July 27, 2023

Net forex inflow into economy falls 2% to $7.28bn

Net foreign exchange (forex) inflow into the economy fell year-on-year (YoY) by 2.4 percent to $7.28 billion in the first quarter of the year (Q1’23) from $7.46 billion in Q1’22 reflecting challenges in the external sector of the economy.

Data from the Central Bank of Nigeria, CBN, Economic Report for Q1’23 showed that forex inflow fell YoY by 3.8 percent to $17.17 billion in Q1’23 from $18.4 billion in Q1’22.

Similarly, the forex outflows dropped YoY by 10 percent to $9.8 billion from $10.9 billion in Q1’22.

Consequently, net forex inflow fell by 2.4 percent to $7.28 billion in the first quarter of the year (Q1’23) from $7.46 billion in Q1’22

The data also showed that net foreign exchange inflow through the CBN deteriorated, falling by 110.5 percent to -$1.68 billion in Q1’23 from -$801.94 million Q1’22.

Inflows through the CBN fell YoY by 7.04 percent to $7.1 billion in Q1’23 from $7.6 billion in Q1’22.

However, outflow through the CBN rose YoY by 5.35 percent to $8.85 billion from $8.4 billion in Q1.22.

Meanwhile CBN forex sales at the Investors and Exporters (I&E) window, Small and medium Enterprise (SME) and Invisibles, fell YoY by 7.3 percent to $4.16 billion in Q1’23 from $4.49 billion in Q1’22.

However, analysts in the financial sector of the economy said that the floating of the naira alongside other market policies are expected to lift investors’ confidence and increase inflows.

In their outlook for the economy in H2’23, analysts at Afrinvest West Africa Limited said: “Although we expect pressure on the external reserves to wane in H2 due to FX subsidy elimination, we do not anticipate sizeable improvement organically as major inflows, crude oil sales proceed, diaspora remittance, and foreign investments are likely to underperform outflows from pending FX obligations and regular monthly import bills.

“The re-introduction of a managed float exchange rate system and unification of the foreign exchange (FX) windows alongside other market-oriented policies are expected to lift investor confidence and stimulate better inflows.”