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Forex Utilisation at Sectoral Levels Drops to $14.64bn

By BusinessNews Staff on February 10, 2014

Amidst the growing anxiety over the dormancy of the nation’s foreign reserves, there are indications that the various sectors of the economy might have scaled down their foreign exchange demand, especially in the third quarter of last year.
A pointer to this came from a publication of the Central Bank of Nigeria (CBN)-External Sector Development Report posted on the apex bank’s website last week.
According to the report, which focused on trends in the Nigerian economy for the third quarter of 2013, the aggregate foreign exchange utilised during the review period stood at $14.64 billion as against $16.53 billion utilised in Q2 2013. This consisted of $7.73 billion and $6.90 billion for visible and invisible trade, respectively, compared with $7.83 billion and $8.70 billion, respectively, recorded in Q2 2013 indicating a decline of 1.3 per cent and 20.7 per cent, respectively).Analysis of foreign exchange utilised by sectors in the review period also revealed that $7.73 billion was spent on the importation of various items into the country compared with $7.83 billion utilised in Q2 2013.
The report stated that the importation of industrial, oil, food and manufactured products utilised 31.4, 27.2, 18.1 and 14.7 per cent of the total amount utilised, respectively. Further analysis revealed that $6.90 billion was utilised for services of which financial services (banking and other financial services) accounted for 83.6 per cent, while transport and business services constituted 6.0 and 4.8 per cent, respectively.
At $4.91 billion in Q3 2013, aggregate foreign capital inflow declined by 42.8 per cent from $8.58 billion in Q2 2013 due to the decline in both direct investment and portfolio investment inflows. Direct investment inflow declined from $1.47 billion in Q2 2013 to US$0.86 billion in the review period. Similarly, portfolio investment inflow declined by 52.3 per cent from US$6.52 billion in Q2 2013 to US$3.11 billion in the review period. Other investment inflows increased by 59.5 per cent from US$0.58 billion in Q2 2013 to US$0.93 in Q3 2013. Portfolio investment inflow remained dominant and accounted for 63.4 per cent of total foreign inflows while direct investment inflows accounted for 17.6 per cent of total. Other investment inflows accounted for the balance.
Meanwhile, the report also showed that foreign exchange inflows to the economy in Q3 2013 stood at $38.49 billion as against $38.17 billion recorded in Q2 2013 indicating a marginal increase of 0.9 per cent. Inflows through the Central Bank increased by 25.6 per cent from $9.44 billion in Q2 2013 to $11.86 billion in the review period while inflows through autonomous sources declined by 7.3 per cent to $26.64 billion. Outflows in the Q3 2013 increased by 5.6 per cent to $13.36 billion as against $12.65 billion in Q2 2013. Consequently, a net inflow of $25.14 billion was recorded in Q3 2013 as against $25.51 billion in Q2 2013 indicating a decline of 1.5 per cent. The CBN component of foreign exchange flows recorded a net outflow of $0.81 billion during the review period in contrast to a net inflow of $3.1 billion in Q2 2013.
As for demand for foreign exchange, the publication disclosed that the aggregate demand for foreign exchange by the authorised dealers during the review period amounted to $9.69 billion as against $8.13 billion in Q2 2013 indicating an increase of 19.1 per cent. A total of $8.17 billion was demanded at the wDAS as against $6.84 billion in the preceding period, an increase of 19.4 per cent. Similarly, demand by the BDC operators increased by 17.5 per cent from $1.30 billion in Q2 2013 to US$1.52 billion in the review period. The total amount supplied in Q3 2013 stood at $9.26 billion compared with $8.42 billion in Q2 2013. Of the total amount supplied, US$7.73 billion was to the wDAS and US$1.52 billion to BDC operators as against US$7.12 billion and $1.30 billion, respectively, in Q2 2013.
The Central Bank of Nigeria, CBN, on Tuesday decried the continued depletion of Nigeria’s foreign reserves and excess crude revenue account, ECA, by the Federal Government, saying this portends grave danger to the economy.
The CBN governor, Lamido Sanusi, said at the end of the 93rd Monetary Policy Committee, MPC, and meeting of the bank in Abuja that with activities towards the 2015 election gathering momentum, 2014 would be one of the most difficult years in the country in recent times.
The CBN governor pointed out that as at December 31, 2013, the country’s gross external reserves was about $42.85 billion, representing a decrease of about $ 0.98 billion, or 2.23 per cent when compared with about $ 43.83 billion recorded at end- December 2012. Sanusi also said the MPC was concerned that the ECA, which had a balance of about $11.5 billion in December 2012, has now declined to less than $2.5 billion as at January 17, 2014.

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