Nigeria’s three-month inflows into economy hit $22.8bn

Nigeria’s economy experienced a 3.01 percent increase in foreign exchange inflows, rising to $22.89 billion in Q3 2024 from $22.22 billion in the previous quarter, according to the latest Central Bank of Nigeria (CBN) Economic Report.

The report disclosed that inflows through the CBN surged by 39.63 percent, reaching $11.86 billion, up from $8.49 billion in Q2 2024 while autonomous sources witnessed a decline of 19.66 percent, dropping to $11.03 billion from $13.72 billion.

On the other hand, foreign exchange outflows also rose, rising by 15.18 percent to $8.43 billion. Outflows through the CBN grew significantly by 27.91 percent while those from autonomous sources fell by 30.06 percent.

It said the total FX outflow through the economy rose by 15 percent quarter-on-quarter and 4 percent year-on-year to $8.4 billion. Combined, the FX inflow and outflow resulted in a net inflow of $14.5 billion.

Analysts at FBNQuest Research Capital attribute this growth to the apex bank’s strategic interventions in the FX market aimed at alleviating demand pressures and bolstering liquidity.

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“The uptick in FX inflows is largely credited to the CBN’s contractionary monetary policy, which continues to attract capital inflows from offshore investors. The bank’s hawkish stance, complemented by strategic FX supply management, has also helped curtail outflows, strengthening the financial system’s overall liquidity,’ it said.

During its most recent Monetary Policy Committee (MPC) meeting in November, the central bank implemented a 25 basis-point rate hike, raising the monetary policy rate to 25.70 percent.

The CBN’s monetary policies in recent years have aimed to balance inflation control with economic growth. However, external factors like global interest rates, geopolitical risks, and oil prices also significantly influence foreign inflows.

On the flip side, Nigeria’s gross official reserves increased from $446.9 million in October to $40.2 billion as of November 2024.

On a year-to-date basis, external reserves have increased by $7.9 billion, reflecting the positive impact of sustained FX inflows and effective reserve management strategies.

“Conversely, FX outflows through autonomous sources, which represent 13 percent of overall FX outflows, declined by -30 percent q/q to $1.1 billion

“Boosting foreign exchange inflows from sustainable sources is essential. This can be achieved through increased crude oil production while creating an environment that attracts foreign direct investment (FDI) and encourages diaspora remittances,” analysts at CSL Stockbrokers said.

“Diversifying the economy beyond oil revenues will also play a key role in reducing vulnerability to external shocks. Additionally, establishing a robust framework for managing foreign reserves is critical,” it added.