Modest Growth in FX Utilisation in Q2 2021, Up Marginally by 1.4% QoQ to US$5.1bn


Friday, December 03, 2021 / 11:15 AM / by FBNQuest Research  / Header Image Credit: Guardian Nigeria


Data from the CBN's latest quarterly statistical bulletin for Q2 '21 shows that the total foreign exchange utilised in Nigeria moved up marginally by 1.4% q/q to USD5.1bn. On a y/y basis however, fx utilisation increased by 49% y/y. The increase is understandable given that the Q2 '20 quarter was the pandemic's low point, with governments around the world imposing lockdowns and travel restrictions that effectively halted economic activity. Despite the increase in forex usage y/y, total fx usage in Q2 was still less than the pre-pandemic quarterly average of c.USD11.7bn for the five quarters before Q2 '20.


We also draw comparisons with the Q2 '21 balance of payments data, which reveals that the country had its first trade surplus since Q3 '19, largely because the value of merchandise imports (fob) at USD11.6bn was still below the pre-pandemic (five-quarter) average of c.USD15.3bn.


Like preceding quarters, merchandise imports accounted for the bulk (USD2.9bn or c.56%) of the total fx utilised during the quarter. The industrials and manufacturing sectors were the major users of foreign exchange within the segment, with total values of c.USD1.1bn (-4% q/q)  and c.USD794m (+11% q/q) respectively.


The fx utilised on food declined by 5% q/q to c.USD506m. The data also show that the financial services sector was the largest user of fx within the invisible trade segment, with a total value of c.US$1.9bn. 


The subdued fx utilisation during the quarter can also be linked to fx liquidity challenges which peaked in Q2 '21. Since then, the CBN's forex arsenal has grown by over USD7bn thanks to the IMF's sovereign depository receipts (SDRs) and the Eurobond issuance in August and September respectively.


As such, we would not be surprised to see a more significant rise in fx utilisation going forward.

Sectoral utilisation of foreign exchange (USD bn)

Proshare Nigeria Pvt. Ltd.

Sources: CBN; FBNQuest Capital Research

Proshare Nigeria Pvt. Ltd.

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