Nigeria’s FX usage rebounds but lags pre-pandemic levels

Nigerian households and businesses utilised more foreign exchange (FX) in the third quarter of 2021, after a 26 percent increase to $6.4 billion from $5.1billion in the previous quarter but that figure still trails pre-pandemic levels.

According to data contained in the CBN’s Quarterly Statistical Bulletin, goods accounted for around 57 percent of FX utilized in the third quarter, in continuation of a trend that has emerged since the outbreak of the pandemic.

This contrasts with the pre-pandemic prevalence of invisibles dominating FX utilization.

In the first quarter of 2020, just before the covid-19 restrictions were put in place, sectorial utilization of FX was $15.20 billion showing a decline of $9.16 billion in the period under review.

The recent report shows that in the third quarter of 2021, forex utilization for the industrial sector, the largest segment for FX utilization within visible trade (goods), increased by 36 percent to $1.5 billion compared to the previous quarter, while the recovery in FX used on manufactured products increased by 14 percent.

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Within the invisible segment, forex consumption by the financial services sector increased by 14 percent accounting for 77 percent of the total FX usage by Invisibles in the third quarter.

The report shows that Nigerians still lag behind in the use of FX for services which includes travelling, education, payment for health services, and other related purposes while the increase in the visible trade is an indication of recovery in FX used on manufactured products which shows the gradual comeback of the country’s healthy import demand.

Although FX utilisation still lags behind the pre-pandemic levels, the rise in total FX utilisation by the various sectors can be attributed to the FX market’s somewhat better liquidity situation during the third quarter of 2021.

The report also showed that the central bank’s official reserve was boosted significantly by the IMF’s $3.4 billion Special Drawing Rights (SDR) allocation and $4 billion in Eurobond sales in August and September of 2021.