Forex

Nigeria’s FX Inflow Hits $30.45bn in Q4

Published

6 years ago

February 9, 2018

Nigeria’s FX Inflow Hits $30.45bn in Q4

In a mark of rising confidence in the Nigerian economy, aggregate foreign exchange (FX) inflow into the economy grew to $30.45 billion in the fourth quarter (Q4) of 2017, indicating an increase by 14.5 per cent, compared to the preceding quarter.

This also represented a significant increase by 86.9 per cent over the corresponding quarter of 2016.

The Central Bank of Nigeria (CBN) disclosed this in its quarterly economic report for Q4 2017 released Thursday.

Increased FX flows were attributed to the 22.7 per cent and 7.7 per cent increase in inflows through the CBN and autonomous sources, respectively.

Also, the report showed that FX inflows into the economy increased in the fourth quarter of 2017 as a result of the rise in the spot price of Nigeria’s reference crude oil, Bonny Light, to an average of US$62.48 per barrel during the quarter.

The rise in crude oil price was also attributed to the decline in United States shale oil output, increased global demand for refined petroleum products, and extension of the Organisation of Petroleum Exporting Countries (OPEC) production-cut deal to the end of 2018.

An overall balance of payments surplus of 2.2 per cent of the gross domestic product (GDP) was also recorded by the country during the fourth quarter of last year.

“Consequently, FX inflow through the CBN stood at $14.71 billion, showing an increase of 22.7 per cent and 118.7 per cent over the levels in the preceding quarter and the corresponding period of 2016, respectively.

“The increase reflected the rise in receipts from oil and improvement in non-oil proceeds,” the CBN report indicated.

Aggregate outflow through the CBN, on the other hand, fell to $8.38 billion, from $9.34 billion in the preceding quarter, but recorded an increase over the $4.65 billion in the corresponding period of 2016.

According to the report, the decline in outflow relative to the preceding quarter reflected the fall in interbank utilisation, third party MDA transfer, drawings on letters of credits, external debt service, and FX special payments in the review period.

Overall, a net inflow of $6.33 billion was recorded through the central bank, compared with $2.64 billion and $2.08 billion in the preceding quarter and the corresponding period of 2016, respectively

The report also showed that oil sector receipts, which accounted for 10.6 per cent of the total, stood at $3.23 billion, compared with $3.17 billion and $1.97 billion in the third quarter of 2017 and the corresponding period in 2016, respectively.

It also put non-oil public sector inflow at $11.48 billion (37.7 per cent of the total), indicating a rise by 30.3 per cent and 141.2 per cent above non-oil sector inflows in the third quarter of 2017 and the corresponding period in 2016, respectively.

“Autonomous inflows at $15.74 billion rose by 7.7 per cent and 64.6 per cent above the levels in the preceding quarter and the corresponding period of 2016, respectively, with inflows from autonomous sources accounting for 51.7 per cent of the total.

“At $9.19 billion, aggregate FX outflows from the economy fell by 9.6 per cent below the level in the preceding quarter, but represented a 69.9 per cent increase over the level in the corresponding period of 2016.

“The development, relative to the preceding quarter, was driven by a 10.3 per cent and 2.0 per cent decline in outflow through the CBN and autonomous sources, respectively.

“Total non-oil export earnings received through the banks rose by 20.7 per cent above the level in the third quarter of 2017 to $614.50 million in the review quarter.

“The development was due mainly to the 43.2, 18.0 and 6.1 per cent increase in foreign exchange receipts from agricultural, industrial and minerals sub-sectors.

“A breakdown by sectors showed that proceeds from agricultural products, minerals, industrial sector, manufactured products and food products were $312.6 million, $103.5 million, $98.9 million, $88.5 million and $10.9 million, respectively,” the report added.

Furthermore, provisional data showed that sectoral FX utilisation stood at $7.45 billion in the fourth quarter of 2017, indicating a 5.5 per cent increase above the level in the preceding quarter. The development reflected the 7.1 per cent and 5.5 per cent rise in disbursement/utilisation for invisible and visible imports, respectively.

