent, to $2.71 billion, compared to $2.42 billion in Q4.
Similarly, interest payments on portfolio investments rose to $0.09 billion, from S$0.05 billion in the previous quarter. Interest earnings on reserve assets increased by 35.7 per cent, to $0.20 billion, from $0.15 billion in the preceding quarter.
On the other hand, interest payments on loans declined by 0.7 per cent, to $0.30 billion in Q1.
The report also stated that non-residents’ redemption of matured investments and the withdrawal of foreign currency and deposits resulted in a net reduction in financial liabilities.
The financial account recorded a net reduction in financial liabilities of $0.52billion (0.5 percent of GDP), compared with $0.85billion (0.7 percent of GDP) in Q4, reflecting tight global financial conditions and uncertainties surrounding the macro-economy as a result of the country’s general elections.
Non-residents’ claims on the economy reduced significantly, as investors redeemed matured investments as capital reversal of $0.78 billion was recorded in Q1, compared to an inflow of $1.94 billion in Q4.
CBN explained that the development was due to reversals of portfolio investments and withdrawal of foreign currency and deposits from domestic money banks.
Similarly, the uncertainties surrounding the 2023 general election and the quest for a safer haven by investors contributed to the divestment.
Accordingly, a portfolio investment reversal of $1.17 billion was recorded, in contrast to an inflow of $0.34 billion in Q4, occasioned by the redemption of investments in short-term debt securities by non-resident investors.