Wednesday, December 02, 2020 / 08:37
AM /by FBNQuest Research / Header Image Credit: UPI.com
Today's
chart shows monthly fx inflows through the economy for the three years to
August '20. It captures movements through the CBN and other (autonomous)
sources. On the CBN side, the large inflows tend to be FGN borrowings such as
Eurobond sales (in November '17, and February and November '18) and the
drawdown of USD3.4bn this April under the IMF's rapid financing instrument to
confront external shocks. On the autonomous side, there are substantial flows
into ordinary domiciliary accounts (November '19 through to January). Other
autonomous sources have been inflows from foreign portfolio investors (FPIs) as
in March '19 and workers' remittances.
CBN inflows have fallen off sharply in
the months of the Covid-19 virus and closed international borders. A decline in
the NNPC's share of oil and gas exports was a contributory factor.
This has been matched by a trend fall
in autonomous inflows this year. FPIs have been scarce and the FGN has not
tapped the Eurobond market. Banks' non-oil export receipts have declined in
line with fragile external demand, to USD530m in July and USD230m in August.
On a net basis, the CBN outflow has
shrunk from USD2.95bn in August '19 to just USD100m this August. Because of the
closure of borders, it made no fx sales to the bureaux de change or at the
investors' and exporters' (I&E) from late March through to late August.
There is generally a net inflow for
autonomous transactions, and this year has been no exception. It reached
USD4.66bn in August as invisible payments for business and other services fell
to only USD120m.
In summary, the virus and governments' responses to it across the world have temporarily changed the structure of fx
flows in Nigeria. Inflows have fallen dramatically in the absence of FPIs at
the entry gate and of Eurobond sales by the FGN, and due to a decline in oil
export proceeds. Outflows have fallen still more sharply due to the consequences
of the closure of borders, not overlooking the CBN's absence from the I&E
window for five months, which has created an external payments pipeline.
The borders have since reopened but
this structure (of fx flows) will remain in place until oil or other fx receipts
permit the smooth functioning of such payments.
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FX
inflows through the economy (USD bn) |
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Source: CBN; FBNQuest
Capital Research |
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