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Declining FX inflows impacting dollar supply, foreign reserves



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The Central Bank of Nigeria’s (CBN) supply in the foreign exchange market has been impacted by the drying inflows of dollars into the Nigerian economy and the nation’s foreign reserves.

Nigeria’s foreign exchange inflow declined by 23.3 per cent to $72.4 billion compared to the previous year, with foreign direct investment dropping by 33 per cent and foreign portfolio investment decreasing by 27.9 per cent.

Data from the CBN revealed that a total of $15.27 billion was supplied by the CBN into the economy, all of which were supplied to I&E window, SME, and Invisibles. Compared to the previous year, FOREX supply declined by 15.3 per cent from $18.03 billion recorded in 2021 and 31.1 per cent drop from $22.16 billion supplied in 2020.

Nigeria’s external reserves declined by $3.44 billion in 2022 to close at $37.1 billion. Furthermore, the reserves level has dropped to $35.22 billion as of 10th May 2023.

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Despite the interventions by the CBN in the official Investors and Exporters window, the naira depreciated by 5.7 per cent against the US dollar in 2022, while the exchange rate trend in the same direction at the black market by 23.1 per cent.

The exchange rate at black market between the naira and the US Dollar remained stable to trade at an average of N747/$1 on Tuesday, 16th May 2023.

This rate remained unchanged from the previous trading session, where it also stood at N747/$1.

While the naira-dollar exchange rate remains stable, the exchange rate between the naira and the euro witnessed a decline, having held steady at N810/€1 for the last three trading days.

The exchange rate between the naira and the euro experienced a decline of over 0.62% to trade at N815/€1 on Tuesday, May 16, 2023.


In contrast, the exchange rate between the naira and the British pound experienced a notable decline of 1.61 per cent, to trade at an average of N945/£1 on May 16th, 2023, compared to N930/£1 recorded on May 15th, 2023.

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This decline marks the largest drop between the naira and the pound in the last 54-day’s trading cycle.

Breakdown showed that foreign direct investment (FDI) in Nigeria dropped by 33 per cent to $468.1 million compared to $698.87 million recorded in the previous year. Similarly, foreign portfolio investment declined by 27.9 per cent to $2.44 billion in the review year.

The CBN continues to adopt its policies towards increasing foreign exchange inflows into the country, especially through non-oil export. Although the impact of Naira4Dollar scheme, which offers recipients of diaspora remittances through CBN’s IMTOs to be paid N5 for every $1 received as remittance inflow.

In the same vein, the RT 200 FX programme, which is aimed at getting US$200 billion in Foreign Exchange earnings over the next 3-5 years from non-oil proceeds, is also ongoing and is expected to improve FX inflows in the Nigerian economy, in the short to medium term.

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