Net Foreign Exchange Inflow Drops By 31% To $21.8bn

The members of the Central Bank of Nigeria’s, CBN, Monetary Policy Committee, MPC, have called on the apex bank to carry out a comprehensive review of the foreign exchange market operations in the country to determine the fundamental drivers, and relative sizes of the segments of the market.

Net foreign exchange inflow into the economy fell by 31 per cent, year-on-year, to $21.81 billion in the seven months to July 2021, from $31.57 billion in the corresponding period of 2020.

The decline was caused by a 30 per cent decline in foreign inflow which cancelled the benefit of a 29 per cent decline in foreign exchange (forex) outflow out of the economy during seven months to July 2021 (7mths-21).

Economic Confidential analysis of Central Bank of Nigeria (CBN) data shows that forex inflow dropped to $49.66 billion in 7mths-21 from $71.03 billion in 7mths-2020. Similarly, forex outflow fell to $27.85 billion in 7mths-21 from $31.57 billion in 7mths-2020.

But on a monthly basis, net forex inflow recorded a marginal increase of 17 per cent to $2.77 billion in July from $2.4 billion in June.

The CBN disclosed this in its Monthly Economic Report for July 2021, attributing the improvement in net forex inflow in July to a 23 per cent decline in forex outflow during the month, caused by decline in its intervention in the foreign exchange market and lower direct payments. This sharp fall in forex outflow dampened the effect of 7.4 per cent decline in forex inflow recorded during the month.

The CBN stated: “ Aggregate foreign exchange inflow into the economy declined by 7.4 per cent and 8.7 per cent to US$6.10 billion, compared with the level in June 2021 and July 2020, respectively.

“The decrease reflected, mainly, the contraction in inflow through the autonomous sources, which fell by 33.3 per cent to $2.79 billion in July 2021.

“However, foreign exchange inflow through the Bank increased by 37.7 per cent to US$3.31 billion in July 2021, as oil-related inflow increased due to the upward trajectory in oil prices.

“Foreign exchange outflow through the economy fell by 23.0 per cent to U$3.33 billion in July 2021. The fall in outflow was due, mainly, to a decrease in the Bank’s intervention in the foreign exchange market and lower direct payments, which reduced the outflow through the Bank.

“However, outflow through autonomous sources inched up by 12.4 per cent to US$0.67 billion in July 2021, due, majorly, to the 13.2 per cent increase in payments for invisible import.

“Overall, foreign exchange flows resulted in a higher net inflow of US$2.77 billion in July 2021, compared with US$2.27 billion in June 2021. From this number, net inflow through the Bank was $0.66 billion, while through autonomous sources amounted to $2.11 billion.”