The average exchange rate of the naira against the US dollar at the Nigerian Foreign Exchange Market (NFEM) fell by 35.53 per cent to N1,304.72/US$ in the first quarter of 2024, down from N841.15/US$ in the fourth quarter of 2023, according to a report by the Central Bank of Nigeria (CBN).
On a day-on-day basis, the naira on Wednesday gained 3.12 per cent as the dollar was quoted at N1,543.84 compared to N1,592.06 quoted on Tuesday and N1,579.22 quoted on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.
The average turnover at the NFEM increased by 61.30 per cent to US$0.20 billion, relative to US$0.12 billion in Q42023, reflecting increased trading activities in the market.
According to the CBN’s economic report for the first quarter of 2024, net foreign exchange inflow to the economy stood at US$11.50 billion in the review quarter. Foreign exchange inflow into the economy increased by 25.69 per cent to US$22.26 billion from US$17.71 billion in Q42023. Inflow through the Bank increased to US$8.09 billion from US$5.01 billion in the preceding quarter.
Similarly, inflow through autonomous sources increased to US$14.17 billion, from US$12.70 billion in the preceding quarter.
Foreign exchange inflows through an economy refer to the funds or currency from foreign sources entering a country’s financial system. These inflows can come from various sources such as exports, Foreign Direct Investment (FDI), Remittances, Portfolio Investments, Loans and Aid.
These inflows are crucial as they provide the necessary foreign currency that helps in balancing payments, supporting imports, stabilising the local currency, and strengthening the overall economy.
Foreign exchange outflow through the economy rose by 63.28 per cent to US$10.76 billion, relative to US$6.59 billion in Q42023.
Outflow through the CBN increased by 80.47 per cent to US$8.93 billion from US$4.95 billion in the preceding quarter. In the same vein, autonomous outflow rose by 10.98 per cent to US$1.82 billion, from US$1.64 billion in the preceding quarter.
Consequently, net foreign exchange inflow through the economy increased by 3.42 per cent to US$11.50 billion from US$11.12 billion in the preceding quarter. Similarly, net inflow through autonomous sources rose to US$12.35 billion from US$11.05 billion in the preceding quarter. A net outflow of US$0.85 billion was recorded through the Bank, compared with a net inflow of US$0.06 billion in the preceding quarter.
Net foreign exchange outflow according to analysts is the total amount of foreign currency leaving a country minus the total amount coming in. It represents a situation where more money is being spent on foreign goods, services, investments, or debt repayments than is being earned from foreign sources.
The external reserves remained above the benchmark of three months of import cover. The external reserves stood at US$32.29 billion at the end of March 2024, relative to US$33.22 billion at the end of December 2023. The level of external reserves in the review quarter could cover 7.1 months of import for goods and services or 10.1 months of import for goods only.
Nigeria’s external reserves currently stand at $36.46 billion as of August 20, 2024, data from the CBN showed.
