Marked Decline in FX Inflows Through the Economy in Q2 2021


Tuesday November 30, 2021 / 09:45 PM / by FBNQuest Research / Header Image Credit: iStock


We see from the CBN's Quarterly Statistical Bulletin (QSB) for Q2 '21 that total fx inflows into the Nigerian economy declined -27% q/q and -16% y/y to USD18.4bn in Q2. This figure is the lowest quarterly inflow since Q1 '17.  It largely reflects a -32% q/q reduction in fx inflows through autonomous sources to c.USD11.9bn. Invisible fx inflows, which comprised about 93% of autonomous flows, fell by 34% q/q. The decrease in invisibles is due to similar percentage decreases in inflows into domiciliary accounts and over-the-counter purchases.


Fx inflows through the CBN also fell by -14% q/q to USD6.5bn on the back of a- 25% q/q reduction in fx inflows from the non-oil sources. The q/q decline was primarily driven by a decrease in fx inflow from the CBN's swap positions to c.USD1.5bn from  c.USD3.1bn in Q1 '21


We recall that within the period, Nigeria's fx reserves fell  to c.USD33.1bn, their lowest level in four years.


In response to the drop in fx inflows and increased demand pressure, the CBN implemented a series of measures, including switching to the importers and exporters (I&E) NAFEX rate of c.NGN411/USD from the previous official rate of NGN379, and suspending fx sales to Bureau de Change operators (BDCs).


In contrast to the q/q reduction in fx inflows, total fx outflows through the economy increased by 5% q/q to c.USD9.8bn. Fx outflows through the CBN which accounts for the bulk of outflows increased by 2% y/y to USD8.9bn. We see from the data that the CBN's fx interventions grew 15% q/q and 35% y/y during the quarter. 


The CBN's largest intervention was on the secondary market intervention sales (SMIS) window which consumed c.USD1.5bn (1% q/q) of total fx outflows. The CBN's sales to the segment grew 8% q/q to USD1.4bn, higher than its USD1.1bn fx sales to I&E NAFEX window. 


As seen from the above, the data support CBN's move to halt sales of scarce fx to BDCs, and channelling the same to more formal segments of the window that require the fx for productive purposes. 

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