The invisible sector accounted for the bulk (47.7 per cent) of total FX disbursed in the Q4 of 2017, followed by the industrial sector (27.0 per cent).

According to the report, Nigeria’s crude oil production, including condensates and natural gas liquids, averaged 1.80mbd or 165.60 million barrels (mb) in the review quarter.

This represented a decline of 0.03mbd or 1.8 per cent, compared with 1.83mbd or 168.36mb recorded in the preceding quarter.

The drop in oil output was attributed to the shut-ins/shut-down in some of the production facilities.

“Crude oil exports stood at 1.35mbd or 124.20mb, representing a 2.4 per cent decline compared with 1.38mbd or 126.96mb in the preceding quarter. This was due mainly to the continued commitment by OPEC and Non-OPEC countries to avoid flooding the global market, despite the exemption of Nigeria from the production cap agreement.

“Allocation of crude oil for domestic consumption was maintained at 0.45mbd or 41.40mb in the review quarter.

“The average spot price of Nigeria’s reference crude oil, Bonny Light (37° API), rose from $52.92 per barrel in the third quarter of 2017 to US$62.48 per barrel in the review quarter, representing an increase of 18.1 per cent.

“The increase was attributed to the production-cut agreement, demand growth from China and increased refining activities in the United States.

“UK Brent at $61.69/b, WTI at $55.47/b, and the Forcados at $62.60/b exhibited similar trends as the Bonny Light,” the CBN report explained.

In addition, the report revealed that activities in the industrial sector showed a significant improvement over the level in the third quarter of 2017.

This was attributed to sustained supply of FX and stability in the naira exchange rate, which facilitated the importation of critical raw materials as well as intermediate goods for domestic production, resulting in new orders, output growth and increased export business.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Black Market Dollar to Naira Exchange Rate Today 9th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 9th, 2024 stood at 1 USD to ₦1,450.

Published

19 hours ago

May 9, 2024

Samed Olukoya

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 9th, 2024 stood at 1 USD to ₦1,450.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,440 and sold it at ₦1,430 on Wednesday, May 8th, 2024.

This indicates a decline in the Naira exchange rate compared to the current rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in the black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

Buying Rate: ₦1,450
Selling Rate: ₦1,440

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.

Black Market Rate

EFCC Raids Wuse Zone 4 Market, Clashes with Bureau De Change Operators

Published

2 days ago

May 8, 2024

Samed Olukoya

Tensions escalated in the bustling Wuse Zone 4 Market as operatives from the Economic and Financial Crimes Commission (EFCC) conducted a raid targeting Bureau De Change (BDC) operators on Tuesday.

The raid, intended to curb illegal currency trading and enforce regulatory compliance, quickly turned confrontational, resulting in clashes between the EFCC agents and currency traders.

Eyewitnesses reported scenes of chaos as the operatives attempted to apprehend BDC operators, who resisted the arrests vehemently.

The situation escalated to the point where gunshots were fired, and vehicles belonging to the EFCC were damaged.

Two currency traders, speaking anonymously, confirmed the events, citing frustration and desperation among the traders as the underlying cause of the resistance.

According to one witness, who requested anonymity for fear of reprisal, the traders’ reaction was fueled by their perception that the EFCC’s arrests were becoming excessively frequent and motivated primarily by a desire to extort money from them.

“Yesterday (Monday), they arrested traders, but they faced resistance today. People are getting tired and desperate,” the witness explained.

Another trader echoed similar sentiments, warning that continued raids by the anti-corruption agency could escalate into violence and potentially lead to fatalities. “If this thing continues like this, that means they would kill people,” the trader cautioned.

The growing frustration among traders stems from their belief that the EFCC’s actions, which often culminate in monetary fines, serve more as revenue-generating measures than effective regulatory enforcement.

The EFCC’s resurgence in raiding activities is part of its broader efforts to stabilize the Nigerian naira and combat illegal currency speculation.

In recent weeks, the commission has intensified its crackdown on suspected currency speculators and fraudulent foreign exchange practices.

However, despite these efforts, the naira has continued to depreciate, reflecting the challenges facing Nigeria’s foreign exchange market.

