Nigeria has recorded a remarkable increase in foreign exchange inflows, with a total of approximately $24 billion entering the country in the first quarter of 2024. This achievement marks the highest quarterly inflow since 2021, reflecting the positive impact of the monetary policies implemented by the Central Bank of Nigeria (CBN).
The announcement came from CBN Governor Yemi Cardoso during an interview with Bloomberg TV in London. Cardoso highlighted the effectiveness of the central bank’s monetary tools in enhancing FX liquidity.
“In terms of liquidity, especially on the foreign exchange side, we’ve seen an increase. The first quarter of this year has resulted in a total inflow of about $24 billion. Now, this is almost about 40 to 50% more than the quarters up to about 2021. Clearly, the tools are having a positive impact. So we believe that continuing on this trajectory, we believe that liquidity will continue to grow,” Cardoso stated.
Tekedia Mini-MBA edition 15 (Sept 9 – Dec 7, 2024) has started registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
Committee on Diaspora Funds
In an effort to further boost FX liquidity, the CBN has established a committee focused on increasing the inflow of diaspora funds into the official FX market. This committee, which reports directly to Governor Cardoso, aims to double the foreign exchange inflows from international monetary operations (IMTOs).
“We’ve had a recognition of the huge role of the Nigerian diasporans play in remitting tremendous amount of money into the system over a period of time. We set up a committee which reports directly to me with the goal of doubling the amount of foreign exchange inflow coming from the IMTOs who service that segment of the autonomous players. Already, it’s beginning to bring about results. Again, we are confident that with these kinds of measures, liquidity will increase in our market,” Cardoso explained.
Other Indicators of FX Inflow
In April, Nigeria recorded a total foreign portfolio inflow of N93.37 billion, against an outflow of N119.81 billion. This marked a significant 415% increase compared to the same period in 2023. Foreign portfolio inflows involve capital moving into a country’s financial markets from foreign investors, indicating growing confidence in Nigeria’s market stability.
Moreover, the country’s foreign reserves saw a notable increase, reaching $33.58 billion as of June 19, 2024, the highest level in three months. This surge in reserves underscores the significant boost in liquidity within the foreign exchange market.
The FX Challenges Persist
While the naira has stabilized around N1500/$1 following these positive developments, it has ceased to appreciate further since the CBN stopped its subsidized FX sales to Bureau De Change (BDC) operators. This stabilization without further appreciation highlights the limitations of the $24 billion inflow recorded in Q1, suggesting that more comprehensive measures are needed to enhance FX earnings and market stability.
The cessation of subsidized FX sales to BDCs has exposed the underlying fragility of the naira’s value, underlining the need for the government to take more robust actions. Analysts say increasing Nigeria’s oil production, the country’s major source of foreign exchange, is crucial in this regard.
Nigeria’s economy relies heavily on oil exports, which are a primary source of foreign exchange. Economists believe that enhancing oil production, which has been on a decline, would not only boost FX earnings but also provide a more stable and substantial revenue stream for the country.
The government has been advised to address the shortfalls in the oil sector, including oil theft and pipeline vandalism, to boost oil output.