The Central Bank of Nigeria (CBN) has reported a significant increase in foreign exchange inflows into the economy, which reached $22.89 billion during the third quarter (Q3) of this year, marking a notable boost to the country’s financial stability.
Additionally, the apex bank affirmed that the country’s external reserves are robust enough to cover nine months of importation.
This is according to the bank’s economic report for Q3 2024 which presents economic developments in Nigeria, for dissemination to the public.
The report, which is published on a monthly and quarterly basis, revealed that foreign exchange inflow through the economy increased by 3.01 per cent to $22.89 billion, from $22.22 billion in Q2 2024. It noted that Inflows through the bank rose by 39.63 per cent to $11.86 billion from $8.49 billion, while autonomous sources fell by 19.66 per cent to $11.03 billion from $13.72 billion in the preceding quarter.
Furthermore, foreign exchange outflow through the economy rose by 15.18 per cent to $8.43 billion, relative to the level in Q2 2024. Outflows through the bank rose by 27.91 per cent to $7.31 billion, while those through autonomous sources decreased by 30.06 per cent to $1.12 billion.
Thus, net foreign exchange inflow through the economy decreased by 2.97 per cent to $14.46 billion, from $14.89 billion in the preceding quarter. However, net inflow through autonomous sources fell to $9.90 billion, from $12.12 billion in the preceding quarter.
A net inflow of $4.55 billion was recorded through the bank compared with a net outflow of $2.78 billion in the preceding quarter.
Also, the country’s external reserves increased and remained above the benchmark of 3 months of import cover during the review quarter, rising to $39.29 billion, from $34.76 billion at end-September 2024.
According to the CBN, this level of reserves could cover 8.91 months of import for goods and services or 13.34 months for goods only.
Reacting to the developments, analysts noted that this highlights improved forex availability within the period and underscores Nigeria’s ability to meet its trade obligations and mitigate potential balance-of-payment shocks.
“This development reflects strengthened economic activity and may bolster investor confidence, although further details on the sources of these inflows (such as remittances, export earnings, or foreign direct investments) would provide deeper insight into the dynamics at play”, they said.
Meanwhile, the naira appreciated this week by 4 basis points (bps) week-on-week (w/w) to N1,547.64/$1 at the Nigerian Foreign Exchange Market (NFEM) following the CBN intervention at the official window, selling $197.70 million to authorized dealers.
Recall that the apex bank had announced that Bureau De Change (BDC) operators will have temporary access to NFEM between December 19, 2024 and January 30, 2025. The BDCs will be allowed to trade up to $25,000 weekly, with transactions requiring upfront funding at prevailing rates and adhering to a maximum spread of 1 per cent.
Notably, the country’s FX reserves recorded accretion last week, as the gross reserves level grew by 226.47 million w/w to $40.79 billion (December 19, 2024). In the forwards market, the naira rates decreased on the 1-month (-0.1 per cent to N1,581.39/$1) contract but increased across the 3-month (+0.0 per cent to N1,638.84/$1), 6-month (+0.4 per cent to N1,720.67/$1) and 1-year (+0.3 per cent to N1,895.16/$1) contracts.
Cordros Research in an emailed note, said, “FX liquidity is expected to remain suboptimal despite CBN FX intervention as inflows from autonomous sources remain weak. Barring any significant intervention from the CBN, the naira is likely to remain under pressure and could depreciate from its current level in the medium term”.
SOURCE: THE SUN
