Naira, Nigeria’s currency, which lost 0.12 percent of its value to the U.S. dollar in the past two days, on Wednesday reversed the loss as it appreciated across foreign exchange markets.
The naira appreciation followed a moderation in demand for dollars by the end users despite continued scarcity of the greenback, traders said on Wednesday.
After trading on Wednesday, naira strengthened by 0.12 percent as the dollar was quoted at N420.25/$ compared with N420.75 per dollar quoted on Tuesday at the Investors and Exporters (I&E) forex window, data from the FMDQ indicated.
The local currency also firmed at the parallel market popularly known as the black market, gaining N2 to close at N604 per dollar as against N606 per dollar closed on the previous day.
However, total foreign exchange (FX) inflow into the Nigerian economy declined to $20.6 billion in the fourth quarter (Q4) of 2021 from $30.2bn in the third (Q3) of 2021, according to the CBN’s latest Quarterly Statistical Bulletin (QSB).
On a year/year basis, FX inflow into the economy also decreased by -17 percent y/y. Lower FX receipts by both the CBN and autonomous sources, the two main sources of FX, contributed to the decrease in FX inflow in Q4 ’21 relative to Q3 ’21, the FBNQuest said in a report on Wednesday.
Based on the data, FX inflow into the CBN declined by -45 percent quarter/quarter to USD9.2bn and compares roughly with the USD7.9bn average between second quarter of 2020 and second quarter 2021, when the pandemic was at its peak.
The primary source of the marked reduction in FX inflow to the CBN during the quarter was a sharp fall in loans to the federal government to just $1 million from $7.3 billion in Q3 2021.
Nigeria’s gross external reserves were boosted in Q3 2021 by the International Monetary Fund’s $3.3bn special drawing rights (SDR) allocation to Nigeria, as well as proceeds of USD4bn from Nigeria’s Eurobond sale.
The inflow of FX from the CBN’s FX swap transactions with banks also fell to $825m from $1.7bn in Q3 2021.
A decline in oil-related FX inflow to $1.6bn from about $1.9bn in Q3 2021 also contributed to the lower value of FX inflow to the CBN during the quarter.
Autonomous inflow of FX also decreased by 14 percent q/q to $11.4bn, mainly due to reductions of -46% q/q and -13% q/q in fx inflows for over-the-counter (OTC) purchase of securities, and invisible transactions.