According to the most recent Quarterly Statistical Bulletin (QSB) from the CBN, total foreign exchange (FX) inflow into the Nigerian economy fell by -13% q/q and -44% y/y to USD16.9bn in Q3 ‘22. Except for a small increase in Q2 ‘22, the quarterly trend for FX inflow has been downward since Q3 ‘21. In terms of the total inflow of FX, autonomous sources accounted for about USD9.7bn, or about 57% of the total inflow. The balance of almost USD7.3bn was due to FX inflow through the CBN.  The total outbound flow of FX (outflow) from the economy also decreased by -10% q/q and -3% y/y to USD9.9bn. Combined, the data implies net FX inflow of c.USD7.0bn, one of the  lowest in recent times.

FX inflow through the CBN increased by 17% q/q. Unlike prior quarters, the data series from the CBN does not show a breakdown for key headline items such as inflows through the CBN.

However, we see from the CBN’s latest monthly report for Q3 ’22 that the lower fx inflow through the central bank was mostly driven by lower receipts from non-oil sources.

FX outflows through the CBN were flat q/q at c.USD8.5bn. The outflows were largely attributable to external debt service payments and third-party transfers for government ministries departments and agencies.

The total fx flow (inflow and outflow) through the CBN resulted in a net outflow of USD1.3bn during the quarter. The net outflow position highlights the demand pressure on gross official reserves and the naira exchange rate.

FX inflow through autonomous sources also declined by 10 q/q to USD9.7bn, largely due to a reduction in over-the-counter purchases.

FX outflow through autonomous sources amounted to USD1.4bn, down -46% q/q. Taken together, autonomous fx flows through the economy resulted in a net inflow of USD8.3bn.

The near-term outlook for FX accretion is not so promising. Despite a gradual rise in oil production, we do not anticipate that oil prices will be as supportive as they were last year.

Monetary and fiscal reforms such as the implementation of a market clearing FX rate, and the elimination of fuel subsidies are also required to attract portfolio inflows into the economy.