Traders at the Wuse Zone 4 Market highlighted the market’s volatility, with fluctuations in exchange rates making it increasingly difficult to predict trading outcomes. One trader, identified as Malam Yahu, expressed concern over the market’s instability and the challenges it poses for traders.

“Right now, the market is just fluctuating, and the naira is not stable at all,” he lamented. Yahu highlighted the impact of the EFCC raids on trading activities, noting how traders refrained from transactions to avoid potential losses.

At the official market, data from the FMDQ exchange securities revealed a sharp depreciation of the naira, raising concerns about rapid fluctuations and market volatility.

The intraday high and low of the naira against the dollar further underscored the challenges facing Nigeria’s foreign exchange market.

As the EFCC continues its crackdown on illicit currency trading, the clashes in the Wuse Zone 4 Market serve as a stark reminder of the underlying tensions and frustrations prevalent among currency traders.

The agency faces the daunting task of balancing enforcement actions with addressing the root causes of illegal trading, amidst ongoing challenges in Nigeria’s foreign exchange market.

Forex

Nigerian Companies Settle Dollar Debts as Central Bank Reforms Bolster Forex Liquidity

Published

2 days ago

May 8, 2024

Samed Olukoya

In a significant development for Nigeria’s corporate landscape, several major companies have begun to settle their long-standing dollar debts following the Central Bank of Nigeria’s (CBN) recent reforms that bolstered dollar supply.

The reforms have provided much-needed relief to businesses grappling with forex scarcity and overdue obligations.

Among the notable firms taking advantage of the improved forex liquidity are MTN Nigeria Communications Plc, BUA Foods Plc, and Cadbury Schweppes Overseas Ltd.’s Nigeria unit.

These companies, some of the largest players in Africa’s most populous nation, have reported that they are now able to access dollars to meet their foreign currency obligations, marking a stark reversal from previous struggles with forex shortages.

MTN Nigeria, the country’s leading mobile operator, disclosed that it utilized the enhanced liquidity in the forex market to significantly reduce its letters of credit obligations by 41.6%, slashing it down to $243.4 million from $416.6 million in December.

Chief Financial Officer Modupe Kadiri emphasized this move as a strategic measure to mitigate losses during an investor conference call last week.

The Central Bank of Nigeria’s reform measures, implemented since the beginning of the year, have been instrumental in driving this positive change. These measures include raising the benchmark interest rate by 600 basis points to attract capital inflows and abandoning the currency’s peg, allowing the market to determine the exchange rate of the naira.

After years of unconventional currency management that deterred investors and exacerbated forex scarcity, these reforms have injected new life into Nigeria’s forex market.

According to Tatonga Rusike, a sub-Saharan Africa economist at Bank of America Corp., portfolio flows have responded positively to the reforms, leading to a substantial increase in average daily forex turnover, which has more than doubled from 2023 lows.

Recent data from Chapel Hill Denham indicates a remarkable surge in dollar liquidity, with a 90% jump to $160.8 million on Tuesday compared to the previous day.

Also, the central bank’s proactive approach, including selling dollars to money traders to enhance distribution to retail users, has further contributed to the improved forex liquidity environment.

The positive impact of increased dollar liquidity is evident across various sectors of the Nigerian economy.

BUA Foods, the country’s largest food and beverage company, reported a 6% reduction in debts during the first quarter of this year, attributed to improved dollar availability.

Similarly, Cadbury Nigeria has been able to fulfill all its dollar requirements from the official market since the beginning of the year, leading to a drop in local-currency cash reserves.

Economists and industry experts view the enhanced forex liquidity as a welcome development that provides companies with a much-needed reprieve to settle debts and navigate the effects of currency devaluation.

Adetilewa Adebajo, economist and chief executive at Lagos-based CFG Advisory, emphasized the importance of sustaining liquidity to support the turnaround desired by companies.

He stressed the need for positive real rates, matching interest rates with inflation, and fiscal responsibility to ensure continued economic stability and growth.

As Nigerian companies take advantage of improved forex liquidity to address long-standing financial challenges, the success of the central bank’s reforms will be closely monitored, with hopes for sustained liquidity and economic recovery in the months ahead.