Foreign exchange (FX) inflows into the Nigerian economy rose by 17.5 percent to $17.18 billion in the first quarter (Q1) of 2023 from $14.62 billion in the fourth quarter (Q4) of 2022, according to the Central Bank of Nigeria (CBN).
This was disclosed by the apex bank in its monthly economic report for the Q3 2023, released on its website.
FX inflow through the Central Bank increased to $7.17 billion, from $6.21 billion in the preceding quarter. Foreign exchange inflow through autonomous sources increased to $10.08 billion from $8.41 billion in the preceding period.
The Central Bank receives foreign exchange inflows from crude oil sales and other sources of revenue on behalf of the government.
On the other hand, foreign exchange outflows through the economy increased by 12.8 per cent to $9.98 billion, relative to $8.85 billion in Q4 2022. Outflow through the CBN increased by 17.9 per cent to $8.86 billion from $7.51 billion in the preceding quarter.
However, autonomous outflow fell by 16.2 per cent to $1.12 billion from $1.34 billion in the preceding quarter, the report stated.
Consequently, net foreign exchange inflow through the economy increased by 24.7 per cent to $7.20 billion from $5.78 billion in the preceding quarter. Similarly, net inflow through autonomous sources rose to $8.89 billion from $7.08 billion in the preceding quarter. However, a net outflow of $1.69 billion was recorded through the Bank, compared to a net outflow of $1.30 billion in the preceding quarter.
According to the report, 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 $0.52 billion (0.5 percent of GDP) in Q1 2023, compared with $0.85 billion (0.7 percent of GDP) in 2022Q4.
This reflected 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. A capital reversal of $0.78 billion was recorded in 2023Q1, in contrast to an inflow of $1.94 billion in 2022Q4.
The development was due to reversals of portfolio investments and withdrawal of foreign currency and deposits from domestic money banks. Also, the uncertainties surrounding the 2023 general elections and the quest for a safer haven by investors contributed to the divestment.
A portfolio investment reversal of $1.17 billion was recorded, in contrast to an inflow of $0.34 billion in 2022Q4, occasioned by the redemption of investments in short-term debt securities by non-resident investors.
Similarly, ‘other investment’ recorded a reversal of $0.86 billion, as against an inflow of $0.85 billion in 2022Q4, due to withdrawal of foreign currency and deposits in Nigerian banks by non-residents.
However, Foreign Direct Investment (FDI) inflow improved significantly to $1.20 billion, from $0.75 billion in 2022Q4, owing to inflow of fresh equity, particularly to the telecommunications sector.
Aggregate financial assets recorded a disposal of $1.30 billion, in contrast to an acquisition of $1.09 billion in 2022Q4.
The development reflected a higher depletion in reserve assets and the withdrawal of foreign currency deposits by banks and the general government.
Other investment assets recorded a significantly lower net acquisition of $0.24 billion, compared with $1.70 billion in 2022Q4.
Following the Central Bank’s effort to enhance liquidity in the foreign exchange market and meet balance of payments needs, reserve assets were depleted by $1.62 billion, relative to $1.11 billion in 2022Q4. Acquisition of FDI assets was low at $0.02 billion, compared with $0.27 billion in the preceding period, the report said.