•Says  economy remain positive amid downside risks

 

By Chinwendu Obienyi

Amid a rapidly drying inflows of dollar into the economy, the Central Bank of Nigeria (CBN) has said that the country’s net total foreign exchange (FX) inflow closed at $72.4 billion in 2022.

According to data obtained from the CBN’s economic report for the fourth quarter (Q4) of 2022 which was released on its website recently.

The figure marked a 23.3 per cent decline compared to the $94.3 billion recorded in 2021 and also a 37.4 per cent decline compared to $115.6 billion received in 2020.

A breakdown of the data showed that $29.89 billion came into the country through the CBN, while $42.49 billion came in through autonomous sources. Conversely, a total of $40.99 billion was recorded as outflow in the same period, slightly lower than the $41.62 billion recorded in the previous year. This indicates a net surplus of $31.39 billion in the review year.

Nigeria has since been witnessing consistent decline in dollar inflows into the economy, on the back of shrinking foreign direct and portfolio investments. 

This also confirms the National Bureau of Statistics (NBS), data that showed thatcapital importation declined by 20.5 per cent to $5.33 billion in 2022.

A further 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, the country’s foreign portfolio investment data showed a decline of 27.9 per cent to $2.44 billion in the year under review. The CBN data revealed that a total of $15.27 billion was supplied by  the apex bank to  the economy, all of which came from the I&E window, SME and Invisibles.

Compared to the previous year, FX 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.

Reacting to the development, financial analysts noted that the decline in the amount of FX supplied by the CBN was partially attributable to the halt of FX sales to Bureau De Change (BDC) operators in previous year. 

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They noted that in 2022, the apex bank made no sale of dollar to BDCs, compared to $2.77 billion and $5.33 billion recorded in 2021 and 2020 respectively.

“The decline in FX inflows has also affected the nation’s external reserves as the apex bank continues to defend the Naira and fund import bills at the expense of its reserve level. Nigeria’s external reserves declined by $3.44 billion in 2022 to close at $37.1 billion. Furthermore, its reserves level has dropped to $35.22 billion as of 10th May 2023”, they said.

Nigeria continues to experience FX inflows drop following the impact of the COVID-19 pandemic on the global economy. This has had a ripple effect on the performance of the local currency at both the official and parallel market.

The CBN’s economic report further revealed that the nation’s economic growth outlook remains positive in the near term amid mounting downside risks, adding that its optimistic outlook is predicated on the assumption that the current trend in crude oil prices will be sustained, the effective implementation of the Medium-Term National Development Plan (MTNDP), and the positive impact of its interventions on growth-enhancing sectors, among others. 

The apex bank however noted that contraction in global demand, persistent security challenges, as well as legacy infrastructural challenges remain headwinds to growth. 

It will be recalled that the CBN has promised to adopt its policies towards increasing foreign exchange inflows into the country, especially through non-oil export. 

The CBN Governor, while delivering a keynote address at the 3rd edition of the Biannual RT200 Non-Oil export summit in Lagos recently, stated that the challenges facing the Nigerian economy requires the enactment of unconventional, innovative, supportive and complementary macroeconomic policy actions that are inclined towards a market-based financing system. 

Emefiele said that unfolding global economic development suggests that monetary policy was reaching its limit and would need complementary help from other spheres of the economy to propel for sustainable advancement while adding that its Naira-for-Dollar and RT200 initiatives are all attempts in that direction, to drive long-run economic development.

“Available data shows that repatriation due to the programme increased by 40 per cent from $3.0 billion in 2021 to US$5.6 billion at the end of 2022. The momentum for 2023 is equally showing strong numbers and impressive prospects. In the first quarter of 2023, a total of $1.7 billion was repatriated to the economy while about $790 million was sold at the I&E window year-to-date.

I want to assure you that the Bank is committed to strengthening and expanding foreign exchange supply into the market” Emefiele said.